Global insurance companies, in general, have been relatively slower adopters of outsourcing (both IT and BPO) compared to banking and financial services. However, with severe competitive pressures and a stricter regulatory environment, the industry has been more open to automation and business process outsourcing. Insurance carriers are under pressure to bring newer and more innovative products to the market quickly and improve profitability.

Heading the list of priorities to meet the above objectives is the need to increase operational efficiency by underwriting new products faster. Moreover, an acute talent crunch is forcing insurance carriers to look at markets such as India and the Philippines to bridge the demand-supply gap for professionals. Estimates suggest that the US now has less than 100,000 qualified underwriters and 10,000 actuaries.

The underwriting process and outsourceability

Underwriting is a rational, but complex process. However, with greater use of technology and process automation, manual intervention can now be considerably reduced. This differs by the type of product being underwritten - motor insurance policies are much simpler to underwrite compared to life insurance policies, and consequently easier to outsource.

So far, offshoring of underwriting services has been restricted to captives of large insurance carriers due to data security concerns. "Underwriting support" - the process that leads to the underwriting decision - has been more easily outsourced to third parties. However, some of the larger third party vendors are now reporting greater outsourcing of underwriting from insurance carriers in the West. In our report "Insurance Outsourcing: India Gains Momentum As Offshoring Intensifies" published in October 2006, we have predicted an above average growth rate (greater than 30 percent CAGR) for higher-end services like underwriting, actuaries and risk management.

The potential for India

The potential for India to develop expertise in this area is huge. Besides the advantage of English language, Indians are by and large proficient in Mathematics, a skill that is essential for underwriting and actuarial proficiency. However, it is difficult to produce quality underwriters through just training or certifications. Underwriting skills are gained from many years of experience and judgment, and time becomes an important ingredient in developing a skilled underwriter.

The industry in India so far is facing a huge dearth of skilled underwriters that can be leveraged by the outsourcing industry. Moreover, the domestic insurance industry, which has been opened to private participation only in the last decade is witnessing explosive growth and is competing for the small pool of underwriters currently available. But, opening up of the sector and greater opportunities for insurance professionals means that the industry is aggressively investing in education and training.

There are now specialized institutions like the National Insurance Academy or offering a wide range of courses and training in a variety of insurance subjects. As the domestic insurance industry matures, the problems of availability of skilled and experienced insurance manpower may reduce. This will help create a favorable eco-system for the insurance offshoring industry in India, and bring huge gains to the Indian insurance BPO industry in the next two to three years. .

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