Litigation in insurance – to in-source or to outsource?

Jun 27, 2018 | Blog

There seems to be a never-ending cycle of outsourcing and then insourcing of services, particularly in the insurance industry. One moment outsourcing seems the way forward, then suddenly it’s an about turn. Over the years the key drivers have essentially remained the same: as an organisation how do we increase efficiency and reduce costs whilst improving customer service or at least not reducing satisfaction levels and retention?

It was roughly 20 years ago when the trend towards outsourcing gathered pace. This included claims processing, policy processing, customer helplines and support services – essentially anything highly transactional with a perceived level of simplicity. Anyone who has worked in the insurance industry now appreciates just how complex “simple” processes can be to get right.

What are the rewards for outsourcing? A case can be made for a more flexible workforce, reduced payroll costs, reduced IT and infrastructure costs. Organisations with key competencies to outsource areas such as litigation, personal injuries, fraud and conversation management are now in the marketplace. So, what can go wrong…?

Whilst many outsourcing contracts work extremely well, and are served by professional and dedicated companies, unfortunately sometimes outsourcing is not the most efficient financial solution. Third parties need to make a margin, insurance companies and those in the insurance supply chain, lose the ability to invest in internal capability, with a knock-on effect of the real or perceived loss of control and Business Intelligence. There are ever-present pressures from the consumer for enhanced service levels to be applied consistently to a company brand standard, and there can also be regulatory reasons.

One area that is consistently outsourced to professional organisations is litigation. After all, once it has commenced you already know you will be in a world of protracted negotiation, litigation and cost escalation. As an organisation you will need to protect your reputation, your brand, your duty to shareholders and of course, your bottom line.

But consider this – how much of the litigation process on a claim actually requires qualified solicitors or barristers? After all, whilst the vast majority of legal firms work tirelessly for their employer, much of the process is a case of “simply” risk and law assessment, perusal of claim and counter claim, timely response to communications and, hopefully, an out of court settlement which suits all parties. Or better still, it is only when the basics fail that the process requires qualified professional intervention – assuming, however, that existing internal systems can handle the processes historically outsourced.

As a company we learned a lot from our work implementing our ICE Claims administration system for a specialist motorcycle insurer. With motorcycles involved, the book of business would be expected to have a higher than average personal injury / litigation footprint than a composite motor insurer. Over the years, they had outsourced their litigation processes – but only a small element of the litigation process actually required professional legal experts. Due to the flexibility of their in-house claims system, they were able to handle the claims litigation processes in-house through a new portal. The advantages of using an internal litigation portal included:

  • A flexible end to end process function which is estimated to save in excess of £1 million a year compared to full litigation outsourcing
  • Clear visibility on the outcomes of their litigation cases, which ensures that case handling and customer service are of the highest levels managed within brand guidelines
  • Detailed MI on demand in the format required by the business to make informed decisions
  • An ability to automate task and follow up actions through the claims system

So, whilst outsourcing can undoubtedly provide a tactical or even strategic solution to your insurance business, thinking slightly outside the box can bring rich rewards with the right claims administration system, investment in key competencies, automation and above all, the ability to record and report performance.

How would your business benefit from a seven-figure cash injection annually straight to the bottom line?

For more information contact ICE InsureTech 

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