embedding innovation in the u.k. insurance
DESCRIPTION
The insurance industry is challenged by competitive pressures, changes in customer loyalty, entry of new players and a stringent regulatory environment, all of which are pressuring insurers to change their business models, streamline operations, and improve processes. Industry leaders are increasingly turning to insurance outsourcing to help them compete and grow.TRANSCRIPT
Confidential © 2010 WNS Global Services | www.wns.com
Underpinning Transformational Change and Embedding Innovation In The U.K. Insurance Sector: What Does It Mean In Practice?
2For more outsourcing solutions for insurance industry visit www.wns.com/services/insurance
Jeremy Owenson And WNS
10 years – Insurance Company Management
Underwriting and Claims
Personal Lines, Commercial and London Market
2 Years – Insurance Consultancy
6 Years – Insurance Outsourcing
Onshore and Offshore
3For more outsourcing solutions for insurance industry visit www.wns.com/services/insurance
Jeremy Owenson And WNS
10 years – Insurance Company Management
Underwriting and Claims
Personal Lines, Commercial and London Market
2 Years – Insurance Consultancy
6 Years – Insurance Outsourcing
Onshore and Offshore
WNS – Leading Provider of Insurance Outsourcing
22,000 employees worldwide
6,000 FTE in India and Sri Lanka focused on U.K. market
450 FTE in U.K.
Fulfill Policy Admin, Sales, Claims including liability and bodily injury, F&A and Actuarial
4For more outsourcing solutions for insurance industry visit www.wns.com/services/insurance
Lines Of Business Serviced
Personal Lines
Commercial Lines
Agency Management
Annuities Pensions Health LiabilityLife
Sales and Customer Service
New Business Quotes / Cancellation / Setup
Policy Administration
Claims Management
Inbound Customer Service Centers
Shared Services Across All Product lines
Finance and Accounting, Business Transformation, Research and Analytics
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Identifying Core Areas For Change
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Core Areas Of Change
Increased indemnity costs
Regulatory pressures
Operational costs
Increasing fraud particularly through new channels such as aggregators
Deteriorating claims service
Introduction of Solvency II
Increased regulatory regime from the FSA, DPA
Introduction of new rules on corruption
Introducing new products, channels and delivery mechanisms
Reducing headcount, sites, closed book and run off activity
7For more outsourcing solutions for insurance industry visit www.wns.com/services/insurance
Core Areas Of Change
Increasing fraud particularly through new channels such as aggregators
– Introduction of MID means people need the Certificate of insurance
– Prospects misrepresenting age – “it was a typo!”, e.g. DOB 20/08/78 instead of 20/08/87
– Increase in incidence of “Ghost Brokers”
– Increasing sophistication of fraudulent or exaggerated claims with complicity of supply chain
Deteriorating claims service
– Increasing incidence of injury claims in motor
– Increase in non-fault expenses
– Increase in “Recession Related” claims
Increased indemnity costs
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Core Areas Of Change
Regulatory pressures
Introduction of Solvency II
– Requires an increased understanding and reporting of risk
– Requires overall of systems, reporting and processes
– Need to establish a new compliance regime in future – pressure due to availability of resource:
– In 1997, there were 50 trained Actuaries in India, today there are 8340 student actuaries
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Actuaries And India
1971 – Indian Insurance Market Nationalised
Decline in competition and reduction in Actuarial Expertise
1997 – Indian Insurance Market opened to competition
Increase in demand for Actuaries
1997 – 50 trained Actuaries in India
Accredited Organisations;– Institute of Actuaries India
– Institute of Actuaries (U.K.)
– Casualty Actuarial Society (U.S.)
– Society of Actuaries (U.S.)
As at start of 2010:
– Qualified Actuaries – 223
– Associate Actuaries – 132
– Student Actuaries – 8340
10For more outsourcing solutions for insurance industry visit www.wns.com/services/insurance
Core Areas Of Change
Regulatory pressures
Increased regulatory regime from the FSA, DPA
– Credit Crunch and data losses tighten the screw
Benchmark standards from India:
– No mobile media
– Increased control over data – internet, email, removal data sticks
– True paperless office – whiteboards for notes
– No mobile phones in the office
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Core Areas Of Change
Operational costs
Introducing new products, channels and delivery mechanisms
Is the money there to launch:
– New products
– Access customers through new delivery channels
– Access to customer self service and the internet?
Are you making the most of emerging technology?
Are you making the most of new underwriting differentiators / products
– For Life products – the rise in internet sales for protection and the requirement for instant decisions
Reducing headcount, sites, closed book and run off activity
– How much management time is spent reducing headcount and closing locations?
– How much time is spent administering closed book: Life closed books
Long tail policies / legacy accounts
Long tail General Insurance claims
– Do you put your best people on these accounts? What is that costing you in terms of lost sales
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Understanding Mixed Opinion
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The Sacred Cows!
Standard Distribution Actual Result
First Quartile (top) 25%
Second Quartile 25%
Third Quartile 25%
Fourth Quartile (bottom) 25%
Understanding areas of mixed opinion and how to tackle these to grow towards a more unified and efficient approach
Many years ago a survey asked London Market Claims Directors to rank the quality of their departments into top quartile, upper middle quartile, lower middle quartile and bottom quartile.
14For more outsourcing solutions for insurance industry visit www.wns.com/services/insurance
The Sacred Cows!
Standard Distribution Actual Result
First Quartile (top) 25% 57%
Second Quartile 25% 43%
Third Quartile 25% 0%
Fourth Quartile (bottom) 25% 0%
Understanding areas of mixed opinion and how to tackle these to grow towards a more unified and efficient approach
Many years ago a survey asked London Market Claims Directors to rank the quality of their departments into top quartile, upper middle quartile, lower middle quartile and bottom quartile.
15For more outsourcing solutions for insurance industry visit www.wns.com/services/insurance
The Sacred Cows!
How is this possible? Do people rank based on what they are good at:
– People who had good systems ranked their performance above average, stating that the systems kept the staff honest
– People who had poor systems said they employed good staff to compensate for the poor systems
The reality is, there are good and bad claims departments out there and there are good and bad people out there
We need to recognise that there is no evil in asking a specialist to deliver a service for you. We recognise that some claim need loss adjusters, but you can also have specialists in customer service, technical claims handling, accounts and recovery functions
The only problem is, People don’t like being told their babies are ugly!
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What Are The Opportunities For The Board Room
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The Opportunities For The Board
There is a real appetite within the BPO community to build a partnership with a client, to work with a client to jointly develop a business plan for growth. This can include:
– Special Purpose vehicles (joint ventures) between a supplier and an insurer, where the insurer gets a financial benefit
– Outsourcing to deliver new technology – the cost of technology and the ability to integrate to legacy platforms
– Commercial deals aligning interest – e.g. Gain-share, payment by results (such as per sale, percentage of amount recovered)
– Co-investment – including using BPO R&A capability to improve deals.
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The Key To Transformation And Development Of A Strong Future Strategy
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The Opportunities For The Board
Exec need to understand where they want to be, and what their management band-width should be focussed on
In insurance, two key areas where the insurer can differentiate are:– Product innovation
– Pricing
There are other areas where management time can be absorbed for very little return. This can include functions often described as the back office:– Accounts
– Administration
– Payroll
– IT
– Claims
But could also include areas such as – Run-off accounts
– Closed books
– Legacy processes
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The Opportunities For The Board
For all these non-core functions, the board should look and see if there is an outsourcer who, with the right attention and experience, can deliver more effectively, and more cheaply. With the BPO appetite for taking risk and entering new partnerships, this will unlock value and reveal a potential asset in an area only seen in the past as a burden.
People need to consider having their ugly babies adopted!
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For more outsourcing solutions for insurance industry visit www.wns.com/services/insurance