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Why the insurance sector should consider ‘lift-outs’

21 May 2024

The insurance industry is currently facing a sea of challenges, including macroeconomic uncertainty, the war for talent, and increased environmental disruption. Amid these challenges, insurers seek operational flexibility to ensure their longevity, scalability, and competitiveness.

The question of how best to manage back-of-house operations is natural in this context, and insurers typically opt for one of two paths: investing more heavily in their in-house administration teams and technology or outsourcing to a specialist third-party provider equipped to handle those functions on their behalf.

While outsourcing has a long list of advantages and is an ideal option for small to mid-sized firms, large insurers might prefer an alternative.

In such cases, ‘lift-outs’ provide a valuable third option. This post will describe the basic function and benefits of lift-outs for insurers, including who should use them and why they’re often the best option for large firms.

What is a lift-out?

A ‘lift-out’ is the process of transferring an existing in-house team to a specialist provider while retaining the team’s accumulated knowledge and experience. This allows the insurance company to reduce the need to maintain their HR, payroll, and other administrative functions, along with the management of the underlying internal processes.

In essence, lift-outs combine the benefits of in-house expertise with outsourcing efficiency.

Why use lift-outs?

Many large insurers have established robust in-house teams with specialised knowledge, while similarly the technology and systems to manage their back-end processes may need capital investment to remain competitive. Lift-outs offer a way to maintain company-specific knowledge and provide access to state-of-the-art technology while allowing the company to scale back the cost of retaining personnel and enjoy many of the advantages of outsourcing.

Rather than making internal teams redundant and phasing out in-house technology systems, lift-out providers can ‘acquire’ the insurer’s team that supports the underlying business process and incorporate them into the service provider’s ecosystem.

This approach offers several advantages to insurers:

  • Flexibility: Lift-outs allow businesses to scale operations up or down based on their needs, without the complexity of internal personnel management
  • Data security and control: Many reputable service providers are governed by strict data security and process control procedures through regulatory oversight and traditional ISO and ISAE/SOC audits, ensuring enhanced data security and mitigating risks associated with external data handling
  • Cultural continuity: Lift-outs allow employees to stay with their original teams, preserving the company culture and internal dynamic while also providing them with longer-term career development within the larger service provider

The core benefits of lift-outs for insurance

Lift-outs are inherently flexible, covering administrative functions and resourcing (accounting, corporate secretarial, invoicing, accounts receivable, and onboarding) as well as data analysis and reporting functions.

Using lift-outs for insurance business processes helps firms to:

  • Alleviate staffing pressures: With much of the insurance sector facing skilled resource challenges, lift-outs can help manage the talent gap by retaining legacy knowledge while also providing a fertile training environment that helps to ensure continuity as and when staff resign or retire
  • Reduce operating costs: Lift-outs reduce the need for large capital investments in technology and staff recruitment, allowing insurers to divert resources to more critical parts of the business
  • Establish long-lasting relationships: Your teams will still feel like your own—because they are

Who should use lift-outs?

Lift-outs are particularly well-suited for any size firm with in-house administrative functions that are non-core to their overall business strategy and want to avoid making substantial new investments in technology and personnel management. Ideal candidates might include medium—to large carriers, captives, MGAs, and brokers.

A lift-out might be the best option if your firm values:

  • Preserving data and inherited knowledge
  • Good cultural fit and trusted communication
  • Continuity for other stakeholders
  • Cost consciousness
  • Reducing operational risk
  • Improved career pathways for administrative teams

Lift-outs can fill the gap if an in-house team is struggling to hire replacement staff or scale with the business’s needs. They can also transfer numerous non-core processes (administration, regulatory) outside of the firm and transition teams from cost centres to productive, well-placed resources.

IQ-EQ has a well-established specialist knowledge base and has helped other clients retain their internal teams while reducing costs. Get in touch today to learn how our team can support yours. Contact us here.

Working with IQ-EQ has been seamless – you and your team understand our business, advise us appropriately, and handle your side of our collective partnership so that we can focus on making good investment decisions. Evan Gibson SVP, Merchants Capital

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