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Business Process Outsourcing in the Insurance Industry

In the wake of the 2008 Global Financial Crisis, insurance companies around the world have taken action to ensure their survival. To assist insurance companies determine ways to improve efficiencies, Accenture has developed a guide to business process outsourcing (BPO) for the insurance sector. BPO can play an important role in realizing a company's growth strategy. Specifically, highly routine work involving large-volume processing of contracts in short periods of time are areas well suited to BPO. A characteristic of BPO offered by Accenture is that it goes beyond focusing simply on lowering personnel costs. Drawing on our expertise in business consulting, we can achieve a reduction in total costs (IT and operating costs) through the simultaneous re-engineering of business processes. Outsourcing operational skills maintenance and business continuation risk management are additional potential benefits. The enclosed guide provides an easy-to-digest explanation of the advantages of BPO, the best way to proceed with an examination of its suitability; using real-life case study examples. Should you wish to clarify any points in this guide or need further details, please do not hesitate to contact us at [email protected]


The significance of BPO

In today's challenging business climate, companies have reached the limits of internal cost reduction

For insurance companies, like most financial institutions, fixed costs, particularly expenditures on personnel, typically account for a high proportion of business-related costs. A key strategy for reducing these fixed costs is to take advantage of economies of scale through mergers and acquisitions, business alliances and business process outsourcing. While M&A activity allows a company to capitalize on the merits of scale internally, alliances allow companies to achieve greater economies of scale through the sharing of business process platforms with other firms. Because costs are divided among participants according to scale, companies can make more of their

costs variable. European and American financial institutions, facing a fiercely competitive environment, have already made extensive use of these two strategies. In the case of BPO, even greater economies of scale are sought. By outsourcing processing to a thirdparty platform designed to operate on a very large scale, BPO can achieve more than an alliance. Because charges are based on the proportion of volume processed, even more expenses can be moved to a variable cost structure. BPO can be implemented either on its own, without assuming the risks associated with M&A or alliances, or in conjunction with those measures. For companies seeking ways to recover from the impact of the global financial crisis, this kind of flexibility and impact is looking increasingly attractive.

BPO role in growth strategies

Until recently, BPO and the outsourcing of processes offshore have been associated with largevolume processing of very basic tasks using cheap labor. But contemporary global companies now view BPO and offshoring as ways of consolidating business resources in core areas like planning. They are also expected to play a role in successful growth strategies by helping companies overcome limits and internal restraints in resource acquisition, while enabling them to implement more business initiatives in a shorter amount of time.


Scope for BPO in the insurance industry

BPO for regular business processes

Parts of the insurance business that involve customer contact include policy handling and call center inquiries. Most of these processes can be standardized to a medium or high degree and handled in large volumes. High-throughput processes are well suited to BPO, and this is why BPO has gained attention in the insurance industry since its core business operations include many of these kinds of processes.

Examples include a company that has temporarily stopped soliciting new business in the Japanese market, or a foreign-affiliated company that has decided to withdraw from the market. The second type refers to a situation in which a company has stopped soliciting new business for certain products, even though it is still selling other products. Since no new policies are issued no matter the type, the number of relevant policies that must be managed and the number of transactions will decline each year until they gradually come to an end. Because the work will cease in the future, firms want to execute these functions at a lower cost through complete standardization, without making any new investment. BPO is therefore highly suited to these cases. From this point on, the insurance industry is predicted to become the stage for alliances on a global scale

as companies pursue even greater economies of scale and as they strive to expand their business portfolios. With companies restructuring their product lineups as part of efforts to consolidate their businesses through a choose-and-focus strategy, a certain amount of closed book business will continue to emerge in the future. This has resulted in greater interest in BPO for closed book operations in recent years.

BPO for closed book operations

Closed book operations are operations related to products that are no longer sold (closed book business), and they are broadly divided into two types. The first type covers cases when all of an insurance company's products are considered closed book operations.


Four ways to reduce costs through BPO

Fixed costs covering personnel, systems and other items weigh down financial institutions, so the issue is finding ways to reduce these costs. An effective approach is to outsource functions so they can be handled more efficiently using a larger platform. The following four methods are the main ways to cut costs:

reduces downtime, again allowing companies to optimize their spread of costs.

3. Trim per capita personnel costs

By simplifying and standardizing business operations through BPR or by moving certain operations offshore, companies can make progress in lowering per capita personnel costs. We sometimes refer to these simplification and standardization measures as "industrialization." The key to their success is whether the processes in question can be compartmentalized and formalized so they are not dependent on the character and tacit knowledge of the person in charge.

until all the policies have expired. If the number of policies and man-hours spent on operations will decrease and eventually disappear in the future, investments and costs for those operations can be avoided through outsourcing.

1. Reduce IT costs

The cost of operating an IT platform can be reduced through shared use and standardization of systems.

2. Cut business operating costs

These costs can be lowered by through various business process reengineering (BPR) measures, such as redefining service levels and increasing the efficiency of business operations after outsourcing. Outsourcing enables companies to make costs variable since charges are calculated in accordance with throughput. It also

4. Lower costs of maintaining outsourced operational skills

With closed book operations in particular, a certain level of knowledge and expertise must be maintained


Case 1: Outsourcing regular operations (open book), including new policies - drastic cost reform combined with BPR

One American life insurance company with assets of more than 10 billion dollars and 250,000 policies in force was able to cut costs by about 50% through the outsourcing of policy maintenance functions other than insurance certificate issuance to Accenture, BPR measures and offshoring in India. Through BPR, processes have been standardized and simplified, and the complexity of tasks more precisely matched to employee skills. This has enabled the company to reduce average processing time, lower the proportion of highly skilled, high-paid employees, and increase the proportion of lower paid workers performing simple tasks.

to integrate the businesses of its acquisitions quickly and smoothly, Company A was especially keen not to make costly new investments in closed book business. So Company A transferred customer contact (call center) operations and policy administration for 200 closed book products encompassing 150,000 policies to Accenture BPO services. On the systems side, Accenture took over Company A's existing systems, while on the administration side it worked to cut costs through BPR measures including standardizing processes, consolidating product lines and improving training content. As a result, administration costs were halved, customer satisfaction survey results improved, processing backlogs were reduced, and the number of complaints was cut to onethird the previous level. Through BPO, Company A was able not only to reduce the administration costs of the closed book business, but also to enhance investment efficiency by focusing resources on new business using the companies it acquired.

Case 3: Back office BPO ­ Pursuing a thorough restructuring of costs by gaining knowledge of outsourcing and then expanding its application

A global investment bank entrusted Accenture with purchasing management processes involving 6 billion dollars worth of transactions in 9 countries over 7 years. Accenture achieved a cost reduction of more than 15% by standardizing procurement specifications, making purchasing functions more efficient, offshoring work to three Accenture locations and introducing electronic bidding. Through this process the bank itself gained firsthand knowledge of BPO. Subsequently, it has gradually expanded the application of BPO to less standardized processes and functions closer to the front office such as business travel management, payment handling and research.

Case 2: Outsourcing closed book operations - reducing administration costs while simultaneously improving customer satisfaction

Company A, a Europe-based global life insurer, acquired Company B and Company C in 2003. While it was necessary


Roadmap for Considering BPO

BPO success hinges on in-depth analysis of procedures

With Accenture, the process of insurance industry outsourcing starts with a complimentary assessment lasting about 4 weeks (2-6 weeks). In this initial study, Accenture identifies areas that are suitable for outsourcing, gauges current cost levels, and determines the scope for cutting costs. It is then up to the client company to decide whether to proceed based on this initial study (Figure 1). The next step in the value assessment process is an in-depth study of business procedures (business process due diligence). This is the most important step in ensuring BPO success.

Accenture conducts an in-depth analysis and assessment of the processes to be outsourced. Based on the current situation, Accenture determines where there is potential for BPR, calculates its likely benefits and defines the new, post-transition business processes and system requirements. Without a study of sufficiently high quality, it is not possible to identify processes that are highly suited for outsourcing and ensure definite benefits.

Step 1: Select processes for outsourcing

Functions that should remain with the client insurance company and processes to be outsourced are identified by reviewing the current workflow and relevant manuals, and then thoroughly discussing the matter with the company, taking legal issues and company-specific circumstances into consideration. Life insurance processes are generally divided up as shown in Figure 2. In Accenture's experience, even within specialized processes and evaluation functions there are many procedures that can be outsourced. So when selecting processes for outsourcing, it is important to view the matter in terms of what cannot be outsourced, rather than what can be outsourced.

Practical due diligence leaves no room for wishful thinking

To achieve cost savings through BPO while striking a balance with operational risk, the processes suitable for outsourcing are properly selected and a further study conducted to determine the order in which to outsource the processes.


Figure 1. Roadmap for considering BPO Go/no-go decision 2-6 weeks 2-3 months Detailed study/ prepare for transition

Explanation of main points Final contract

Go/no-go decision 2-3 months

Value assessment*


· Implement transition plan, update contract · Establish operations and maintenance; handover

Service launch

Letter · Reach mutual · Final scrutiny and/or understanding on of intent verification of steps to outsourcing be taken and benefits approach · Agreement on main · Consider scope of content of contract business processes · Accord on transition covered and cost plan · Present potential benefits of 4-6 months outsourcing

(Shorter time frames also possible)

Before starting a full-fledged value assessment, clients can conduct a pre-assessment using a simple kit to identify benefits in just a few days

Figure 2. Selecting Areas for BPO

Product development Other business processes

Finance/ accounting Human resources Materials procurement IT development/ maintenance IT operation Inventory management FSA Report (Partly)


Sales/marketing Sales/marketing services

Salesmen/agent Payroll management, management licensing, etc Direct sales Sales support/ logistics Channel personnel/ recruiting Channel finance Agency sales Compliance Corporate sales Agency management Sales/service support Preparation of agency reports Agency training Channel strategy/ management Sales management Advance sales/ planning support Domestic marketing/ sales support Channel communications

New contracts New contract services

Application data input Requirements/ issue tracking management Certificate issuance Underwriting


Product planning/ Insight-driven marketing price setting Campaign New product development/ application/ management approval Telemarketing/ Branding/ customer advertising acquisition Customer insight Preparing marketing materials Market/company research

Customer service

Customer/ contract management Collections

Payment changes Tax reporting Reinsurance Claims/payments management Call center(s) Complaint handling Domestic communications/ imaging Dissemination of customer materials Knowledge management Document management/paperwork acquisition Paperwork preparation

Initial target processes

Target processes for second phase

Processes best performed by insurance company

Note: For areas covered by Accenture, some processes may be split with insurance company on an individual level Areas stipulated by law as insurance company duties are not outsourced


Step 2: Determine the BPO approach

The BPO approach taken for each process is determined by further classifying the processes according to complexity and risk level (Figure 3). For processes viewed as suitable for a `lift and drop,' examining ways to transfer processes as quickly as possible helps maximize the benefits of BPO. For processes assessed as `some transformation and outsource' and `significant transformation and outsource,' an effective way to maximize savings is to use BPR techniques to gauge the scope for improving efficiency. When looking at BPR, companies can take advantage of the knowledge and experience Accenture has accumulated through our many years of experience in business consulting.

Step 3: Indentify Order of Priority

Processes to be outsourced are ranked according to the level of difficulty and expected benefit to determine the order in which BPO is carried out (Figure 4).

Step 4: Define the division of duties

Next, a location (onshore, nearshore or offshore) is decided for each process lined up for outsourced, using a logic tree such as the one shown in Figure 5. Using the result of this decision, a post-transfer workflow and a resource plan, reflecting the benefits of improved process efficiency, is drawn up for each process/function.

When considering locating a process offshore, possible limitations and language issues must be considered. When offshoring a process for which Japanese is needed, measures for enhancing the Japanese-language abilities of offshore personnel must be implemented alongside a closely coordinated and secure offshore review system.

Figure 3. Maximizing BPO benefits


Lift & Drop

Areas where business processes have already been standardized/ simplified, making them suitable early candidates for BPO

Some Transformation & Outsource

Areas requiring BPR to further standardize/simplify processes and limit risks before BPO

High High Process complexity Low

Lift & Drop Wave1 Significant Transformation & Outsource Wave 3 Some Transformation & Outsource Wave 2 Don't Outsource 9


Significant Transformation & Outsource

Areas requiring new systems, large scale drastic reform of business processes and additional standardization/simplification before BPO

Don't Outsource

Areas ill-suited to BPO

Figure 4. Prioritizing BPO



· Consolidate sales administration activity


· Analyze data

Quickly achievable

· Send / receive documents · Check problems with documents (standard)

Expected benefit

Very careful planning


· Check problems with documents (non-standard) · Create complex numerical reports (including data validation)

Careful planning

· Resolve problems with documents (non-standard)

Implement with care

· Resolve problems with documents (standard)

Very cautious scrutiny


· Develop product · Complete risk/actuarial processes

Cautious scrutiny

· Manage fixed asset · Manage property

Implement with other areas

· Input processing


· Typical examples of processes covered




Level of difficulty

First priority Second priority Third priority Fourth priority Minimum BPO targets

Figure 5. Defining division of BPO duties

What processes cannot be outsourced?

What is nature of process? Strategy/ decision- Yes making processes Specialized processes

What processes cannot be offshored?

BPO not OK

Yes Is it truly No necessary to have in-house? Can rule-based Yes approach be taken? Yes Yes Is high-level Are there communication constraints? No in Japanese No (legal or physical) necessary? Yes

Onshore/ nearshore

Evaluation processes



Execution processes


Addressing concerns

When considering BPO, the concerns of outsourcing companies typically fall into three main categories. Accenture can address all of them thanks to our accumulated expertise in BPO.

and the attainment of benchmarks agreed in advance with the insurance company. Even after outsourcing begins, we continue to work closely with the insurance company and work to continue improving capabilities through study sessions for employees and other measures. In addition, we may take on employees transferred from the insurance company to ensure the smooth transfer and execution of processes if deemed necessary.

Concern 3: Is it actually possible for the process to be handled in Japanese (when offshoring)?

Offshoring is not an essential part of BPO. While Accenture's onshore, nearshore and offshore locations can be used on an individual basis, a combination of locations is also possible. A flexible approach to BPO can be taken too, initially outsourcing processes onshore or nearshore with a gradual move offshore once processing has stabilized. We assign certified Japanese-language speakers to our offshore centers and require that employees study Japanese with native Japanese instructors at the workplace. All the services we currently offer customers in Japan (e-mail, telephone) are conducted in Japanese. Additionally, to ensure the quality of service, the insurance company can interview candidates for employment at the offshore center in Japanese either in person (on site) or by video conference.

Concern 1: Can companies outside the insurance industry handle processes without difficulties?

We ensure that the insurance company feels reassured about the implementation of outsourcing by carrying out the following three measures before the outsourcing takes place: 1) Drawing on Accenture's global experience in providing outsourcing for insurance processes, we plan the approach together with the insurance company; 2) During the knowledge transfer stage (transition stage) skills are transferred from the insurance company's staff to Accenture's personnel through on-thejob training; 3) The outsourcing begins only after process simulation testing

Concern 2: Will operational efficiency really be enhanced?

Accenture can offer a range of BPR initiatives based on our experience in business consulting. BPR mainly consists of standardizing, documenting and equalizing processes, and aggregating and consolidating the processing of similar tasks. Also, per unit processing costs can be reduced further still by using platforms for processes and systems that are geared for global use.


Toward BPO in Japan's insurance industry

Our network of BPO locations facilitates global expansion and dramatic cost-cutting

Accenture has been providing BPO services for more than 20 years, and we now have 50 outsourcing centers and more than 90,000 employees (including IT outsourcing centers and staff) across the globe (Figure 6). This network enables us to support clients who are expanding globally in some or all of the territories they are moving into.

operations. This approach takes into account concerns over the ability of call centers to respond appropriately in Japanese and the management of financial institution data overseas. We are currently working on the construction of facilities outside the Tokyo area for the provision of BPO services.

Accenture offers extra value

A special characteristic of Accenture's approach to BPO is that we can draw on our experience in business consulting to offer far-reaching solutions that increase processing efficiency through BPR. Another major strongpoint is our ability to optimize resource placement through global, nearshore and onshore (at the insurance company) sourcing. With these special advantages, we can help realize management objectives by using BPO as a form of outsourcing business continuity risk management or as means to concentrate business resources in growth areas. And helping our clients achieve their strategic goals is something we aspire to do.

BPO as a means of implementing BPR

Especially when accompanied by offshoring, BPO, can result in surplus personnel. By utilizing our expertise in supporting BPR, Accenture can build solutions aimed at enhancing profits even after outsourcing, such as reassigning personnel to sales to increase revenue, and proposing specific strategic measures that go beyond the usual approaches to this issue, such as relying on natural attrition or hiring freezes.

Driving ahead with a domestic (nearshore) BPO model

While the basic BPO strategy involves a global expansion of service delivery capabilities and operational hubs as indicated above, we also believe it is important in the financial sector to establish BPO using domestically based


Figure 6. Accenture's Global Delivery Network

Montreal Chicago San Antonio

Toronto Wilmington Cincinnati Houston

Riga London Warsaw Brno Bucharest Madrid Bratislava Málaga Delhi Mumbai Pune Bangalore




Shanghai Chengdu Guangzhou Hyderabad Manila Chennai

São Paulo Curitiba Buenos Aires

Port Louis

BPO centers

IT centers

IT & BPO centers

Future Location

Japanese language


Accenture's recognition in the marketplace for its BPO capabilities

Accenture is a leader in Business Process Outsourcing (BPO)

And is recognized in the marketplace for its BPO capabilities


Years experience in BPO

280 150

BPO clients

Named #1 for two consecutive years in the 2009 Global Outsourcing 100 (2008, 2009)

Countries serving client operations

50+ 37

Delivery locations

Won 4 consecutive years (2005 ­ 2009)

Languages supported Won relationship of the year with Kimberly-Clark (2008)

Ranked #1 leading Outsourcer (2007)


Contact Us

Should you wish to clarify any points in this guide or need further details, please do not hesitate to contact us at [email protected] Nobuhiko Watanabe Executive Partner Financial Services Accenture Japan Ltd Outsourcing lead [email protected] 03-3588-3065 Naoyuki Shibata Executive Partner Financial Services Accenture Japan Ltd Insurance lead [email protected] 03-3588-3559


Copyright © 2011 Accenture All rights reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

About Accenture

Accenture is a global management consulting, technology services and outsourcing company, with approximately 211,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world's most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$21.6 billion for the fiscal year ended Aug. 31, 2010. Its home page is

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