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Home | Blog | Why Do Insurers Give Up And Just Outsource Claims Processing?

Why Do Insurers Give Up And Just Outsource Claims Processing?

By Magellan Solutions

Updated on June 11, 2024

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Let’s check some insurers’ responsibilities and why it is practical just to outsource claims processing.

Outsource claims processing has become a reliable solution for insurance companies wanting to optimize their operation. Although many try to do the process on their own, they end up giving up and looking for other avenues.

There are a lot of factors that explain why many insurers tend to rely on a third-party service provider. According to a recent study, 64% of insurance company owners think that the rising labor costs are the main reason why they will outsource. Meanwhile, 48% of insurers feel that the scarcity of agents’ key skills affects their quality standards and customer experience. Thus, they will look for an offshore insurance process outsourcing provider to lend them industry experts.


Below are some of the tasks and responsibilities of an insurer:

  • Reviewing claim submissions
  • Obtaining and verifying information
  • Correspondence with insurance agents and beneficiaries
  • Preparing claim forms
  • Record management and maintenance of insurance policies and claims in database systems
  • Determining policy coverage and payout claim amounts.

As you can see, the work of an insurance agent is not just about processing paperwork. It involves a very intricate and sophisticated system in order to verify all the claims.

Aside from these tasks, insurance agents are also responsible for collecting insurance debt from their existing customers. Most of the time, they need to be 95% successful in debt collection. This is the benchmark for recovering the funds they paid for other insurance claims.

All these contribute to the rising labor costs and the inferior skills of claim insurance agents. So, what difference can an insurance outsourcing company make for your business?


What are the Benefits of Insurance Claims Outsourcing?

The Insurance Business Process Outsourcing (BPO) market share in the US is around US$1.7 Billion as of 2020.

This is the largest in the industry, as it consists of a 28.81% share of the global market.

With this in mind, let’s take a look at why almost 80% of insurers in the US prefer to work with claims outsourcing companies.


Reduce Claims Processing Costs

Processing costs and claims payments already take up 80% of an average insurance policy. So, reducing the processing time to settle a claim can lessen administrative costs. It is only logical to shorten these processes since insurance agents spend at least 55% of their time working on these non-core activities.

Insurance outsourcing companies can help you centralize all the information related to a claim. There’s no need to worry about any privacy issues as they can use secure, cloud-based systems. They can share all the information with your team through the Internet. Your policyholder can resolve the claim quickly as everything is already organized for them.


Application of Insurtech in Your Operation

Usually, call center companies have access to the most advanced technology available. So, it is only fitting that partnering with a BPO company could also give you access to this technology. Digitizing your insurance policy claim makes your business adaptable to the future. Moreover, customers at this age expect digital claims to function as a standard operating procedure. Doing this will show an additional 20% improvement in your customer satisfaction scores.

On top of that, outsourcing for insurance companies means you no longer have to worry about maintaining and upgrading your software and other digital tools. As a result, you can save up to 25% to 30% on your expenses.


Major Improvement in Customer Service Experience

Outsourcing claims processing is one of the most critical processes for any insurance company. However, it can also be a stressful experience for policyholders. Of course, they will not file any insurance claim if nothing bad happens, like an ill individual trying to file a medical billing and claims processing. Even a natural disaster can result in a claim on their homeowners’ policy.

If you want their business in the future, you might not want to add stress to their lives. That’s why you must make the claim process convenient and easy for your customers. When you outsource this function, the third-party service provider will guarantee a customer-based service. They train their agents to handle stressful situations for your customers.

Empathy and accommodation of your customer service reps will help alleviate the situation. Consequently, your policyholders will still use your insurance service in the future.


5 Types of Insurance that You Can Offshore to Insurance Outsourcing Service Providers

    1. Healthcare Claims Processing – According to research, Americans believe that lack of health insurance contributed to 67% of all bankruptcies.
    2. Automotive Insurance Claim—Most Americans can afford auto insurance, which costs just around $1,430 annually. On top of that, the average car accident in the US is 6 million yearly.
    3. Life Insurance—In a recent study, 33% of households failed to meet their daily expenses during the first month after the death of their main wage earner.
    4. Property Claim Processing – 98% of all claims in the US are about property damage accounts.
  • Travel Insurance might not be as popular as before due to travel restrictions in different countries. However, many Americans expect to travel after the COVID-19 pandemic. There has been a 19% yearly increase in travel insurance spending since 2016.

Around 42% of US insurers operate in the property and casualty insurance (P&C) industry. This is understandable since many policyholders worry about the safety of their mortgage investment.

On average, 6 to 10 hurricanes occur in the US yearly. These hurricanes can certainly damage their property. This is where claims handling companies can help them. Another top insurance niche in the US is the medical claims processing business. It consists of 15% of insurers in the country. Like the P&C industry, Americans think that investing in medical claims processing services could help them secure the future. The US spends around $11,582 per person on insurance claims.


Partner Now with the Best Insurance Business Process Outsourcing Company in the Philippines for SMEs!

If you’re an SME looking to outsource claims processing then go to Magellan Solutions. We have more than 18 years of experience assisting many industries with their BPO needs.

Besides claim processing, we can work with other back-office functions of your insurance company, such as:

We are an ISO-certified BPO company that strictly follows a high standard of service from recruitment to the onboarding process. We also guarantee fortified protection for your data. Our tech support team uses different security protocols to prevent online breaches.

Our Business Developers can help you in setting up your key performance indicators (KPI). KPIs will guide you and monitor the progress of your business with us.


We also offer guaranteed flexible pricing options based on several factors like service and number of agents you need. Magellan Solutions understands that start-up businesses have limited funds for outsourcing services.

Contact us today and get a free 60-minute business consultation. Please fill out the contact form below.


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      Why Do Insurers Give Up And Just Outsource Claims Processing?

      Magellan Solutions

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