Outsourcing of Insurance Claims: A U.K. Case Study

Contemporary business outsourcing has extended beyond manufacturing to include service sector industries, including insurance. There are developed theoretical arguments that both support and reject insurance claims handling as a service that should be determined by the market and outsourced where possible. Indeed, insurance has a tradition of using professional loss adjusters to negotiate the settlement of both commercial and personal lines claims. There appears, however, to be little empirical research to evidence either the success or failure of approaches to insurance outsourcing. This exploratory study adopts a case study methodology using a major U.K. insurer. Findings indicate a significant return to in-house claims handling but also point to advances in the professional exercise of bulk purchasing power in the provision of indemnity. Possible explanations for this behaviour are considered and an industry-wide survey is suggested.