For 20 years, the offshore case in reinsurance servicing wrote itself.
Executive Summary
Saving on labor costs was the bargain that built the offshore model for reinsurance brokerages and other insurance industry participants. That logic held for two decades, but the firms getting the most out of offshore now have stopped treating cost as the design principle and started treating accountability as one.SSA & Co. Managing Director Brian Nordyke explains in the second part of series of articles that aims to help insurance and reinsurance industries to modernize. The series is based on observations made over the course of his engagements with major reinsurers over the past several years.
Read Part 1: Why Reinsurance's AI Pilots Don't Scale
Processing volumes were climbing; margins were under pressure; and a large share of the work—for example, contract setup, premium bookings, claims entry, cash matching—was repetitive and rules-based. Moving that work to lower-cost hubs in India, Eastern Europe, Latin America and elsewhere freed onshore teams to spend their time on complex, client-facing servicing, and it took real money out of the cost base while doing it.
That bargain generally worked.
The metric that justified the original move—cost per person, or cost per transaction—became the metric that governed the model and drove decisioning. Every decision that followed ran through the same filter: which team gets which book, where the next hire lands, how a hub was judged a success. The answer was always some version of what is most cost-effective.
However, designing an operation around labor arbitrage above all else produces a predictable set of problems outlined below.
Diminishing Returns of the Legacy Offshoring Model
