Deloitte today announced the results of its 12th annual life and annuity back-office operations benchmarking studies, LIONS 2007 and ACES 2007, which provide comparative analysis widely used by top insurance companies to benchmark expenses for operations and information technology. The analysis covers a variety of topics including efficiency, effectiveness, key trends, use of technology and business performance.
“Given the increasingly competitive and slow growth environment for life insurance products, cost containment through operational efficiency is considered a top priority for executives,” said Joe Guastella, national leader for Deloitte’s insurance consulting group. “But it is vital executives recognize that success depends not just on committing to increase efficiencies – it also requires focusing on the ones that have the most impact.”
The studies found that while the life insurance industry has made some progress with respect to cost cutting and increased efficiencies, there is still opportunity for further change:
Life line expenses per $1,000 of total annual premiums have declined 9 percent per annum.
New business and customer service operations and related IT expenses are a significant part, roughly one-third, of overall baseline costs.
Because expenses are evenly divided among new business operations, customer service operations, and related IT, insurers need to manage the entire business process model, not just one area.
There is continued opportunity to improve service standards, especially in call centers.
“Annuity sales have experienced explosive growth over the short term, which may be masking underlying efficiency issues,” said Richard Roth, practice leader for Deloitte’s global benchmarking group. “While it can be challenging to try to determine where a system can be made more efficient right when it’s being taxed the most, that is exactly the time to seek out the disconnects and redundancies because they are magnified.”
The studies revealed several areas that offer annuity providers the opportunity to improve efficiency:
Reducing the not-in-good-order (NIGO) rate by addressing root causes.
Expanding the use of straight-through-processing (STP).
Exploring additional outsourcing opportunities.
Leveraging eService capabilities.
Webcast of Benchmarking Study Results
For those not able to attend the Insurance Benchmarking Forum, an annual benchmarking client meeting held in Dallas at the end of 2007, where the LIONS 2007 and ACES 2007 results were announced, a one hour summary web cast will be hosted on January 8, 2008 at 2:00 PM.