Wednesday, July 8, 2009

Insurers may be forced to cut costs, outsource

European insurers such as Allianz SE and Axa SA may be forced to cut costs, outsource more functions and boost revenue from emerging markets to maintain earnings growth as the recession in their home markets deepens, consulting firm Accenture Ltd sai, reports Bloomberg.
Insurers may gain from moving asset management, claims handling and the underwriting of insurance risks outside the company, Thomas Meyer, the Zurich-based managing director for Accenture’s insurance practice in Europe, Africa and Latin America, said in a telephone interview.
"Insurance is a 300-year-old industry and it hasn’t changed that much since its inception, with the average insurer still handling about 85% of its operations that create value inhouse," Meyer told the news agency.
In contrast, "car manufacturers nowadays only handle about 15% themselves," he said. Almost 16,000 people have been fired by insurers worldwide since the start of the financial crisis as they seek to trim costs to offset slower earnings growth.
Global life and non-life insurance premiums fell in real terms last year for the first time since 1980, Swiss Reinsurance Co, the world’s second-largest reinsurer, said last month. The industry has written down US$243 million (RM862.34 million) on credit and investment losses since the start of 2007.
"While the financial crisis will lead to declining premium income in developed and saturated markets, emerging markets such as China, India and Brazil will offer opportunities to grow," Meyer said. British insurers are among companies that have announced moves to outsource some services. Aviva plc reduced its workforce by 3,000, or 6%, and said it was scaling back operations that had been outsourced to India.

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