Actuarial Processes - Sutherland Global Services

Business Transformation Services
Consideration Brief
Actuarial Processes
Delivering Business Performance Improvement
Through Business Process Outsourcing
Table of Contents
Executive Summary
Client Background
The Sutherland Approach
Process Analysis Findings
Recommendations and Solutions
Results and Performance Gains
Summary
About Sutherland Global Services
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Sutherland Global Services
February 2012
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Executive Summary
This Consideration Brief addresses how true Process Consulting delivers
positive change that impacts business revenue, provides competitive
advantages, and raises overall productivity in an organization.
In this document, we review the business case of a global specialty insurance
company that engaged Sutherland Global Services to conduct a detailed
Assessment and Process Analysis of the company’s Actuarial operations. This
is one in a series of solutions that Sutherland has provided for the client
company, which had undergone significant growth as a result of recent
acquisitions. Our previous work had revealed that process ownership was
decentralized among shared businesses and services, and processes were
supported by disparate technology. An artificial sense of separation had
negatively impacted the insurer’s business productivity and revenue.
Sutherland configured a successful solution that brought a sense of “one
company” to this conglomerate of multiple organizations.
In this particular case, we were engaged to address a number of challenges
faced by the company’s UK-­‐based Actuarial operations. Our task was clear:
Alleviate the heavy backlog of Actuarial analyses, improve cost efficiencies, and
build a solid base of actuarial talent to handle the work volume. Our extensive
expertise in the insurance industry and our history of success with this client
company provided a solid framework on which to build a solution. We began
by identifying “pain points” and opportunities for improvement. Following a
detailed analysis and process mapping exercise, Sutherland designed a
customized solution to enhance the efficiency and effectiveness of the
company’s Actuarial operations.
The initial results were significant, and our client continues to yield measurable
improvements. Our Process Analysis phase revealed several opportunities to
reduce labor costs by up to 40% without displacing current staff. Through
regionalization of labor and standardization of processes, Sutherland identified
a number of ways the insurer could increase the productivity and output of its
actuarial operations by as much as 30%.
While some of the specific processes and terminology in this case are unique to
the insurance industry, the story is universal. Our client’s situation will ring
familiar to any business owner challenged by the high cost of operations and
shrinking margins in an increasingly competitive market. Today, more
companies are turning to Business Process Outsourcing as a viable solution for
these challenges
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Client Background
Our client is a $7 billion international underwriter of specialty insurance and
reinsurance products in key areas of the property-­‐casualty market. Its four
business segments include: Commercial Specialty, Excess and Surplus Lines,
Reinsurance and International Specialty, which includes Lloyd’s Syndicate.
The company had grown significantly in recent years to service the Commercial
Specialty and Excess and Surplus lines: First, it combined two individual
companies to form a new Specialty company, and second, it had acquired three
strong niche insurance companies – including one with six US locations.
For this particular Actuarial solution, our efforts focused on the company’s
Lloyd’s Syndicate office in the UK, located in the heart of the London Insurance
Market.
The Sutherland Approach
The insurance company’s executive team engaged Sutherland to assist in
evaluating its UK Actuarial Operations and look for opportunities to implement
a solution that would ease the workload of current staff and help produce
analyses and reports much more quickly and accurately. Our approach included
four key elements that are pillars to every Sutherland solution: People,
Process, Technology and Location.
In the fall of 2010, we launched a high-­‐level discovery process in order to
observe and define current actuarial activities, identify a potential and
recommended project scope, determine key metrics, and outline the solution
and transition approach. Sutherland completed the first portion of the review
with the following assumptions in mind:
• Risk-­‐managed, conservative solution
• Preservation of core processes and staff
• Solution would be an onshore (retained) and offshore hybrid
• Timelines would have precedence over process perfection
• Stable technology, utilizing current ResQ actuarial software
Through on-­‐site visits at the UK offices, our team conducted an in-­‐depth
review, which included observing processes, evaluating actuarial software, and
mapping processes. Using onshore and offshore locations, we developed a
solution to improve the utilization of the company’s Actuarial staff. Ultimately,
our solution would reduce the overall cost of Actuarial operations and yield
significant labor savings without displacing staff. Our approach reveals one of
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the key advantages of business process outsourcing: Shifting a high-­‐volume
workload to an economical offshore solution enables company employees to
focus on what they do best – building the business and providing excellent
service to customers.
Process Analysis Findings
Our discovery exercise and process analysis phase revealed several challenges
and opportunities for improvement in the company’s Actuarial operations:
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Attracting a sufficient volume of actuarial talent in the UK
Improving efficiency and productivity while reducing labor costs
Producing actuarial analyses and reports, quickly and accurately
Reducing backlog of actuarial analyses
Utilizing Actuarial software correctly to maximize effectiveness
Recommendations and Solutions
Following our exploratory phase and detailed data analysis, Sutherland’s
Solution/Service Delivery team recommended several enhancements to help
the UK Actuarial office operate more cost-­‐effectively and efficiently. Our
solution was designed to eliminate the current backlog of analyses, to provide a
cost-­‐efficient resource for Actuarial staff, and to generate overall efficiency
gains.
Implementation of the solution was phased in over a 6-­‐month period, following
our foundational philosophy of building a global process foundation and then
transitioning additional businesses into the shared support world.
Our first step was to start a three-­‐month training session with the client to
completely evaluate and train on the current operation, and then shift the
operation’s workload to an offshore geographic region where there is a high
concentration of Actuaries. This offshore team supplements the current
Actuarial staff without displacing employees and expanding the current
operations. Providing a resource for highly qualified Actuaries was valuable to
our client, because the accuracy and timeliness of actuarial data provides a key
competitive advantage for insurance companies when pricing their plans.
As part of our solution, Sutherland supports the UK operations by handling all
of the following tasks:
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Data uploading -­‐ We perform regular claims data manipulation and
uploads in ResQ, actuarial software utilized to streamline the data/risk
calculation process.
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Data validation and checks
• Perform at each stage for the current month’s uploading as
well as for previous data
• Perform various checks to analyze the accuracy and
consistency of the data
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Reserving Methodology
• Perform regular reviewing & selection of paid and incurred
claims development patterns.
• Application of various reserving methodologies on the data.
• Perform initial draft selection of ultimate losses for discussion
with senior actuaries at the company
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Reporting
• Create regular reports and data outputs as requested by the
client company’s actuaries.
• Keep client actuaries apprised at all times through the timely
completion and submission of all requested program
reporting
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Compliance – Sutherland handles all escalation calls/queries from the
client company and its employees
Results and Performance Gains
The initial gains were both financial and qualitative in nature. Most notably, the
results were seen almost immediately. Our client’s feedback captures it best:
“Sutherland’s learning curve was minimal.
They ramped up quickly and our backlog is gone.”
Among the key achievements and measurable results in the UK Actuarial operations:
• 100% reduction in backlog
• Increased productivity by 50%
• Ramped up staffing by 40% with cost-­‐efficient labor
• Improved output of reports and analyses by 100%
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Summary
The Sutherland approach to process consulting revealed that the insurer’s
current Actuarial operations in the UK were under-­‐staffed and subsequently
lagging in productivity. Current staff did not have enough time to keep pace
with the high volume of output required for maximum efficiency in the busy
London insurance market. Our discovery process revealed the root causes –
namely, a shortage of Actuarial talent in the UK, a heavy backlog of
analysis/reporting work, and underutilized actuarial software. Following a
detailed process analysis, Sutherland designed a solution that included an
offshore talent pool and additional support with data uploading and review,
reporting, and compliance. Results were immediate and significant, including a
40% reduction in operating costs and a 50% increase in productivity. Future
efforts to generate efficiency gains will continue to drive down costs and
improve productivity and performance across the UK Actuarial operations.
About Sutherland Global Services
Established in 1986, Sutherland Global Services is a global BPO services
enterprise providing integrated Platform-­‐based and Analytics enabled business-­cycle
support solutions for major Industry Verticals and global industry leaders.
Sutherland collaborates with clients to help them excel in their industry while
maximizing their customers’ lifetime value.
Sutherland is Certified as a Minority Business Enterprise by NMSDC®.
© 2012 Sutherland Global Services WP-­‐ACT-­‐040312
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