While economic indicators are starting to signal a slight recovery, the treacherous waters in which the life insurance and annuities industry has been treading have far from receded. Recent third-party expert statements paint a sober picture
These statements reflect a wider view that there is clear and present danger for the industry. But there is a life raft available for this highly riskaverse sector.
Business process outsourcing (BPO) represents a strategic and efficient option for companies looking to thrive in these tumultuous times. If implemented properly, BPO can be a fast and simple solution to rapidly reduce costs, help organizations survive the economic downturn and set the stage for future growth and expansion after the economic tidal wave subsides.
Rapid cost reduction is mandatory for companies trying to survive in the most challenging economic climate in over 60 years. But BPO delivers benefits which extend far beyond cost savings.
While insurance companies already outsource highly transactional processes such as claims and payments, new business processing and underwriting support, they can gain significant additional value by leveraging BPO for other processes. For example, outsourcing research and analytics for actuarial support can optimize pricing and more accurate premium calculations helping the company target additional consumers based on demographics, groups and risk profiles. A BPO provider with deep domain experience can support customer retention, cross sell and up sell initiatives and exploit new sales channels and entry into new geographies.
An area that can provide immediate business benefits and cost efficiency is policy servicing. For example, experience suggests that it costs insurance companies between $200 - $350 per year to service a U.S. life policy. A BPO provider with deep domain and customer support expertise can service the same policy for approximately $100 per year, representing annual savings of at least 50 percent. Let’s look at several case studies which demonstrate BPO’s value to insurance companies today
Annuities administration for a global insurance company
As a result of its partial offshoring of simple annuities administration-related tasks, one of the world’s largest insurance groups was experiencing significant error rates and longer response times which led to end-customer dissatisfaction. As a result, the company chartered WNS with delivering all activities related to its annuities administration, ranging from simple tasks such as change of bank details and issuing tax certificates to highly complex processes including reissuing retained payments to customers and performing audit work on the guaranteed minimum pension quotes built for the customer at the start of the annuity.
Leveraging its deep knowledge of the insurance industry and its experienced team, WNS was able to achieve:
24 processes for a U.S. top 10 financial planning, asset management and insurance company
A premier financial planning, asset management and insurance company with more than $450 billion in assets under management had just completed one of the largest spin-offs in U.S. history and needed to focus on its core product development and marketing. The company decided to turn to a BPO provider to deliver its servicing functions, requiring
1) the ability to transition the work of approximately 350 FTEs in six months
2) to maintain and significantly improve operational performance to bolster the confidence of the sales force distressed about the loss of the iconic brand name of the parent organization
3) to design an efficient program capable of handling 24 fragmented processes with significant variability and cyclical volumes
4) to develop a pricing structure with optimum client benefit which also incentivized the provider to drive continuous improvement;
5) to provide a robust security environment
6) to provide business continuity planning.
In its three year partnership, WNS has delivered
Ensure BPO is a CEO priority In uncertain times, sponsorship for critical initiatives such as BPO must come from the very top of the organization. Only the CEO can deliver the message that there are no other options for the business. If the commitment is not there, then the junior management sees implementation as optional, easily finding ways to opt out with spurious arguments. The prevarication of junior staff and their desire to protect their jobs can delay the delivery of savings, and jeopardize the success of the business.
When the CEO takes a positive decision and makes outsourcing a priority, significant success can be attained. For example, the CEO of a re-insurance company that was acquiring a closed books business mandated the outsourcing of all its operations. By doing so, the company was able to complete six conversions of policies to its new, single system within six months, and increase its policies under management by $6 billion in five years.
Approach outsourcing with an open mind Merely thinking policy renewals or rules-based transactions limits the extent to which BPO can be used as a “survive and thrive” tool for insurance companies. Smart insurance organizations have been outsourcing these types of processes for years. But the BPO industry has moved well beyond volume-based voice and data work into highly complex industry and insight processes – think research and analytics for actuarial pricing support, identifying customers’ proclivity to pay premiums or buy new policies in different geographies and socio-economic categories, sales support for customer retention, cross sell and up sell, or assisting financial advisors prepare portfolio analysis. Smart insurance companies collaborate with providers to determine ‘the art of the possible.’ They begin by determining what is core and non-core to their business.
In the insurance industry, core processes include product development, sales/agency administration and regulatory compliance. But beyond these, most SG&A and highly complex processes can be seamlessly transitioned and successfully outsourced to a provider with a proven track record and substantial insurance industry expertise.
Keep it simple
Speed to cost reduction with no diminution of quality should be the first and foremost objective of BPO as a survival tool. This is not the time to radically transform business processes, implement new enterprise technology, or put in the latest bells and whistles. It’s time to get the cost out, and fast. For example, in the insurance industry, instead of trying to integrate multiple policy administration or claims systems overnight, companies should outsource the operations of some of these systems – both IT and business processes – to a service provider and move to a single system over a period of time. There may even be opportunity to monetize some of these assets by entering into a right contract and financial model with a BPO service provider. Keeping it simple also means avoiding a wholesale overhaul of the business model at once. This does not mean that changes in workflow, or standardization of processes which can be accomplished during transition or shortly thereafter should be off the table. Keeping it simple means being realistic about the aspirations for the program in times of economic uncertainty, focusing only on obtaining the benefits that truly matter.
Companies can move fast on their outsourcing program by mandating aggressive timelines across the board. Truth is, there is no change without urgency. This is the time for insurance companies to quickly take a look at theirclosed book of business, open book business running on older legacy systems, and claims and payments associated with older policies and systems that do not have cross sell or up sell opportunities and outsource these operations to a BPO service provider to reduce costs. But fast is the key word here. If moving quickly to implement BPO is not seen as vital to the basic survival of the company, it will not produce the desired results. Imposing deadlines for the development
Protection, changes, premiums and payments services for a global insurance company
The client was experiencing challenges with its legacy systems and had no flexibility in how it serviced its protection policy holders. It also had unequal amount of work allocated to its payments team due to surrenders and switches, which led to quality, team performance and service level issues.
In the protection policies process, WNS has achieved for the client
In changes, premiums and payments – which are managed across three teams – WNS has:
Of particular and vital relevance to the insurance industry
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25 November 2021
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