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Can agencies improve operating performance in a softening property and casualty insurance market? A recent property/casualty forecast by Conning Research & Consulting predicted a softening market through 2007, despite losses incurred during the 2005 hurricane season. Agency principals describe rate reductions, pricing pressures and increased competition leading to decreasing revenues and profit margins. But in spite of these challenges, some agencies are finding new ways to manage and even thrive.
Traditionally, when faced with softer markets, agency principals find themselves forced to trim marketing budgets or let go of staff, but reducing visibility and the ability to process accounts undermines the need to increase volume, improve service quality and improve competitive positioning. While automation can improve efficiency and costs over the long term, it often requires a considerable upfront investment and carries risks that the new system may take time to deploy and may involve a period of disruptions.
Another approach that is enabling managing general agents, retail agents and program administrators to increase revenues and operating profits even in a soft market is to employ highly skilled, low-cost offshore staff members who connect remotely to an agency's server to do routine processing tasks. English-speaking college graduates located in China, the Philippines or India can learn agency systems and do overnight insurance processing remotely as they are an extension to the clients' team. This "remote staffing" approach frees existing agency employees to drive more business and renewals.
Consider that surveys show that most customer service representatives spend twice as much time doing computer processing as on the phone with customers. By reducing the processing workload, producers are able to spend more time in face-to-face or phone meetings with customers.
One fast-growing program administrator, Lighthouse Underwriters L.L.C., initially contracted remote staffing services to handle billing after a staff person with those responsibilities left the company. After seeing initial success in handling that task, the company expanded the remote staffing services to include submission processing and policy issuance with the result being a significant improvement in customer responsiveness.
With repetitive, back-office tasks handled offshore, the Lighthouse staff is more focused on revenue-generating, customer-service activities. What does that mean in today's soft market?
"We have seen a direct impact on our efficiency and bottom line," said Lighthouse Senior Vp Sean Gormley. "Enabling our own staff to focus on productive-based tasks, as opposed to a lot of the repetitive tasks they had been doing, is especially important in a soft market where margins are being squeezed. We're able to add new programs and expand top-line growth, while lowering related operating costs."
Other advocates of remote staffing report that this approach relieves many of the usual hurdles related to recruiting, interviewing, training and retaining staff--tasks that are draining of management time and invariably challenging and expensive for agencies. These advocates point to the emphasis that a remote staffing company places on learning and documenting client processes, on training and quality control. This makes agency growth scalable, consistent and secure at low cost. Moreover, agencies typically see their fully loaded staff costs drop by 40% to 60% when they utilize talented, offshore processing specialists.
Remote staffing is increasingly being viewed by MGAs, retail agents and program administrators as a viable solution to boost operational performance, whether in favorable or tougher economic environments. And it is an approach that has proven that it can facilitate agency growth through increasing revenues and lowering agency costs.
Dan Epstein is chief executive officer of ReSource Pro L.L.C., a New York-based firm specializing in remote staffing for the insurance industry.