Rethinking Outsourcing in the Age of AI
How AI is rewriting the economics of outsourcing in the insurance industry. What previously required 50 FTEs offshore can now be executed by an agentic system in milliseconds.
For the last three decades, outsourcing to lower the cost of labor was the default playbook for many tasks inside the insurance industry (and many other industries). The logic was undeniable: if you wanted to protect margins and scale operations, you engaged in outsourcing.
You moved repetitive, high-volume tasks—claims intake, policy checking, data entry—to markets where labor was cheap. This division of labor really made profound impacts on operating costs, which allowed insurance businesses to protect profits and grow their businesses.
Does that logic still hold?
The unit economics of the insurance industry might have fundamentally shifted and the causative factor came from outside the industry. After building agentic systems to automate many of these outsourced workflows, I believe Artificial Intelligence may have broken the traditional outsourcing model.
The AI Tipping Point
What previously required a team of 50 FTEs offshore can now be executed by an agentic system in milliseconds (when built and trained correctly). These systems have reached a tipping point, where accuracy rates are at parity with human operators; however, the turnaround time is so many orders of magnitude smaller than the outsourced approach that I believe this will become increasingly inevitable.
The carriers and brokerages that recognize this shift, and move to re-shore their operations via AI, might be able to define the next decade of the industry. Those who don't will remain tethered to a linear cost structure that is rapidly becoming obsolete. Not saying it's necessarily a bad decision, but the risk of not incorporating AI into this space might be too high now.
The Legacy BPO Model
The legacy Business Process Outsourcing (BPO) model was built on a simple premise: Human labor is expensive here, but cheaper there.
However, even the most efficient outsourcing model creates a linear relationship between growth and cost. To process 20% more claims or underwrite 20% more submissions, you generally need 20% more bodies or time.
The Human Latency Problem
Even the best offshore teams have physical limits on typing speed, reading comprehension, and cognitive processing. Turnaround times are measured in weeks; queues build up; and exception handling creates bottleneck loops between the onshore and offshore teams.
AI Decouples Revenue Growth from Headcount
At Soter, we have moved beyond theoretical pilots. We have deployed AI-driven workflows into production that automatically handle end-to-end processes previously managed by offshore teams.
AI collapses the timeline:
Zero Latency
Workflows run in seconds, not weeks.
Zero Downtime
No shift changes, no handoffs, no holiday delays.
Zero Attrition
No re-training costs due to turnover.
Re-Shoring with AI Is a Control Play
The hidden cost of outsourcing has always been the loss of control. When you ship processes overseas, visibility diminishes. You cannot audit every keystroke, you cannot instantly implement new underwriting guidelines, and you often discover "process drift" only after an E&O event occurs.
Re-shoring with AI is a control play, not just a cost play. When you bring these processes back inside your digital walls via AI:
- Auditability: Every decision, extraction, and action is logged. You have a 100% audit trail for compliance.
- Agility: Updating a rule set or underwriting guideline happens instantly across the entire system.
- Consistency: The model does not have "bad days." Compliance becomes a hard-coded feature, not a training goal.
The New Unit Economics
Outsourcing was the hero of the last twenty years because it lowered the floor on costs. But in the 2020s, that floor is still high compared to AI.
With BPO, you are paying for:
- • FTE salaries
- • Management overhead
- • Vendor margins
- • Training costs
- • Rework and coordination
With AI, you compress that stack into:
- • Compute costs
- • Model integration
- That's it.
Instant Elasticity
When a CAT event spikes claims volume, you don't hit a capacity wall. You aren't scrambling to hire temporary staff or paying overtime premiums. The system simply absorbs the load, scaling up instantly to meet demand, and scaling back down just as fast.
The Reality Check
This isn't about futurism; it is about the current competitive landscape.
Labor is no longer the limiting factor—speed and precision are. AI is objectively faster, more elastic, cheaper, and more accurate than the lowest-cost human alternative.
The "outsourcing advantage" may have eroded over night. The leaders winning today aren't looking for cheaper humans; they are building autonomous systems that render the need for cheap labor irrelevant.
See How SoterAI Re-Shores Operations
Discover how carriers and brokers are using SoterAI to automate workflows previously handled by offshore teams—delivering faster turnaround, better control, and dramatically lower costs.