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  • Impact of Outsourcing On Insurance Companies in India

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    Arup Sarkar
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    Insurance Companies and Outsourcing

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    Impact of Outsourcing on Insurance Companies in India

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    Insurance Companies and Outsourcing

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    23 views4 pages

    Impact of Outsourcing On Insurance Companies in India

    Uploaded by

    Arup Sarkar
    Insurance Companies and Outsourcing

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 4
    customer centcia Technology |Arsies| inactive Impact Analysis of IRDA Guidelines: Re-defining Outsourcing activities of Insurance Companies in India Version on Authors Gautam Vaidya Designation Principal Consultant Date Noy. 19th 2010 www.customercentria.com Summary Insorers need service provider support for many oftheir operational requirements. A very simple example of picking renewal cheques f-om the homes ofthe poli holders asa differentiated service can be termed asa core activity (under theheads premium collection orckequepick up) asperIRDA guidelines. Doesthis mean tha: such services wilThavetobe discontinued? ‘With the recent guidelines issued by IRD A toall nsurers for their outsouscing activities, weneed torevisittheanswersto questionslikeabove. These guidelines require that Insurers should not engage in outsourcing which would result in their internal contro, business conduct or reputation being compromised or weakened. This issue is addressed in the guidelines by giving direction on strengthening risk management practices and by offering guidance in effectively managing outsourcing without compromising efficiency or transparency. Thi sin-line with theinternational norms and as.atlined by the Rasel Committeeand the same srebeing considered in Banking by Reserve Bank of India, The main issue forthe regulators is eorporate governanee and risk management “practices ofthe insurance companies governing eore functions like underwriting, claims, investments and product developmet The IRDA clearly affrras that will nt allow outscureing isthe core activities as defined by i and the insurers should wens themselves, This is to tnake certain that all poli servicing, right trom issuance to grievance arc hanced by reduce the risk of compromising heservicelevelby any Tairdeparty. ‘These latest guidelines i followed in leter and spirit by the Insurers will ead lo a drastic improversent in customer te industry and will ensure that the insurers acquire a technology and process to improve their ints like branches, websites, callcentresardallotker ofices. customer toueh-p Outsourcing Activities of Insurers are broadly classified into two categories. Coreactivities Non Coreactivities Allactivtiosrelatingto: ‘inerering Yactity management. Housekeeping, security, office bowsete lain, orev Productdesian, Internal, Ievestment + Website developmentand management, ‘Prersium collections, er Pay oll management, AllIeformation Technology support exept hardwaresupport, Datastorage (physical image), HRservices, Servicetax consultancyand support, ‘TMsfiling, Complisncewithlaborlavs, Data entry Including scanning, indexing Printingand posting ofremainders andotser documents, Preemployeseat medical checkups, Calleenternd outbound ealing or registering complaintsoransweringenquities, Claimprocessing foraverscasmedieal carance contracts, Chequepickupand bankingofcheques, Admitting orrepudiatianofall aims, ankreconelliation, + Polieyservicingexcept registering ‘complaints /gsievances /enquities, Approvingacvertisoments, Marketeon Appeintmentof Sueveyorsand Lass Assessors and accounsing including NAVesleulations, rtisswed, Motorinsuranceserviees, ‘Compliance with AML, K¥Cete + Tele-marketingandallother sctivitios Allotheractivities nat specified herein wwhichare not coreaclivitiesand which do ‘asnorecore tivities not haveany relation toproduet design, The guidelines define outsoureing as use of a third party to pesform activities that would noresally be urertaken Dy the Insurer itself Key Areas of Concern: he guidelines provide significant inputs on the criteria to be applied for selection of service providers. Longer Sules Cycle~ Asper the guidelines Insurers are expected to filea certificate with the Authority that no core activity has heen outsourced — this will engthea the sales eycle fr service providers as the Insurers migh nocd to seck clasiicetions fsom IRDA for al activities on the margins of being termed as core. The service providers will have zo provide doteiled docsmentation to the clients, defining the intervelationship of the ‘outsourced actvity with ather activities within the company, regulatory status of theserviee provider, inanctal, reputationalimpactor snssrancecorapany. Coution List= Provision ofa caution list wil ensure that ll the serviee providers are on their tues and provide best possible services to ther clients. This ist will sct as 2 big alarm bell for anyone wanting to deel with oatsourcersppearingintha ist Increased Cost of Otsoureing-As we understand the caution lst will be iz public domaie for all businesses ‘to ee. Thi risk wllin tursdirecty or indirectly increase the cost of outsourcing forthe insvrers due tothe risks for the service providers doing business with insurers. The provisiox of caution Iist will add to the downside risk for the service providers n dealing with any insuranes cornpany and in turn service providers wil tise thistiskby adding thisriskto thelr cost ofeutsourcing woktow New Skill Ser andl Technologies- all insurers will require further clarifications from the reguletor on the lassfiestion of activities. Asweseeit these gudelines will distsrb quitea few life insurers that were planning to oursovree many activities in the aftermath of the changes {a ULTPs that have affected their eost structures severely. Insurers will have to now develop skills and adopt newer technologies tobe compliant with these new ‘guidelines, Managements willhave orethinkand zedesign processes tobe compliant ofa Customer service — Customer service isa term widely used for a gamm ivities and goes beyond just registrationon complaints, Alo: ofinsurecshave or are is the process of out sourcing this complete activity

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