The outsourcing of insurance claims processing is a small but growing segment of the overall Business-process Outsourcing (BPO) market. While insurers have entered into outsourcing engagements on many non-core business functions such as policy administration and customer service, they’ve held off on outsourcing claims processing, which they regard as a core, strategic business application.
That’s beginning to change as traditional back-office service providers such as CSC, IBM and Unisys and offshore vendors such as Genpact, EXL Service and Wipro flex their processing muscle. Last year, Unisys snagged a three-year national contract with the Blue Cross Blue Shield (BCBS) association to offer Blue companies outsourcing services for claims processing. Under the agreement, the 40 independent Blue companies have the option of contracting with Unisys for end-to-end BPO services. The aim of insurance BPO deals is to reduce administrative costs, redirect internal resources to strategic programs and address changing technology and regulatory requirements.Claims processing is an integral part of the insurance value chain. As such, speed and accuracy are paramount — mistakes can break an insurer’s credibility. Industry segments like healthcare, consumer property and casualty tend to have high volume of claims activities, and insurers in this space are more likely to rely on service providers.
On the other hand, in the life insurance, commercial property and casualty markets, the volume of claims is low, with claims themselves being more complex. Hence insurers are less likely to rely on service providers.
Insurers typically save 10%–15% by outsourcing claims processing to onshore providers, that process on a captive platform, and in contrast can save 30%–40% by utilizing offshore providers, which brings the added benefit of low-cost labor.
For smaller insurers, which lack robust document-management capabilities, outsourcing can reduce complexity and turnaround time. For larger insurers, avoiding large capital outlays for new equipment makes outsourcing an attractive alternative.
The leading service providers have built their claims-processing capabilities — often by cobbling together ready-made components. Genpact’s practice spans life insurance and annuities, health and property and casualty. It offers services spanning the spectrum of the insurance value chain, including actuarial, new business underwriting and policy administration. FileNet supplies its main workflow technology. It uses Savvion for business-process management, and has developed in-house applications for client visibility, such as a Web-based intranet called In-Sight and a digital cockpit providing real-time metrics. “Some of the key factors used in evaluating a service provider are scale, experience in the process being outsourced, domain knowledge and an ability to execute,” says Mohit Thukral, SVP, Genpact. Sourcing decisions also revolve around the provider’s financial stability, governance approach, security, data privacy and compliance practices.
A New Focus
The cornerstone of Unisys’ deal with BCBS is its Health Payer Administration Solution, which improves claims handling by cutting administrative and operating costs while enhancing speed and quality of service. Key claims-processing operations include claims entry, document management, member-eligibility verification and benefit adjudication, provider verification and payment processing.
Claims-processes outsourcing is also being heavily implemented by state Medicaid agencies, which have been under regulatory pressure to modernize their systems. The Medicaid Information Technology Architecture program, developed by the Centers for Medicare & Medicaid Services, spells out a set of IT requirements for states such as utilization of industry standards, increased use of off-the-shelf software, utilization of secure storage and data transmission and use of common federal-reporting requirements.
