A perfect fit

The insurance industry's fondness for outsourcing has extended to HR. Hugh Morris looks at this growing trend and assesses the benefits for insurance companies

During recent years, HR outsourcing has become increasingly popular within the insurance sector. Growing numbers of insurance organisations are expressing a keen interest in moving aspects of their HR function to an external provider. So what are companies getting for their money and what benefits of outsourced HR are driving this trend?

One obvious advantage is cost reduction. A provider will restructure an insurance organisation's HR processes to minimise cost, and can generate extensive savings through aggregation of HR infrastructure. For instance, a large broker with offices throughout the UK may have developed a network of several distinct HR processing centres. An outsourcer can integrate these expensive resources into one central, and more cost-efficient, processing site.

Service improvements

To appreciate the benefits of outsourced HR, however, it is vital to realise that cost savings are only part of the picture - an insurance company can also expect to benefit from a significant improvement in service.

It is not entirely true that an HR outsourcer delivers service improvements primarily by deploying specialist technology - fit-for-purpose technology is essential for any HR outsourcer but as an enabler, rather than the complete solution. Genuine transformation of the HR function must, therefore, be achieved by transforming the HR employees themselves.

HR employees often feel that their back-office role is marginalised, and a largely administrative, non-creative job. And if they are neither satisfied nor stimulated by their job, their HR role will suffer.

An outsourcer's job, if done well, is to transform an insurance organisation's HR staff into highly-motivated entrepreneurs. The employees must no longer be considered a non-core section of their company, but as actually delivering a service - human resources - back to the company. This creates a service-focused mindset, centred on achieving measurable performance improvements, effectively changing HR from being a back-office operation to a front-office one.

Once the HR department is focused, it is more keen to improve. Driving for service improvements creates a far more creative, strategic and entrepreneurial role for HR employees. When no longer marginalised, the HR team delivers service improvements that will be recognised and encouraged by both the outsourcer and the insurance organisation.

An insurance organisation outsourcing its HR function also stands to benefit from the specialist knowledge of the outsource provider - whereas HR may be only one part of an insurance organisation, it is the entire focus of an outsourcer. As it has access to far greater resources than an in-house team, its knowledge and expertise will be correspondingly greater. One of the key benefits of outsourcing HR is to tap into this bank of knowledge.

Double expert

To gain maximum advantage from the relationship, however, providers should be both an HR and insurance expert.

A specialist HR outsourcer can also bring institutional experience of the insurance industry that an in-house team is unlikely to have. As an outsourcer's responsibilities are likely to include talent management, recruitment and training, insurance expertise can significantly boost the delivery of these services. Experience of managing HR for a range of insurers will, for example, help an outsourcer add value in the recruitment and training of underwriters.

An outsourcer's level of insurance experience is also vital when addressing regulation within the insurance industry. For instance, an HR provider can use this knowledge to ensure that employees comply with the Financial Services Authority's regulatory requirements. This includes introducing processes to check experience and skill levels during recruitment, and providing training, supervision, assessment and recording to ensure that every employee continues to be competent to do their job.

An additional benefit of the HR outsourcer is to provide vital assistance when an insurance organisation expands internationally. For example, Xchanging recently supported Tokio Marine's move into the London Market by managing its HR during the transition.

Pioneer teams in this position face a pressurised and difficult period as they establish their organisations in a new territory.

It is, therefore, critical at this point that time-consuming HR administration takes up as little valuable time as possible. Outsourcing this function can relieve the pressure.

An HR provider's knowledge of the local environment, including local employment laws, job markets and regulation, will be invaluable for the new office. Outsourcing will allow the HR function to hit the ground running, rather than spending precious time and resources becoming acclimatised to the new territory.

Repatriating workers

Outsourcing can also manage the complex process of repatriating workers, handling everything from work permits and tax to accommodation.

The insurance sector can expect to see significant growth in HR outsourcing during the next six to 12 months. As organisations see substantial benefits being delivered, outsourcers will be able to provide HR improvement to a broad spectrum of the insurance industry.

- Hugh Morris is chief executive officer of Xchanging Human Resources Services.

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