Having experienced a decline in profitability as a result of the global financial crisis, insurance companies worldwide are refocusing their internal operations, with attention on reducing costs and improving the efficiency of their business processes through transforming policy administration, according to the Capgemini and Efma 2012 World Insurance Report released today.
March, 2012 – The 2012 World Insurance Report explores ways insurers can dissect their business to identify opportunities that will make fundamental and lasting improvements to their core operations. It draws on research insights from 19 markets including: Australia, Austria, Belgium, Brazil, Canada, Denmark, France, Germany, Hong Kong, India, Italy, the Netherlands, Philippines, Singapore, Spain, Switzerland, the United Kingdom, the United States and Vietnam. Based on a comprehensive body of research, the report features an exclusive Business Agility1 and Policy Administration Transformation Survey conducted via in-depth interviews with 71 insurance executives.
The report draws three clear conclusions:
- Managing costs and efficiencies are critical levers of Insurers’ performance
- Insurers indicate policy administration as their next priority
- Making investments in several policy administration sub-functions is important for insurers to achieve business agility in the years ahead
Costs and Efficiencies Are the Critical Levers of Performance Today: Although premium volumes are rising in some markets, few insurers are in a competitive position to raise rates. Additionally, many insurers face the difficult task of growing the top line as customers increasingly focus on price and the industry’s commoditization.
Insurers, especially in non-life (i.e. Property & Casualty), need to achieve sustained performance in the coming years and emphasize key components of underwriting performance. They also need to consider ways to minimize claims, acquisition and other operational costs while growing their business. Core operational functions, such as policy administration, offer one of the few remaining areas in which transformation can deliver both cost savings and customer benefits.
Policy Administration Is the Next Priority to Achieve Cost and Operational Efficiency: Globally, many leading insurers acknowledge they cannot continue to rely on aging and inflexible policy administration systems, which lock them into legacy business practices and inhibit their ability to compete in a customer-centric market.
Policy administration transformation was identified as a priority in the next two years by a vast majority of European (93 percent) and North American insurers (67 percent).However, in the APAC region only 36 percent of respondents indicated it was a key priority, as insurance markets recently opened to private players only in the last decade, allowing many entrants to immediately deploy modern policy administration (PA) systems.
“Policy administration transformation is fundamentally critical for insurerswho are upagainst today’s challenging economic backdrop and new competitive environment where the right opportunities for improving margin and top-line growth are hard to find” said Jean Lassignardie, vice president, sales and marketing for Capgemini’s Financial Services Global Business Unit. “In such conditions, we see insurers modernizing legacy policy systems toachieve streamlined operations with much needed reductions in operational costs. This same path is serving to capture efficiencies that ultimately lead to improved time-to-market, increased customer satisfaction and better servicing of policies.”
According to the report, 69 percent of surveyed insurers said the ability to optimize operational efficiency was extremely important in driving decisions to transform Policy Administration systems, and 66 percent said lowering the total cost of ownership (TCO) was essential. By transforming their policy administration systems, insurers can deliver much needed reductions in operational costs by reducing TCO by up to 40 percent and cost per policy by up to 30 percent. Insurers can also improve performance by reducing business and technological process inefficiency by up to 30 percent.By transforming these systems, insurers can better manage current market challenges including regulatory-compliance issues, customers and intermediary satisfaction, aging and inflexible systems, and protracted product launches (by increasing the speed to market by up to 60 percent).
Survey Shows Investment in Several Policy Administration Sub-Functions Is Paying Dividends: Capgemini’s Business Agility Model2 shows that the insurance industry has, on average, progressed furthest in achieving agility in certain core policy administration back-office levers, including confirmation of coverage and policy issuance, policy/contract maintenance, billing and premium invoicing, and premium reminders/renewals.
“Business agility is the critical focus for insurers moving forward as they face evolving social, regulatory, and technological trends,” said Patrick Desmar�s, Secretary General, Efma.
The report reveals that the emerging areas of focus within Policy Administration for the near-to-medium term includehigher agility levels in underwriting and riskanalysis to decrease the chance of adverse risk selection. Also noted are the higher levels of agility in rate and quote to enhance the ability of insurers to offer online rate modification capabilities to their traditional as well as non-traditional channels.
For more information about the 2012 World Insurance Report, please visit www.capgemini.com/wir12
With around 120,000 people in 40 countries, Capgemini is one of the world’s foremost providers of consulting, technology and outsourcing services. The Group reported 2011 global revenues of EUR 9.7 billion. Together with its clients, Capgemini creates and delivers business and technology solutions that fit their needs and drive the results they want. A deeply multicultural organization, Capgemini has developed its own way of working, the Collaborative Business ExperienceTM, and draws on Rightshore ®, its worldwide delivery model.
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About Capgemini’s Financial Services Global Business Unit
Capgemini’s Global Financial Services Business Unit brings deep industry experience, innovative service offerings and next generation global delivery to serve the financial services industry. With a network of 18,000 professionals serving over 900 clients worldwide Capgemini collaborates with leading banks, insurers and capital market companies to deliver business and IT solutions and thought leadership which create tangible value.
More information is available at: www.capgemini.com/financialservices.
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Efma, a not-for-profit association formed in 1971 by bankers and insurers, specialises in retail financial marketing and distribution. Today, more than 3,000 brands in 130 countries are Efma members including over 80% of Europe’s largest retail financial institutions.
Efma offers the retail financial service community exclusive access to a multitude of resources, databases, studies, articles, news feeds and publications. Efma also provides numerous networking opportunities through work groups, online communities and international meetings.