Outsourcing is one of the insurance industry's thorniest issues. Insurance carrier executives and front-line staff both are keenly interested in how the use of outsourcing develops for decidedly different reasons. To this point, however, despite all the watchers, the pot is not boiling.

Several years ago, I published two research reports related to information technology outsourcing (ITO) and business process outsourcing (BPO). The goal was to assess the insurance industry's adoption of outsourcing as a tool.

After several months of data gathering and discussion with industry players, I came to the conclusion these approaches held great promise for insurers. With the exception of the top tier of carriers–some of which created their own offshore entities to leverage an outsourcing model–many carriers had only dabbled in use of outside resources, especially for BPO. As a result, I said there was high potential for carriers to lower costs while improving service levels via expanded use of outsourcing.