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Insurance Companies in India rejig their structures
Life insurance companies in India are taking a hard look at their internal structures to remain competitive. Earlier this month, the insurance regulator brought in a wide range of changes which are super customer-friendly. This has however impacted the profitability of insurance companies considerably. The big change was in the ULIP (Unit Linked Insurance Plan) category which is combination of insurance and investment. Companies are now looking at off-loading their non-core activities to other companies who have the relevant experience for the same. The move is being considered by the leading private life insurance companies and will result in considerable cost savings for them. Process like analytics, handling of insurance claims and customer service are some of the areas which companies are exploring for off-loading to other companies. This will be a new trend for the insurance companies as the move has not been tried out by any player so far - at least not in a big scale in the life insurance industry. While the move will definitely bring down the costs, the impact on customers and the way customers view the companies which do this may have to be studied in detail. Just recently the health insurance companies did notice a considerable stress with TPAs (Third Party Administrators) who handle a good part of the claim process. The concept is not without flaws and customers might not take to it easily. In fact, a lot of health insurance companies now have removed the services of TPAs and do all the claims processing internally. It can an endless debate on the merits and de-merits of outsourcing parts of your business. But it goes without saying then economics favour outsourcing in the shorter term. As things stand, life insurance companies might test the waters by outsourcing customer service department and the study the impact before rolling out the process to more critical functions.
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