The stubbornly soft insurance market, coupled with the deepeningeconomic recession, has agents and brokers scrambling to find waysto streamline operations, give clients more face time and focus onprospecting for new business. Yet while many of their insurancecarriers have already embraced outsourcing, agency principals havebeen more skeptical about taking the plunge–but that is nowchanging.

A growing number of agency owners and managers are outsourcingback-office services such as policy-checking, claims-reporting,billing and loss summaries.

Unlike insurance companies, agencies have not outsourcedcustomer service functions–seen as one of their core functions inmaintaining personal contact with clients. Instead, they've optedto farm out routine back-office tasks so they can do more of whatthey do best, which is sell and service customers face-to-face.

It is rarely a slam-dunk sell to get agents and brokers to turnover any important tasks to outsiders. Agency owners are smaller,more entrepreneurial operations. They like to retain control overtheir information, and they work hard to build and maintain strongrelationships within their communities.

Agency owners, however, are also realists. If outsourcing canboost productivity without producing negative side effects, manyowners can and do use it.

Outsourcing often receives a bad rap. Some large corporationsuse it to cut staff and overhead. But for agency managers,outsourcing can facilitate growth and stimulateproductivity–particularly when experienced staff are hard to findor expensive to hire.

Outsourcing, too, should not be a tool to replace employees whohave important experience and skill sets, but rather a means tomaximize the impact of these employees.

Choosing what tasks to outsource and what outside firm to retainis critical. Some agency services should never be outsourced, andany firm offering outsourcing services should be thoroughlyscreened before entering into an agreement.

When we sit down with agency managers, we like to discuss sevensteps that all small- and medium-sized agencies should take whenconducting due diligence on insurance process outsourcing.

o Step 1: Outsourcing Should Be About Growth, NotDownsizing.

Agencies with an experienced staff should consider outsourcingas a means to make the best use of employees' time, not to downsizeand cut costs.

Outsourcing routine tasks can reduce costs, liberating resourcesthat can be deployed more productively.

o Step 2: Keep Control Of Your Systems and Security.

In traditional business-process outsourcing, some vendorspromise cost savings by adding a client to their agency managementsystem, arguing they can run agency functions more quickly and atless cost.

The problem with that approach is if the relationship faltersdue to price increases or a decline in the quality of service, theagency can be saddled without the systems and the people to runcritical back-office functions.

A more prudent approach is to have the outsourcing companyconnect remotely to your system, learn your processes, follow yourprocedures and essentially become an add-on to your agency.

The same way you connect to your server from home, they can fromtheir offices. That way, all the information stays on your serverand can be monitored daily by your managers.

Meanwhile, should you ever decide to end the relationship, youneed only change your password to maintain exclusive control andaccess to the system.

o Step 3: Maintain Close Communication.

This is an obvious and critical need. However, to assureeffective communications it is wise to consider only industryspecialists who understand the challenges and objectives specificto your kind of insurance agency.

Look for a provider that maintains its corporate head office orat least a fully functional branch office in the United States toensure quick turnaround in the event a problem.

Also, check the education level of a provider's staff, as wellas their professional and English proficiency. Reducing errors andomissions from levels current in an agency is definitely possible,but depends upon the quality, education and training of yourservice provider's employees.

o Step 4: Ease Of Implementation.

Some outsourcing solutions can involve substantial investment innew information technology systems, processes and training. Othersdo not. It often depends on how a service provider connects to theagency's office, and whether the solution requires the agency tomigrate to another system or continue to use their own.

Often the most painless and effective outsourcing solutions donot require systems or processes changes, which means the learningcurve takes place with the service provider, not the agencystaff.

Find out the typical length of time that outsourcing solutionstake to implement, compare costs between solution providers, andask for references to learn about other client experiences.

o Step 5: Winning Internal Support.

Critical to the success of any outsourcing project is thesupport and buy-in of an agency staff. This is why outsourcingsolutions that involve downsizing do not make sense for small- andmedium-sized agencies.

An agency's staff needs to understand the objectives behind theoutsourcing project–that it is designed to enhance their positions;make their work more interesting by stripping out the routine,monotonous and low-value tasks; and consequently raise theirproductivity and impact within the organization.

Management needs to provide clear direction, be responsive toquestions and concerns, and reassure staff that the outsourcingsolution is designed for their individual benefit as well as forthe agency as a whole.

o Step 6: Do The Due Diligence.

What is the track record of the specific service provider? Lookat the firm's existing clients and find out what were the concerns,challenges and solutions they went through, and whether there hasbeen a net improvement to top- and bottom-lines since the servicehas been provided.

Some service providers will provide, at no obligation, freetrials for prospective clients, to demonstrate how the solutionwould work specifically for an agency's task requirements. Be sureto clarify what is involved in such a trial to determine whetherthis can be accomplished with minimum inconvenience to regulardaily operations, and to set performance metrics.

o Step 7: Do The Math.

It is a given that the economics have to make sense. In thisrespect, offshore solutions can offer the best returns oninvestment if quality control can be maintained.

Agency managers need to know their current fully loaded costs ofdoing the work in-house–including salary, benefits, hiring,training, management supervision and attrition–and compare thesecosts to your service provider's solution.

Besides purely financial gains, there may also be intangible yetsignificant benefits to outsourcing, such as the greater ease ofadding additional capacity to your operation by documentingworkflows, and by placing the burden for hiring, management andquality control on the service provider.

By following these seven principles, agency owners and managerscan generate substantially greater confidence about pursuingoutsourcing as a means of making their agencies more efficient,more competitive and more profitable.