Jessica: Hello and welcome to the WNS business insights podcast series. My name is Jessica Reinelt and I am your host for this podcast and joining me today is Rajesh Desingu, VP of the insurance practice at WNS, North America. WNS is a leading global business process outsourcing company. Today we’ll be talking with Rajesh on the topic of how insurance companies can leverage Business Process Outsourcing to improve the new product development function. Hello Rajesh and thank you for joining us today.
Rajesh: Hi Jessica. Looking forward to the conversation.
Jessica: Okay Rajesh, just to kick this off, why don’t we start by talking about some of the trends and challenges insurance companies have to address in new product development?
Rajesh: Jessica, we know the insurance companies are facing one of their most challenging times in recent history. Now if you look at the investment losses, it is very evident, you know, the falling sales of annuity products, the weak job market; all those put pressure on profitability. The financial flexibility of the insurance industry is in question which means the capital adequacy of the insurance industries in the next twelve months is really going to be tested.
Jessica, in my conversations with senior executives and actuaries who are responsible for product developments in insurance companies, it is clear that they are increasingly concerned about profitability. That is what is on top of their mind. While product profitability has always been important for actuaries or product development executives, the rigour which is required now on profitability models is far greater. Let’s look at the management teams. The management teams are getting extremely risk averse and that means pressures for product profitability are getting more and more intense.
Now another aspect that is challenging for product development is the ability to identify niche market segments, and developing profitable products that match the needs of this segment is becoming extremely important and that becomes a critical differentiator. This demand on the product development team for a differentiated product from sales and marketing are increasing. Added to this is the challenge of shortening of product life cycles. Now, this requires the product development teams to roll out new products much faster than before which means the speed of product development is becoming critical.
There is also an increasing trend towards creating hybrid solutions for customers which essentially means you are selling wealth management solutions to customers rather than just selling just a life insurance or an annuity product.
Jessica: Okay, I see. So, how can outsourcing help in the new product development?
Rajesh: Jessica, outsourcing can really help the new product development teams in insurance companies. Now, for example, an outsourcing service provider can help the actuary and the product development team increase the rigor applied to the profitability model. Now, when you run profitability model that minimize risk, you are looking to analyze large volumes of data, which are pulled together from diverse data sets. Now, by bringing in a pool of high quality talent, the underwriters, the actuaries that significantly lower cost, an outsourcing service provider can help build the model that manage these large and disparate data sets with a lot more rigour and at a reduced cost. Now, Jessica another aspect where outsourcing can help is by increasing the speed of product development. Now, it is estimated that there is a shortfall of almost 40 to 50 per cent between supply and demand for qualified actuaries. Now this shortage hampers the speed of product development.
Now, by leveraging qualified professionals, located in countries like India to do part of product development work insurers can increase the speed of product development. By outsourcing Jessica, you can really reduce costs. At times, it can be as high as 50 per cent associated with product development which in turn add to the profitability of the product.
Jessica: A reduction of 50 per cent in costs! Sounds amazing. Can you share some examples of how WNS has helped processes in new product development?
Rajesh: Sure Jessica. I can share a few examples. For a global insurance company, WNS delivers actuarial support services. The WNS team comprising of you know we have statistical and data analysts who apply advanced statistical models like predictive modeling and segmentation that help insurance companies do proficiency analysis, Mortality and mobility trends, financial and regulatory reports that need to be filed every quarter and every year. Now, we help provide inputs for pricing which helps them to optimize the premium that they need to charge, undertake performance analysis for the distribution network to see you know which distribution channel is performing well. Similarly what products are getting sold. All of this we are able to provide to the insurance companies.
Now, let me share another example. You know, we work with a large insurance company to launch a new product through a new distribution channel. Now we are talking of helping them launch a new product and a new distribution channel, something that they have not done today. Their current distribution channel was only through their agents. They wanted to expand the market and explore directly writing to business. They tied up with the financial arm of a leading super market chain and started offering insurance products to the customers. The WNS team supported the product development process, and also undertook the policy administration processing and by delivering it out of a global delivery centre, it significantly reduced the costs and improved profitability of the product. The end result – Now, the client has a new target segment which is expanded through a different distribution channel and they’ve leveraged BPO to reduce the costs. In two years, the business really grew rapidly. Now the client is expanding to all the provinces in Canada.
Jessica: That’s a great example Rajesh. I am going to ask you one more question. What are the things that senior executives should bear in mind when they are looking to outsource new product development processes?
Rajesh: That’s a great question Jessica. A few things that senior executives should do are first ensure that there is support for the program from the senior most levels in the organization. Second, they have to move fast, because the truth is there is no change without urgency. Now, one way to do is by debiting budgets in advance. Building BPO savings into the budget ensures that managers stay committed to the outsourcing program. Now, ensure that the task force leading outsourcing initiatives is empowered and has the right talent and last and very important is the aspect of alignment of goals and culture between insurance company and the service provider. The single biggest reason for failure of an outsourcing agreement is lack of this alignment. So just make sure that you choose a service provider who aligns to your goals and culture.
Jessica: Okay great. Thank you, Rajesh for taking the time to speak with us today.
Rajesh Thanks Jessica. It was a pleasure speaking.
Jessica: Thank you. For more information on how you can leverage outsourcing for improving the efficiency of your product development processes while dramatically reducing cost of operations, please visit www.wns.com/insurance/lifeandannuity.