The focus of this three part series is for the reader to gain insight into and knowledge about managing a smooth and seamless transition for outsourcing claims business processes. Part 1 concentrates on the upfront gathering of current and future requirements, the Request For Information (“RFI”) and Request For Proposal (“RFP”) process, the selection of the “right” vendor, and a brief on contract negotiation. Part two will focus on the development, testing, and conversion that takes place between both organizations, and some of the pitfalls to avoid. Part three will focus on maintaining the long term partnership relationship with your vendor.
Outsourcing for many Insurance and Financial Services organizations is viewed as a strategic tool for bringing about a more productive, cost effective, and profitable business. The key benefit to outsourcing a segment of a business or an entire business unit is to enable the organization to focus on their core competencies and deploy resources with regard to these core competencies.
When the strategic decision to outsource has been made, there are plans and best practices organizations must follow in order to guarantee a successful, smooth and seamless transition. Foregoing any of these steps could lead to a potential disaster and often times a long, drawn out process.
Detailed Business, Functional, and Technical Requirement
All too often I’ve seen organizations fail at one of the most important steps in the process, creating a complete set of claims business and functional requirements, documenting well defined workflows, and detailing technical and infrastructure reviews and requirements. Organizations need to allocate the right amount of time and resources upfront to gather and document these requirements and workflows. Unwilling to do so or short-changing the process will lead to a long and expensive outsourcing transition.
You maybe asking yourself, “Why is this step so important?”
The answer — the detailed documentation sets a strong foundation for all activities and processes that follow, both within your organization and eventually with the outsourcing organization you select. The goal here is to achieve a clear, detailed, and descriptive understanding of your claims business. As daunting as this may be the benefits of having your claims processes and workflows clearly defined outweighs the many pitfalls you will encounter should you not execute this step.
Selection of the Outsourcing Organization That Fits Your Needs
Finding the right organization to administer your claims business is critical to the success of your outsourcing strategy. But how does one find which organization is the “RIGHT” fit for their business? By creating a high level Request For Information (“RFI”) followed by a detailed Request For Proposal (“RFP”).
If your organization takes the time upfront to detail the business, functional and technical requirements, then your RFI and RFP are nearly complete. Generating the RFI and RFP is a matter of taking the information documented and formatting it apprpriately. The RFI is then used to narrow your search from a long list of possible outsourcing organizations to a handful of potentially qualified options. Once you have narrowed your search, the RFP becomes your driver. It helps to further narrow the selection process to 2 or 3 organizations.
Figure 1 — RFI / RFP Process
Once the outsourcing organization is selected the contract negotiations begin. The outcome of this step is to finalize a contract that both organizations can agree to. The focus here is to define who is responsible for what, and when. Items that are imperative to the contract are:
Service Level Agreements (“SLA”)
Vendor modifications and who pays for them
Escalation procedures for disputes and interpretation of the contract
Cost basis per transaction
Contract negotiations are difficult and time consuming. If done right this will set the stage for a successful transition of business and for a long term arrangement between your company and the organization you selected to handle your business.
Figure 2 – Phase 1 Tactical Roadmap