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. Experience suggests that it costs insurance companies $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! In this article, through various examples, the author demonstrates how BPO can help the insurance industry survive this economic downturn. It also offers eight simple rules to ensure success of your outsourcing program. Finally the author also suggests the various insurance processes that companies can outsource. Read more such articles at http://www.wns.com/Insights/Articles/tabid/81/Default.aspx

1. Business Process Outsourcing:
A survival tool for the life insurance and
annuities industry after the economic tsunami

2. 1

3. Business Process Outsourcing:
A survival tool for the life insurance and annuities industry after the economic tsunami
While economic indicators are starting to signal BPO to the rescue for life insurance
a slight recovery, the treacherous waters in which
and annuities companies
the life insurance and annuities industry has been
treading have far from receded. Recent third-party Business process outsourcing (BPO) represents
expert statements paint a sober picture a strategic and efficient option for companies
looking to thrive in these tumultuous times.
Ernst
n & Young’s 2009 Insurance Outlook for the
If implemented properly, BPO can be a fast and
U.S. Life Insurance market – posted to the
Insurance Law Center on April 21, 2009 – simple solution to rapidly reduce costs, help
noted that U.S. life insurers will be dealing with organizations survive the economic downturn and
the multiple lingering side-effects of the global set the stage for future growth and expansion after
financial crisis and deepening recession for the economic tidal wave subsides.
some time to come. The implications of the
current economic crisis may take months or Rapid cost reduction is mandatory for companies
perhaps years, to fully evaluate. Once the trying to survive in the most challenging economic
immediate crisis passes, insurers will have to
climate in over 60 years. But BPO delivers
adjust to an environment that has
benefits which extend far beyond cost savings.
fundamentally changed – both for them and for
the consumer.
While insurance companies already outsource
According
n to Laura Bazer, vice president, highly transactional processes such as claims and
Moody’s, “Rising investment losses, falling payments, new business processing and
equity markets, and weakening economic underwriting support, they can gain significant
conditions will pressure the profitability, additional value by leveraging BPO for other
financial flexibility and capital adequacy of
processes. For example, outsourcing research and
[life] insurers over the next 12 to 18 months.”
analytics for actuarial support can optimize
(Source: Resource magazine, February 2009.)
pricing and more accurate premium calculations
A February
n 27, 2009 article on helping the company target additional consumers
StreetInsider.com said, “After the close, based on demographics, groups and risk profiles.
Standard & Poor's lowered its counterparty A BPO provider with deep domain experience can
credit and financial strength ratings on 10 support customer retention, cross sell and up sell
groups of U.S. life insurers and its counterparty initiatives and exploit new sales channels and
credit ratings on 7 U.S. life insurance holding entry into new geographies.
companies.” Standard & Poor cited higher loss
assumptions. The firm said, "Today's rating
actions primarily reflect the incorporation of
these incremental asset stress factors into our
capital adequacy analysis as well as the effects
of severe equity market declines and volatility
on earnings and capital adequacy. We expect
that the effect of these factors will challenge
life companies' competitive strengths and ability
to generate profitable business. Over the past
few weeks, we also took rating actions on
several other life companies because of related
issues."
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 risk-
averse sector.
wns.com | 2

4. An area that can provide immediate business Clearing the decks for success -
benefits and cost efficiency is policy servicing.
Eight simple rules for life insurance
For example, experience suggests that it costs
insurance companies between $200 - $350 per and annuities companies
year to service a U.S. life policy. A BPO provider 1. Ensure BPO is a CEO priority
with deep domain and customer support expertise In uncertain times, sponsorship for critical
can service the same policy for approximately initiatives such as BPO must come from the
$100 per year, representing annual savings of at very top of the organization. Only the CEO can
least 50 percent. Let’s look at several case studies deliver the message that there are no other
which demonstrate BPO’s value to insurance options for the business. If the commitment is
companies today. not there, then the junior management sees
implementation as optional, easily finding ways
to opt out with spurious arguments.
Annuities administration for a global The prevarication of junior staff and their
insurance company desire to protect their jobs can delay the
delivery of savings, and jeopardize the success
As a result of its partial offshoring of of the business.
simple annuities administration-related
tasks, one of the world’s largest insurance When the CEO takes a positive decision and
groups was experiencing significant error makes outsourcing a priority, significant
rates and longer response times which led success can be attained. For example, the CEO
to end-customer dissatisfaction. As a of a re-insurance company that was acquiring a
result, the company chartered WNS with closed books business mandated the
delivering all activities related to its outsourcing of all its operations. By doing so,
annuities administration, ranging from the company was able to complete six
simple tasks such as change of bank conversions of policies to its new, single
details and issuing tax certificates to highly system within six months, and increase its
complex processes including reissuing policies under management by $6 billion in
retained payments to customers and five years.
performing audit work on the guaranteed
minimum pension quotes built for the 2. Approach outsourcing with an open mind
customer at the start of the annuity. Merely thinking policy renewals or rules-based
transactions limits the extent to which BPO
Leveraging its deep knowledge of the can be used as a “survive and thrive” tool for
insurance industry and its experienced insurance companies. Smart insurance
team, WNS was able to achieve: organizations have been outsourcing these
Increase
n in customer satisfaction from types of processes for years. But the BPO
76 percent to 88 percent industry has moved well beyond volume-based
voice and data work into highly complex
Consistent
n turn around time of more than industry and insight processes – think research
98 percent and analytics for actuarial pricing support,
identifying customers’ proclivity to pay
8 percent
n improvement in accuracy and
50 percent reduction in errors reported premiums or buy new policies in different
by customers geographies and socio-economic categories,
sales support for customer retention, cross sell
Zero
n customer complaints for more than and up sell, or assisting financial advisors
a year prepare portfolio analysis. Smart insurance
companies collaborate with providers to
3

5. Business Process Outsourcing:
A survival tool for the life insurance and annuities industry after the economic tsunami
determine ‘the art of the possible.’ They begin
24 processes for a U.S. top 10 financial
planning, asset management and by determining what is core and non-core to
insurance company their business.
In the insurance industry, core processes
A premier financial planning, asset
include product development, sales/agency
management and insurance company with
administration and regulatory compliance.
more than $450 billion in assets under
But beyond these, most SG&A and highly
management had just completed one of the
complex processes can be seamlessly
largest spin-offs in U.S. history and needed
transitioned and successfully outsourced to
to focus on its core product development
a provider with a proven track record and
and marketing. The company decided to
substantial insurance industry expertise.
turn to a BPO provider to deliver its
servicing functions, requiring
3. Keep it simple
1) the ability to transition the work of
Speed to cost reduction with no diminution of
approximately 350 FTEs in six months
quality should be the first and foremost
2) to maintain and significantly improve objective of BPO as a survival tool. This is not
operational performance to bolster the the time to radically transform business
confidence of the sales force distressed processes, implement new enterprise
about the loss of the iconic brand name of technology, or put in the latest bells and
the parent organization whistles. It’s time to get the cost out, and fast.
3) to design an efficient program capable For example, in the insurance industry, instead
of handling 24 fragmented processes with of trying to integrate multiple policy
significant variability and cyclical volumes administration or claims systems overnight,
4) to develop a pricing structure with companies should outsource the operations of
optimum client benefit which also some of these systems – both IT and business
incentivized the provider to drive processes – to a service provider and move to a
continuous improvement; single system over a period of time. There may
even be opportunity to monetize some of these
5) to provide a robust security environment
assets by entering into a right contract and
6) to provide business continuity planning. financial model with a BPO service provider.
Keeping it simple also means avoiding a
In its three year partnership, WNS has wholesale overhaul of the business model at
delivered once. This does not mean that changes in
50 percent
n cost savings across all workflow, or standardization of processes which
operations outsourced to WNS can be accomplished during transition or
shortly thereafter should be off the table.
Effective
n management of volume Keeping it simple means being realistic about
variability with enhanced service
the aspirations for the program in times of
outcomes, enabling the company to
economic uncertainty, focusing only on
eliminate overhead cost during lean
obtaining the benefits that truly matter.
times
Accuracy
n improvements of 78 percent 4. Move fast
across all processes Companies can move fast on their outsourcing
program by mandating aggressive timelines
A FINRA-licensed
n team to ensure
across the board. Truth is, there is no change
compliance with U.S. securities
without urgency. This is the time for insurance
regulations
companies to quickly take a look at their
wns.com | 4

6. closed book of business, open book business implementation of a roadmap, including scope,
running on older legacy systems, and claims provider selection and transition will mobilize
and payments associated with older policies the organization.
and systems that do not have cross sell or up
sell opportunities and outsource these 5. Empower an internal outsourcing champion,
operations to a BPO service provider to reduce and put top talent on the case
costs. But fast is the key word here. If moving Survival programs are always led from the top
quickly to implement BPO is not seen as vital and center. As evidence of executive
to the basic survival of the company, it will not commitment, the appointment of an
produce the desired results. Imposing outsourcing Champion / program management
deadlines for the development and leader with the right level of responsibility and
authority is critical to success. This must be
Protection, changes, premiums and payments someone who is fully accountable for and
services for a global insurance company committed to the success of the program, has
organizational respect, knows how to exercise
The client was experiencing challenges authority, is not distracted by other
with its legacy systems and had no responsibilities, is a good politician and has a
flexibility in how it serviced its protection personal incentive to succeed. For example,
policy holders. It also had unequal amount when a large insurance company decided to
of work allocated to its payments team due make its first foray into outsourcing its
to surrenders and switches, which led to underwriting and claims processes, it assigned
quality, team performance and service level its CIO the role of ‘outsourcing czar’ as the
issues. organization had already successfully
outsourced IT processes under the guidance
In the protection policies process, WNS has and leadership of this executive who well
achieved for the client understood the challenges and complexities of
outsourcing. It also appointed highly
A versatility
n increase from 80 percent to
320 percent against the number of staff knowledgeable business owners to oversee the
required per work type processes, and these business owners report
into the CIO who holds ultimate responsibility
An overall
n versatility improvement from for the success of the underwriting and claims
eight percent to 30.5 percent against processing outsourcing initiative.
maximum possible versatility
Significantly
n increased accuracy and 6. Develop a realistic deployment plan
reduced errors reported by customers Even when outsourcing is being implemented
for cost, a measured, tightly sequenced but
In changes, premiums and payments – rational program that meets milestones and is
which are managed across three teams – not disruptive to the business has a much
WNS has: greater chance of success than an all hands-
on, sprint-to-the-finish program. In their haste
Maintained
n versatility at 130 percent
to cut out more cost, companies at times push
across the three teams; significantly
for or buy into an unrealistic transition
increased accuracy levels in premiums
and payments; roadmap. When the first failure occurs because
processes cannot be documented thoroughly,
Continuously
n met all critical and key the network is not ready or work shadowing is
SLAs insufficient, the naysayers come out in force.
A deployment strategy that builds up steam
Maintained
n end-to-end WNS-controlled
over time after the success of initial phases is
turn around time at 99 percent
far more likely to meet objectives.
5

7. Business Process Outsourcing:
A survival tool for the life insurance and annuities industry after the economic tsunami
For example, when choosing to outsource expertise knows the types of cost savings
policy changes processes, it is best to begin which can be attained per outsourced process,
with simple products like term life insurance to and can work with the client to craft a contract
enable the provider to quickly ramp-up in specifically designed to attain them. For
terms of both offered products and the client’s example, an experienced service provider may
internal working style and culture. After that well commit upfront to savings of 50 percent
program is successful, other more complex or more in policy servicing, and 20 percent
processes, such as actuarial, underwriting and year on year productivity gains in underwriting
policy transactions, can be transitioned to the support.
provider.
Advantages life and annuities insurance
7. Insist on alignment
Outsourcing can mean a massive dislocation of companies gain by moving to a BPO
culture, resulting in a tug of war between model today
client and provider. When new people and
In general
processes are introduced into the equation,
Standardized
n business processes
dissonance naturally occurs. In the insurance
industry, there are four key alignment points.
First and foremost, the provider must
understand what values are important to the
client and adjust its working style accordingly.
Second, the provider must design its
deliverables to support the client’s needs.
Third, the provider must have solid and proven
insurance domain expertise – such as a
requirement that all team members are LOMA-
or other industry body-certified – in order to
effectively design and deliver the program. And
fourth, all operations, processes and
expectations must be documented to ensure
the provider has full understanding of, and
Consolidating business processes offshore in an
insights into, the various state, federal and
effort to reduce cost has a positive by-product –
compliance regulations to which the client levels of standardization that are difficult to
must adhere to. achieve through incremental efforts such as
process reengineering when times are easier.
8. Debit budgets in advance With standardization, the organization is well-
This little trick obtains commitment where it positioned to take the next step to transform
counts - in the budget process. Building BPO processes through technology and quality,
savings into the current year's budget in taking them to the next level of efficiency.
advance ensures managers have no excuse but
Rationalized
n delivery model
to be committed to the implementation of the The greatest challenge in moving to a shared
BPO program or find some other way to get the service, or horizontal structure, is overcoming
cost out fast. Truth be told, short of cutting misconceptions and fears about diminution of
staff to the bone, there is rarely another way. service levels, risk and performance.
This is particularly true in cost center By ‘wrenching’ processes out of the business
functions such as underwriting support, policy lines in the name of corporate survival, the
changes, claims and finance and accounting. objections which delay or derail consolidation
A BPO provider with insurance domain and centralization are, in effect, overcome.
wns.com | 6

8. n Commercialized approach to operations plummeting. Leveraging outsourced research
Most companies cannot put a price on the cost and analytics can help insurance companies
of paying a bill, collecting a receivable or attain the investment income required to stay
interacting with a customer. Imposing the afloat. Outsourced research and analytics for
discipline of a BPO contract replete with unit actuarial support can proactively optimize
cost, turn around times, and customer pricing. And research and analytics experts can
satisfaction levels makes the organization think successfully take insurance companies’ raw
differently about consumption and service data and turn it into highly valuable information
levels, making the actual cost to sell a product and insights which assist in all areas, especially
or service, transparent. sales and marketing campaigns.
n Support for rapid global market entry Customer retention and sales initiatives
n
One of the major differences between this With rampant job losses, reduced income and
economic crisis and past recessions is the fear of non-essential expenditures, insurance
extent to which financial markets and consumers have been reducing coverage
economies are now integrated and globalized. enhancements and even abandoning paying
Survivor companies will have to move rapidly to renewal premiums. Outsourcing customer
serve global markets, focusing much of their retention and sales functions is a cost-effective
resources to compete. This means having the strategy to aggressively reach out to customers,
flexibility to quickly scale back, middle and offer alternate plans and cross sell or up sell
additional life insurance and annuity products.
And a service provider with deep insurance
industry domain knowledge possesses the
insights needed to sell appropriate products to
individual consumers by doing an in-depth
analysis on each customer and suggesting the
most suitable alternate products, riders and
policies. Further, an insurance industry savvy
services provider can help insurance companies
extend their sales efforts through alternate
channels such as banks and supermarkets.
Systems and technology optimization
n
As a result of growth by mergers and
acquisitions, most insurance companies utilize
front offices processes. BPO provides that scale, a wide array of disparate policy and claims
expertise and flexibility. Providers can rapidly systems across their enterprise. This is
tap into talent pools globally to deliver business inefficient, expensive and potentially fraught
processes; with connectivity, savvy companies with error. Consolidating systems and
will become agnostic as to delivery location, just technology platforms into one or two systems
as easily consolidating general ledgers in Manila operated by a BPO provider can result in
as in Milwaukee or Manchester. improved customer service, greater productivity
and efficiency, and lower cost.
Of particular and vital relevance to the insurance
industry Reduced compliance costs
n
Fiduciary reporting and compliance is extremely
Critical
n data-based insights via research and
costly and time consuming. An outsourcing
analytics services provider who understands the
Life insurance and annuity companies heavily intricacies and imperatives of compliance can
depend on the returns they can generate by significantly reduce both the time and expense
investing premiums collected. But given the associated with the strict regulations to which
state of the economy, investment incomes are insurance companies must adhere.
7

9. Business Process Outsourcing:
A survival tool for the life insurance and annuities industry after the economic tsunami
Which life and annuities insurance processes are ripe for business process
outsourcing?
New business support Policy administration Premium administration
Sales
n Manual
n remittance exception Fund
n applications
Conversion
n processing Refunds
n
Quote
n acceptance Policy
n benefits Billing
n
Cross-selling
n and up-selling Policy
n reinstatements and Premium
n mode changes
quotes Bank information changes
Customer
n enquiries n
Policy
n changes Premium audits
Actuarial
n services n
Inbound
n customer service
Exposure
n assessment
Endorsements
n
Claims
New
n business data entry
Renewals
n
Claim setup
Rules-based
n underwriting n
Policy
n issuance Examination
n
Review
n
Settlement
n
Correspondence
n
Tax compliance
n
Policyholder
n and broker claim
enquiries
Claim
n assessment
Settlement
n
WNS Global Services
North America United Kingdom India
420 Lexington Avenue The Lodge Gate No. 4, Plant 10
Suite 2515 Harmondsworth Lane Godrej & Boyce Complex
New York, NY 10170 West Drayton, Middlesex Pirojshanagar
UB7 0AB Vikhroli (West)
Mumbai 400 079
wns.com | 8

10. Copyright © 2009 WNS Global Services
About WNS
WNS is a leading global business process outsourcing
company. Deep industry and business process
knowledge, a partnership approach, comprehensive
service offering and a proven track record enables
WNS to deliver business value to some of the leading
companies in the world. WNS is passionate about
building a market-leading company valued by our
clients, employees, business partners, investors and
communities.
To learn more, please write to us at info@wnsgs.com
or visit wns.com