Over the last ten years, insurance process outsourcing has evolved as a potential support to meet the market needs with its distinctive offerings. In most countries especially the fast developing nations, the outsourcing providers have applied different approaches to determine and serve the needs of the clients. These days the providers can be grouped or classified into three prime categories i.e. Traditional, Transactional and Strategic.

In the traditional model the company agrees to delegate some of the tasks to the outsource provider and get those tasks accomplished to a defined level. The most important advantage of this type of outsourcing is the wage arbitrage. The tasks are performed with the help of trained staff which is generally off –shore to monitor the capital investments and the benefit is mostly the difference in the cost to accomplish these tasks within the house as opposed to by the outsource provider. This type of outsourcing can also help reduce the internal staff’s workload, providing them with ore time resources to shift their focus on to higher value work depending upon their type of tasks they outsource. Traditional outsourcing also helps decrease the dependency on the hard to find and retain junior staff of the company, but for the major part, its focus is only the wage arbitrage.

The transactional model of outsourcing is prevalent in resolving certain specific issues, which include situations like processing and entrepreneurial bottlenecks. A classic example of a similar situation could be a company backlog on policy checking in an insurance company. Such situation can enhance a company’s risk exposure and is often non-compliant with the regulations. At the most, the company may opt to solve the backlog or the specific issue by outsourcing its resolution. The benefit is vice versa that is wage arbitrage as well as resolution of the current issue.

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