Insurance

Top 3 US Life and P&C Insurance Company outsourced Product Development and Support to enable it to beat competitors into a market segment

Scope: Product Development and Support
Geography: North America

Situation
A well-known insurance company wanted to develop insurance products for the top 10% of the 27 million households they served. By being first into this market, they could gain dominant market share position and appeal to these high-worth customers. They came to us to see how they could reduce their current internal product development cycle time of three to five years. 


Approach and Solution
We developed a business case based on identifying partners able to provide or adapt existing products to meet customer needs as well as provide agent and field customer support. We then conducted a procurement process and selected another insurance company to provide existing products under our client’s brand. The agreement also included the development of new products as needed.

Result
The client achieved its strategic goal of beating its primary competitors to the market by at least 18 months.  They gained significant market share, with sales ahead of forecast. The company also achieved cost savings as product, sales and new product development costs were borne by the supplier of products. Operational efficiencies result from the supplier’s staff making joint calls with the insurance company’s agents to provide specialized expertise at point of sale and thereby increasing the closure rate.
 

Top 15 US Life Insurance Company uses outsourcing for Policy Conversion & Administration

Scope: Policy Conversion and Administration
Geography: North America

Situation
This leading US insurance company had a significant closed book of business from its own underwriting and two acquisitions. It wanted to convert and consolidate all the policies onto one IT and policy administration system within six months, as well as provide customer relationship and agent management on an ongoing basis. The company had budgeted about US$85 million for support costs over five years and another US$12 million for the conversion.

Approach and Solution
We developed a business case that supported outsourcing and completed the procurement process within four months. The supplier agreed to convert all 400K policies within six months, consolidate the IT systems onto one platform, manage the data center and provide CRM and policy administration.

Result
The supplier met the contractual commitment to move the acquired policies off the seller’s platform within the desired time frame, helping the insurance company avoid unnecessary costs in the conversion process. Specifically, the company realized a 33% reduction in policy conversion costs (from an estimated US$12 million to approximately US$8million) and a 42% reduction in five-year support costs (from an anticipated US$85 million to around US$50 million).

Top 3 Life and P&C Insurance Company uses Lab and Paramedic Services outsourcing to improve quality and timeliness of medical data for Life Insurance underwriting

Scope: Lab and Paramedic services
Geography: North America

Situation
A large insurance company needed to reduce the attrition rate for new life policies. Research indicated that a long policy issue cycle time was causing “buyer’s remorse” and that the delay resulted from underwriters reviewing every policy due to a lack of confidence in the accuracy of the medical data. This lack of confidence was justified, as no company had the capability to handle all the demand for on-site medical visits or lab testing

Approach and Solution
We researched the market and contracted with a company willing to make the investment to provide national paramedic and laboratory services, as well as meet specific service levels for accuracy and timeliness of data. We also found a company to provide a tele-underwriting solution that interfaced with Everest’s client’s systems. Within a year we rolled out this solution throughout the life insurance company’s 14 agent regions in the US and Canada.

Result
The company reduced its issue cycle time from 45 days to less than 14, cutting its attrition rate by 50%.  This enabled the company to re-assign approximately 50% of the underwriters working on life policies to other tasks. The tele-underwriting solution reduced costs by about US$50 million per year, and increased the company’s competitiveness through lower premiums.  At the same time, the automated underwriting process allowed our client to focus on high-risk applications. In addition, the lab services contract reduced lab and paramedic services costs by about US$20 million per year.
 

Top 3 P&C and life insurer improves cash flow by reducing its check processing cycle time

Scope: Check/Credit card processing
Geography: North America

Situation
A large insurance company wanted to reduce its check processing costs.  Before investing in new equipment, it wanted to evaluate the impact of that investment on check processing costs. Current expenditures were about US$.25 per check with a process cycle time of about 72 hours for some 1.2M checks per month.

Approach and Solution
We evaluated suppliers, analyzed their capabilities, pricing and process performance versus an in-house process re-engineering effort. We also redefined the scope to include crediting funds in the insurance company’s account.  Bad check expenses were less than .01% of checks processed. The client decided to go with an internal business process re-engineering effort that would reduce the cycle time to 24 hours, cut processing costs to less than US$.12 per check and have the company absorb any returned check charges.

Result
The company postponed its equipment investment and gained approximately US$500,000 a day in additional interest income. Processing costs were reduced by US$.13 per check in six months and process cycle time was reduced to 24 hours.

Top 5 P&C insurance Company outsources Application Development and Maintenance and creates an internal market to maintain competitive tension among pre-qualified suppliers

Scope: IT - ADM
Geography: North America

Situation
A highly regarded insurance company wished to shorten development cycle times and improve productivity, capabilities and quality while also reducing ADM costs by 25% - 40%. To make matters even more complicated, spending was not aligned with business value and the company needed to have predictable results in terms of time, cost, quality and shared risk. In addition, it was facing a retirement bubble in which about 25% of the 1,500+ programmers in-scope were eligible for retirement in the next five years.

Approach and Solution
We recommended the company move from a domestic to a global ADM delivery model with two to four strategic partners.  This would allow them to leverage gain sharing, labor arbitrage, variable staffing and application rationalization.

We created an “internal market” where vetted suppliers under prenegotiated contracts competed for work.   A team experienced in developing requirements, evaluating supplier proposals and managing work, managed the process. We also created customized processes and tools and trained the governance team to achieve targeted results.

Result
The internal market ensures that suppliers are aligned and motivated to work in the buyer’s best interests. They are encouraged to provide the best possible service and creative solutions to maintain a competitive position. The program provides added insight into each other’s needs and capabilities encourages a trust-based relationship and fosters a willingness to share and fairly allocate risk.  Aggregate savings over five years is estimated at US$110 million, and governance, procurement and legal costs were reduced as well.

Top 15 US Life Insurance Company – Enterprise Sourcing Strategy, IT & ADM Renegotiation, and multi-process sourcing

Scope: Multi function
Geography: Global

Situation
Burdened with multiple IT outsourcing contracts based on different business units and geographies, as well as more than 17 policy administration systems due to past acquisitions and decentralized decision making, this company need a cohesive Enterprise Sourcing Strategy across most back office functions. The scope was quickly extended to include Procurement Outsourcing and the administration of insurance policies.

Approach and Solution
After the Enterprise Sourcing Strategy identified potential savings, the client and Everest engaged three existing suppliers in win/win negotiations by recompeting and renegotiating contracts for IT infrastructure, ADM and policy administration. Savings were achieved by using offshore, server and data center consolidation, improved demand management and reduced supplier margins

Results
The company improved their ability to create and support new insurance products. They simplified governance requirements by creating a standardized approach to outsourcing and supplier management, and they reduced the number of IT and policy admin systems that needed to be supported, allowing for improved performance. There were direct cost benefits as well, including some US$22 million to US$39 million savings identified in IT and ADM. Contracts were signed locking in savings of US$36 million with multiple initiatives still under consideration, and procurement savings were projected at US$22 million+ per year while cutting projected supplier fees in half.