Companies looking to maximize efficiency and grow have a great opportunity to optimize and scale their business processes without a heavy investment in hard and soft resources. This is accomplished by delocalizing traditionally internal operations to positively influence product and service offerings...and improving the business model itself.
Third-Party Administration (TPA), provides a strategic path for insurers who want to excel in today's environment and position themselves to take advantage of future opportunities.
The insurance industry faces intense market pressures from many angles - new entrants are quickly exploiting new technology with niche offerings while consumers are clamoring for the intuitive experiences that are now routinely offered by other industries. Third-Party Administration (TPA), or Technology-Enabled Outsourced Services, provides a strategic path for insurers who want to excel in today's environment and position themselves to take advantage of future opportunities.
What is "Tech-Enabled Services"?
Tech-Enabled Service companies exist in many different spaces but can be boiled down to this: business services companies that use modern and open technology to deliver something that is better, faster, and cheaper than if done in-house. Tech-Enabled Services are replacing the physical/on-premise delivery model with on-demand delivery models.
Benefits of Utilizing Third-Party Administration in Insurance
Flexibility and Scalability
Customer demands are changing faster than ever before due to rapid ascent of technology and greater demand for real-time information. To take advantage of evolving customer desires and rapidly adapt to market conditions, insurers need flexibility and scalability in their operations. Third-Party Administration, also referred to as Business Process Outsourcing (BPO), provides flexibility and scalability advantages to the insurance industry, often at a lower cost than maintaining internal operations and most certainly reduces valuable human capital that can (and probably should) be employed for more valuable endeavors.
By utilizing a technology-heavy Third-Party Administration service, like Input 1's Billing-as-a-Service, insurers can rapidly and cost-effectively enhance their billing and payments services, bringing new products to market faster, and create economies-of-scale that increases profit margins with greater ease. An established third-party administrator already possesses the expertise, staff, technology, logistics structure, and resources that streamline and perfect the services they offer, whether it be billing and payments, claims, data management, human resource services, etc. Moreover, experienced third-party administrators have purpose-built APIs that accelerate integration with existing core systems and they can tailor their services to fit the nuances of carrier products.
To take advantage of evolving customer desires and rapidly adapt to market conditions, insurers need flexibility and scalability in their operations.
Through TPA, insurance companies and managing general agents can quickly scale their operations to satisfy changes in the organization's needs while significantly decreasing the transition time and cost to implement these changes. Also, for insurers looking to grow, they gain the flexibility to make business decisions without locking themselves into a long-term path because of logistical considerations attached to having these services in-house. Modern third-party administrators are cloud-based, omni-channel and do not require costly version upgrades.
Decrease in Operational Costs
As insurers navigate business cycles and the changing insurance market, decision-makers seek to improve the standing and productivity of their companies. Strategic reduction of certain expenses and reallocation of resources towards growth initiatives will yield greater efficiency and higher margins.
A significant cost to a company is the selection, education, and management of human capital. While billing is a core process, the human resources deployed to this process come at a very high opportunity cost when compared to the same deployment towards revenue generating efforts such as product innovation and enhanced selling techniques. Choosing a tech-enabled TPA vendor alleviates the cost of:
- Hiring internal staff or spreading existing staff too thin between projects
- Material, equipment, and additional office space
- IT infrastructure
- Expensive core software systems
Moreover, tech-enabled services are frequently charged for using a recurring-revenue billing model, including subscription, transactional, and other utility (volume of usage) based measurements. This means that adopters of these services can pay for them as they are used, with the revenue generated by the business as it grows, rather than making large capital investments up front.
The agility realized from Tech-Enabled Services creates a meaningful opportunity for increased efficiency and decreased costs.
Focus on Core Competencies
Core competency is an organization's defining strength, providing the foundation upon which the business will grow, seize upon new opportunities and deliver value to customers. While there are many avenues to gain a competitive edge in the marketplace, to ensure long-tem growth and success, an organization should identify its core competencies and then invest in those areas, focusing resources on building and maintaining the skills that contribute to the greatest success.
When we are talking about core competencies in this context, we are not talking about core processes (i.e., policy, billing, claims, etc.). Rather, we are talking about what makes a company unique. At Input 1, it is our thesis that the best outcome a company can have is when it retains its core competencies while finding how to best execute its core processes - and sometimes that means outsourcing them.
Further developing core capabilities requires significant resources and support from a company's decision-makers and management. A company seeking to develop its core competencies must identify abilities they do well or which provide a competitive advantage and build infrastructure to ensure success.
Partnering with a tech-enabled Third-Party Administrator allows a carrier to focus on growing their markets and increasing product profitability and quality.
We believe that partnering with a tech-enabled Third-Party Administrator allows a carrier to focus on growing their markets and increasing product profitability and quality. Focusing internal staff and limited resources on revenue growth rather than on operations will result in a higher ROI.
Benefits of Using Billing-as-a-Service (Baas)
Utilizing Billing-as-a-Service for billing and payment management is a way for insurance companies to differentiate themselves from the competition and focus on their core competencies of creating and selling great insurance products. BaaS can manage every step of a payment collection lifecycle while providing exceptional customer experiences, adaptable to each product and fully integrated into the carrier portal.
BaaS providers, like Input 1, provide the flexibility and cost-effectiveness to scale operations up or down based on variations in volume and market conditions. Adapting to fast-changing customer demands in a service industry is a crucial component to staying competitive and maximizing operational efficiency.
Furthermore, utilizing client-branded Billing-as-a-Service delivers and elevated agent and customer experience. Policyholders are looking for exceptional self-service tools when they have queries or require assistance. Agents are looking for quick answers to their questions and self-service tools to common tasks. With BaaS, insurers get all of this and more - without significant capital outlay and in a fraction of the time.
Tech-Enabled Insurance for the future
Companies face many challenges in their quest to improve business processes, decrease operational costs, and offer a seamless customer experience. A strategic way to gain a competitive edge in the market is to partner with a Tech-Enabled Services firm to manage an existing yet cumbersome core business process in a more efficient manner and focus on other initiatives that yield greater returns. The companies that move swiftly and decisively are likely to be those that win big. New revenue streams await insurers that search out and tap into digital. Shifting from reactive - indemnifiers of risk - to proactive partners to their customers.