More Carriers Turning to IT Outsourcing

Outsourcing decisions are always difficult to make, particularly when you add in the social and political factors that arise when an insurance carrier decides to outsource some of its IT work to another company.

Finding a partner to perform some of your company's business processes has become quite common, but an increasing number of insurance carriers are turning to outsourcing for IT projects as well.

I recently interviewed Leah Hollstegge, a director of the Ward Group, on this very subject and you can hear the information on our podcast page (or check out the Ward Group homepage).

The initial love affair companies had with outsourcing almost always boiled down to saving money, but Hollstegge reports that no longer is the case, at least for IT departments. In fact, over half the companies Ward Group surveyed reported negligible cost savings from IT outsourcing.

So why bother if you aren't going to save any money? Outsourcers often provide better performance in many of the functions formerly done in-house. Again, the numbers are eye-popping. Over three-quarters of those surveyed by Ward Group reported seeing performance improvements.

It says a lot that the standard of performance has increased over the years among IT outsourcing firms to the point that so many companies believe they can turn to others to do the job better than their own employees.  

As Hollstegge points out, regional carriers don't always have access to specialized IT resources. In addition, the increasing volume of business for outsourcers creates even more efficiencies for everyone involved.

It will be interesting to see how insurers continue to address their shortcomings in the future. Will they focus more on internal development of talent, or will they look outside their four walls for help. I'd love to hear your comments on the steps you and your IT department are taking.