Transforming insurance operations: third-party service providers vs traditional shared service centers

While traditional captives have helped US insurance carriers benefit significantly from labor arbitrage, third-party service providers are now emerging as an attractive alternative thanks to their increased insurance expertise, investment, and technical capabilities, coupled with a shift in market dynamics.

A few key reasons for this shift are:

• Greater financial pressure from labor inflation, the rising costs of claims, and the need to modernize technology that has reduced the cost benefits of captives.
• Sporadic investments in technology rather than continuous improvement, which has meant that third-party service providers are ahead of the game in digitalization and intelligent automation.
• High rates of turnover (and a growing backlog volume) due to market demand and labor shortages. Carriers have struggled to attract new hires. Vikas Bhalla, EVP and Head of Insurance, EXL and Dennis Winkler, Insurance practice leader at ISG discuss the evolution of captives and strategies that carries can adopt to optimize costs and improve CX.