Outsourcing eBusiness Brings Insurers Massive Cost Reduction

press release

London, UK - 16th August 2001, 1900 GMT - Insurers are under competitive pressure to cut costs through eBusiness and are now outsourcing to joint ventures according to the Intelligence Unit at mi2g.

"Potential savings from eCommerce in the commercial Property and Casualty insurance industry are substantial”, said Christopher Hopton, Partner, Bain & Company. “We estimate that globally the industry could save $39 billion, representing 9% of total costs, by using eCommerce applications to gain efficiencies in distribution, administration and claims costs.”

Lloyd's of London is poised to sell half of its claims processing business in October and the Ins-sure joint venture with the International Underwriting Association (IUA), Lloyd’s and Xchanging has already been set up to provide processing services to the London market. "The expansion of our eCommerce capability, both internally and through strategic partnerships, is a major factor in the modernisation of the Lloyd’s market” said Nick Prettejohn, CEO of Lloyd’s.

“eBusiness outsourcing and joint-venture deals were once regarded as restrictive, but they now provide far greater flexibility, security, balance sheet benefits and cost savings”,said Jonathan Moore, Partner at lawyers Hammond Suddards Edge. “This matches the needs of large insurers operating in an increasingly commoditised and fast moving environment.”

Allstate has restructured its workforce to move towards a multi-channel sales strategy using the internet, call centres and agents, thereby eliminating thousands of non-agent positions and converting captive agents into independent contractors. These changes will save $600 million.

“Once upon a time the symbol of the insurance world was that of a glacier - big, frozen and slow. Today, the symbol of the lower expense ratio insurer is a jet stream”, said D K Matai, Managing Director, mi2g. “The insurance industry should now be ready to outsource major elements of their eBusiness solutions through joint ventures, accruing massive cost reductions and retaining control. ”

In the 21st century, competitive advantage accrues from the time to market through the offloading of non-core processes. eBusiness outsourcing reduces the need to employ technical resources to build expensive platforms and middleware.

“We see both Life and Non-life insurance companies examining the deployment of eBusiness across all elements of their organisations”, said Chris Dawson, Vice President, Bain & Company. “In North America, cost savings of 20%-30% are already being identified and achieved, with relatively rapid realisation rates. These organisations are now turning their attention to potential revenue enhancement.”


Editor's Notes:

About mi2g:

mi2g software works with financial services groups, both large and small, to change and eEnable their entire business. We automate our clients’ business in such a way that they and their customers can use the World Wide Web both to increase their business volume and reduce their overall cost base. mi2g eBusiness Solutions Engineering pays particular regard to security and advises on the management of eRisk, which incorporates Bespoke Security Architecture. mi2g’s clients are mainly from the banking, insurance and reinsurance sectors. For further information – www.mi2g.com

First contact for additional information - Intelligence Unit, mi2g

Telephone: +44 (0) 20 7924 3010 - Facsimile: +44 (0) 20 7924 3310 - eMail: intelligence.unit@mi2g.com

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