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.”
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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
