Insurance carriers weighing the issue of whether to outsource IT or some of their business processes have debated everything from the political ramifications of such a move to the position of the U.S. dollar in the world marketplace. Whether it is despite or because of these issues, industry observers, such as John Varricchio, partner with Ernst & Young and a leader in the insurance operations improvements practice, see "a dramatic uptick" in interest among insurers. "As companies streamline and centralize their processes and operations, it leads to easier outsourcing decisions," he says. "You can streamline the complexity, and that makes it easier to outsource elements of the business."

One of the reasons for the surge in interest is because cost savings still can be achieved, particularly as other geographies have emerged to compete with India for outsourcing dollars. "Other pockets of expertise have opened up around the globe," says Varricchio.

Insurers have to be careful they get everything they bargain for when they make the decision to outsource. Part of negotiating an outsourcing agreement is to agree on the services that will be provided, how the work will be measured, and how those measurements will be monitored, according to Jeff Argotsinger, senior vice president of Swiss Re. "At the end, we have to know what's going to happen if they don't meet the standards," he says.