A year ago I was in Phoenix to participate in one of the sessions at the spring SOA meeting. I was given five minutes to make a point. While five minutes is not a lot of time, it was more than enough time to make a point, especially if no one else is debating you. To celebrate my five minutes of fame I have reprinted my brief, yet scintillating talk. The point I was trying to make was underwriting needed to become an insurance company’s strategic intellectual asset. Of course, re-reading what I wrote/spoke a year ago, I never mentioned my point in exactly that fashion. Not that it mattered. After all, I was talking to a bunch of actuaries.
Society of Actuaries Life 2007 Spring Meeting
May 10th Session 43
Speed Underwriting: At Least 10 New Ideas in 90 Minutes
Strategic outsourcing represents a significant shift in the way businesses operate to stay competitive in the global economy. Outsourcing strategies have evolved from short-term tactical cost savings to higher-level strategic initiatives that drive revenues and profits. Cost reduction is tactical, not strategic. As insurance companies focus on core competencies and migrate away from fixed cost to flexible variable cost models, outsourcing becomes more and more attractive. Outsourcing must be pursued on a partnership basis. The buyer should get excellent service at a reasonable cost and the provider should make a profit or service quality will suffer.
Strategic outsourcing begins with careful planning. Explore your strategic options for the current reality: a supply and demand imbalance in underwriting talent that will persist for many years to come. Downsizing and demographics have combined to create the current reality. What are your company’s strategic plans to attract, acquire, and retain talent? What does your company’s long-term underwriting training program look like? Does your company have a strategy to capture its underwriting knowledge before that knowledge walks out the door?
This reality is not a short-term threat. Unfortunately, our minds do not perceive longer-term threats because the human mind is not equipped to comprehend the modern world we have created. Decades of downsizing and the aging of the Boomers are simply two drivers of strategic outsourcing.
Skills and knowledge can be taught. Talent must be acquired. And talent needs to be matched with the work to be done. The scarcity of talent demands different approaches.
Combined intelligently, your company’s core competencies plus extensive outsourcing strategies can improve returns on capital, mitigate risk, provide greater flexibility, and make you more responsive to the needs of your customers.
Disclaimer: Strategic Outsourcing Program LLC Edmond, Oklahoma is not me. I was doing a Google search with the term “strategic outsourcing” and I found this company based in the same town I live in.