Insurance agencies face increasing pressure to improve efficiency and reduce costs while also competing for clients in a crowded market. One way for an insurance agency to address these challenges is to consider restructuring its resources and hiring remote employees to complete back-office tasks. To better understand how agencies can restructure their resources, we must first identify the sources of inefficiencies and where revenue is lost.
The Hidden Cost of COIs
Many insurance companies provide their customers with a statement of coverage, known as a Certificate of Insurance (COI). Typically, these are produced by an account manager. But did you ever consider how much it costs to produce these COIs?
Cost of Man Hours
The average mid-level account manager salary is $53,963 (this can vary a bit by state), which roughly translates to $27.00 per hour. Your insurance agency will also cover payroll taxes and benefits, so it’s not unreasonable to expect your cost to be roughly $35.00 per hour — a 17% rise from just two years ago.
On average, an insurance account manager can generate three COIs per hour, though more complex coverage types can take longer. This means that each COI will cost your business just under $12.00 to produce.
That might not sound so bad, but it’s easy to imagine how it can snowball once you complete many COIs. It wouldn’t be unusual for a client to need 50 or more COIs in a given year. Based on the above calculations, you’re looking at an annual cost of $600 for a single client.
Cost of Resources
The hard cost of generating these certificates is only one expense. If you operate a small-to-midsize insurance agency, you’ll likely need flexible staffing options to cover a variety of administrative tasks. The time spent generating each COI is better spent focusing on other processes, such as billing or compliance.
For that matter, if your account manager is out sick or on vacation, it can create a backlog of COIs that can bring your company’s efficiency to a grinding halt.
How Outsourcing Can Help
One of the primary benefits of outsourcing back-office tasks is that it allows agencies to focus on their core competencies. It also leaves the less critical tasks to specialists.
For example, rather than having in-house staff spend time issuing COIs, agencies can hire remote employees who are trained and experienced in this task. This can free up time for in-house staff to focus on other essential responsibilities such as selling insurance policies, servicing clients, and marketing the agency.
In addition to improving efficiency, outsourcing back-office tasks can also reduce costs for insurance agencies. Hiring remote employees can be more cost-effective than hiring in-house staff. First, it eliminates the need for office space, equipment, and other overhead expenses. Second, remote employees also have the added benefit of working from anywhere. This can help agencies tap into a larger talent pool and potentially find more qualified candidates.
But how can insurance agencies generate revenue by outsourcing tasks such as issuing COIs to remote employees?
One way is by taking advantage of the time and cost savings that come with outsourcing. By outsourcing tasks such as COI issuance, insurance agencies can reduce their internal costs and pass on some of those savings to their clients through lower fees or more competitive pricing. This can help agencies win more business and increase their revenue.
Another way that insurance agencies can generate revenue through outsourcing is by offering additional services to their clients. For example, an agency that outsources COI issuance to remote employees may be able to provide faster turnaround times or a more streamlined process for requesting and issuing COIs. This can be especially appealing to clients who need COIs on short notice or have complex requirements.
Insurance agencies can charge a premium and increase their revenue by offering these value-added services.
Finally, insurance agencies can generate revenue by using outsourcing to improve their overall efficiency and productivity. By outsourcing tasks such as COI issuance to remote employees, agencies can reduce the time and resources they spend on these tasks and use those resources to take on more business. This can help agencies increase their revenue by serving more clients and completing more projects.
Introducing remote talent into your agency’s overall staffing plan can also help solve additional challenges the industry faces.
Changing Staffing Needs and the Insurance Industry
In recent years, employers have dealt with the so-called “Great Resignation.”
Scores of employees have quit their jobs in search of greener professional pastures. But as the Harvard Business Review points out, the average monthly quit rate has risen since 2009.
Either way, employers and HR managers deal with staffing shortages in insurance agencies. And this also means changing workplace expectations that affect payroll and benefits.
Staffing Shortages in Insurance Agencies
While many industries have felt the strain of staffing shortages, the insurance industry has been hit unusually hard.
Currently, the insurance sector employs 1.56 million people, roughly 85,000 less than the pre-pandemic employment rate. More tellingly, 14% of insurance companies have reduced their staffing — but only 6% had planned on doing so. Lack of staffing can be especially problematic for smaller insurance companies or those located in small towns. These simply lack the resources to attract industry professionals to their community and are rarely equipped to offer the kind of salary and benefits that many account managers or insurance professionals have come to expect.
Compensation Expectations
The pandemic provided American workers with far more employment options than ever. A person living in rural Virginia can easily work for a company based in California, so long as they have a computer and a reliable internet connection.
Consequently, it’s easier for job seekers to locate positions that offer significant wages and benefits — there are isolated reports of insurance companies increasing salaries by $30,000-$40,000. Needless to say, it’s difficult for smaller insurance providers to offer the kind of compensation package that can attract and retain top talent.
Even if you could, using generous compensation packages to entice new hires can create inequality. It can also foster resentment among veteran office staff unless you increase salaries across the board, which is also cost-prohibitive.
Cutting HR Costs
As they say, good help is hard to find. But it doesn’t have to be. Partnering with a team of Edge remote employees gives you access to industry-leading expertise without having to spend a fortune on hiring an employee.
You can secure an Edge remote employee for a mere fraction of the cost of hiring a full-time employee. And you’ll never have to worry about creating a unique salary and benefits package. This also means you don’t have to bother with a lengthy onboarding process for new hires.
The insurance industry thrives on relationships. Relying on a team of Edge employees gives you and your current team the luxury of focusing on these relationships without the burden of introducing a new team member to your company and helping them integrate into the surrounding community.
Adopting ESG Criteria
Meanwhile, agencies are being pressured to integrate ESG criteria into their business model.
ESG (standing for Environmental, Social, and Governance) criteria demands that companies reduce their environmental impact, pursue corporate transparency, and promote equity and inclusion within their workforce.
In light of these developments, insurance providers may soon be expected to provide specific disclosure documents to validate their efforts toward ESG compliance. Producing these documents will require a more significant commitment to maintaining data and taking specific steps toward eco-friendly practices within their respective industries.
For example, in 2022, the U.S. Securities and Exchange Commission (SEC) released a proposal related to climate disclosure requirements that would obligate companies to document how they’re seeking to mitigate climate change risks and transition to a low-carbon business model. For auto insurers, this may include ways you’ve promoted a shift to electric vehicles or other low-emission cars and trucks.
How to Cut Costs Amidst a Changing Landscape
Perhaps the most significant challenge is that these regulations are constantly changing.
Insurance companies may find it difficult to stay up-to-date with evolving regulations and the impact of new technologies. Adapting to new demands can also take time away from other administrative tasks, not to mention your vital customer relationships.
By partnering with an Edge remote employee, you’ll gain access to industry experience and specialized knowledge that can keep you and your company on track with these increasing demands. At the very least, outsourcing your administrative tasks allows you to stay compliant without diverting resources away from your core tasks.
In other words, restructuring your office environment will allow you to delegate compliance issues to key personnel. This ensures that your team can focus on the revenue-generating tasks that make up the core of your business.
Getting Back in the Game
Hopefully, you now know better how insurance agencies can reduce costs by restructuring their resources through effective practices like outsourcing. One of the best reasons to consider outsourcing is that you can get out of the office and back in the game.
Think about your original motivations for starting an insurance business in the first place. Chances are you had a passion for helping people by offering them a little security in an insecure world. Don’t let that passion be swallowed by administrative concerns and other back-office busy work.
Your customers deserve what only you can offer them: your time, attention, and empathy. Reorienting your operations can guarantee you’re available to give these things to them.
