www.niit.com www.niit-tech.com www.niitsmartserve.comGlobal Learning Solutions

Insurance BPO: the way forward

Dhiraj Dolwani

NIIT SmartServe

Business Process Outsourcing

The delegation of one or

more IT-and-labor-

intensive business

processes

(such as accounts

payable, call center-based

customer service, or

claims processing)

to an external provider

that owns, administers,

and manages the

selected processes based

on defined and

measurable performance

metrics

Forrester

The final word!

Work where it makes economic sense…

Three essential elements to BPO delivery

Labor

arbitrageProcess

improvement

Technology platform

BPO provides real benefits

• Capture significant savings

– Use mix of process efficiencies and low-cost labor

• Avoid IT capital investments

– Outsourcing allows companies to escape the upgrade

treadmill -- especially in non differentiating processes like

HR or accounting.

• Move to variable pricing

– CFOs like the idea of paying per policy for claims

processing, per headcount supported in HR, or per

invoice in accounts receivable or accounts payable.

Changing nature of BPO work

Example:• Low end data entry • Medical transcription

Low end(simple &

standardized activities)

Example:• Billing services• Document management• Policy servicing

Advanced technical skill and some

judgment required

Example: • Strategic planning and forecasting

• Research & Knowledge Management

Critical work-typesExtensive

judgment and analytical skills

required

Commodity functions, not differentiators;

with little value add for Insurers

Lines of Business

Business Processes

Life

HealthAnnuities

Retirement

PlansAuto

Liability Property

Marine

C H A N N E L S

Distributors Independent

AgentsThird Party

AdministratorsKiosks Call Centers Branches

Infrastructure Layer

(Hardware Platform, Security Layer)

Financial

Markets

Regulators

Banks

Internal

Communication

Channels

Call Centers

Distributors

Third Party

Administrators

Product

Development

Claims

Mgmt

Policy

AdminReinsurance

Mktng. &

Sales

E N A B L I N G P R O C E S S E SRisk

ManagementLegal &

Compliance

Agency

Management

Finance &

AccountingInvestment

ManagementSupport

Systems

E X T E R N A L I N

T E R F A C E S

Life Non Life

W O R K F L O W

Customer Management

Regulatory & Tax Environment

Insurance Spectrum

Underwriting

Insurance BPO:

Management of closed books of business

• Life policies are particularly well suited

• These are old mainframe applications that

can be expensive to maintain

• Most choose to maintain the old applications

themselves or outsource them

• Offshore outsourcers are particularly well

placed for this

UK Life & Pensions policy admin services

InsuranceInsurance

CompanyCompanyUK UK

Outsourcer Outsourcer

Offshore Offshore

PartnerPartner

10 year

contract

Offshore BPO Operations for Life & Pensions

7 year contract

Tiger • Business Process Outsourcer (BPO) • UK’s leading BPO for life and pensions work• Maintains 4 million policies

Scope

All aspects of life and pension policy processing• general servicing• amendments• payments in• payments out • new business

US HQ 36,000 employees100 countries

Wholly owned insurance subsidiary

Case1:

L&P closed book policy admin services

17th Nov2003

1st Dec 2003

26th Jan 2004

29th March 2004

Address change

Client change &

Quotes

Agent change

27th Sept 2004

25th Oct 2004

28th Feb 2005

28th June 2004

Pension Enquiries,

PensPolAlt & Cease

Premium

Transfers, IncAddBen

& NewBusApps

Indexing

SP (legacy

platform)

Gone Away

8th Dec 2003

Contract (MSA & WPA) signed on 30th Sep 2003

14th Mar 2005

Suspense &

Refunds

Retirements

Simple work types

(contract amendments)

Indexing

(vital to onshore work

mgmt also)

Complex work types

(enquiries, payments-in

& payments-out)

OUTBASKET QUALITY

100% 100% 100% 100%

98.29%

98.86%

100%

96%

97%

98%

99%

100%

101%

Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06

Outbasket Quality Target

INDEXING QUALITY97.3% 97.94%

96.82% 97.26% 97.63% 96.84% 97.18%

65%

70%

75%

80%

85%

90%

95%

100%

Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06

Indexing Quality Target

Case 2: US variable annuity POS

•Contract Set Up

•1035 Exchange

•Projects

•Training

•Production Logging

by SR's

•38a-1 Reporting by

SR's

•PRD - Service

Request

•Reviewing reports

•Updating

Procedures

•Sox Document

Maintenance

•Weekly and Monthly

Production Reporting

•OMR Survey

•Maintenance of

IIRWin Skill sets

•System

Enhancement

Process (RITS)

•Monitoring Daily

Production Queues

•Merrill Lynch –

Quarterly Reporting

•Breakage Tracking

•Address Change

•Beneficiary

Changes

•Agent Changes

•Ownership Changes

•Name Changes

•Power of Attorney

•Telephone

Authorizations

•SSN Changes

•Client Numbers

•CIP Checks

•Cost Basis

•Account Values

•Contract

Acknowledgments

•Trusts

•BD Mergers

•DOB Changes

•SA Renewal

Options

•Correspondence

•Reallocations

•Block Reallocations

•Regulation 60

•Advisory Fees

•Cash Surrender

•IRA Withdrawals

•Partial 1035

•Partial Withdrawals

•Telephone Partial

withdrawal/surrender

•Trustee to Trustee

Transfers

•TSA Loan

Processing

•Approving ATR's

•Free Looks

•Check Register

•Stop Pay and

Reissues

•72T/Q Withdrawal

•Automatic

Rebalancing

•Dollar Cost

Averaging

•Pre-Authorized

Checking

•Systematic

Withdrawals

•Death Claims

•Scanning

•Indexing

•Cash Processing

•QA of Service

Requests

•QA of Financial

Transactions

•Initial Payments

•Rollovers

•Pay-Ins

New

BusinessPayments

Imaging

and Admin

Services

Service

Requests

and

Reallocations

FinancialsMngmt

AdminQA

•Death Claims

•Monitor Disb/Syste

matic Email box

Non-Financials

Systematics

Disbursements

Admin

Processing lifecycle

•Monitoring NF/Reall

E-mail box

Reallocations

The BPO market in the near future

• Outsourcing simple tasks will continue to lead the market– Check processing, Credit card processing

• Shared services will ramp further– Processes like finance and administration, and HR which are highly

common across industries but require more interpretation than simple bulk transactions. Lend well to using self-service portals.

• High-volume vertical processes will grow as a segment– policy administration, claims processing

• Specialized complex vertical processes (KPO)– will gather more momentum: compliance support, environmental data

analysis & reporting

Knowledge based services

• A major area for growth for offshore BPO is emerging in the form of knowledge-based services, sometimes known as knowledge process outsourcing (KPO).

• KPO services are diverse, but are not typically amenable to a cut-and-dried rules-based approach. Instead, they provide higher value addition in which subjective analysis or judgment is required (often using staff having higher level of educational qualification)

• Examples include research & analytics, equity research support, legal support and judgment-based aspects of mortgage and insurance claims processing.

Case3:

Knowledge based Compliance Support

ClientClientIFAIFA

(Independent (Independent

Financial Financial

Adviser)Adviser)

SesameSesamewww.sesame.co.uk

ProductProduct

ProvidersProviders

Regulator Regulator

FSAFSA(Financial(Financial

ServicesServices

Authority)Authority)

- Compliance Help-desk

- Commissions

- Compliance Services

- System Tools

- Product research

- Indemnity

Compliance Support for UK IFA’sPost Sale Compliance Service (suitability of advice) for business written for: Designated Investments (S&I, Pension, Protection), General Insurance, Mortgage

Compliance support: process overview

Deficiencies are identified

India QC

Feedback to IFA

Case

Review

Case

Closed

Re

Review

UK QC

UK

QC

IFA Error Log

IFA responds with clarifications / data

Check if all points

resolved and / or

any further deficiencies

After all points are resolved

Case Selection,

Case Request, etc

Quality Sampling

UK Process India Process

Customer service over telephone

Calling Members:

-To send in overdue

documents / cases

-Pro-actively Resolve

deficiencies if resolvable

over telephone

Receive Calls:

Addressing Advisers

concerns on

- reviews / approvals,

- Financial Services

Authority based

guidelines / regulations,

Providing pre-sales

guidance

Future of BPO Delivery

• An SOA formula lies at the heart of BPO delivery success– Allow providers to build BPO-enabling extensions across multiple

customers

– Ease the integration challenge for customers and suppliers

– Minimize implementation costs in the context of one-to-many engagements

• Longer-term, BPO blends with SOA to foster independent business process services. – Pursue a unified IT/business process approach to BPO

– Take an active role in shaping BPO delivery

– Organize for business process and SOA

• IT enablement will not be an afterthought in BPO delivery: BPO is the beginning of the process-focused IT era.

Some insurance market implications

• Insurers are redefining and reengineering their business processes (such as policy and claims management) to attain greater operational efficiency and improve financial performance. This will force integration and optimization of business processes across multiple function areas.

• Insurers' focus will return to their core competencies of assigning and assuming risk, as well as underwriting. Internal investment for business process operational expertise will be reduced as insurers buy these services from BPO providers.

• BPO providers' penetration into the core insurance business will take different forms for different segments.

BPO key success factors

• Process Transitioning Capability: proven methodology for business process migration management

CAP-D � SOL-D � Transition � Service Delivery

• Robust technology & telecommunication infrastructure

Not necessarily bleeding edge!

• Ramp-up and skill management

Ability to hire talent & train for skills

• Cost control and productivity management

Six-sigma for continuous improvement & Reengineering for radical benefits

• Trust and confidence

Ongoing long-term relationships

Case 4: Reimbursement process

Doctor enters procedure details on PDA at point-of-care

Claims Rules Engine integrated at the back end catches coding errors and

omissions and results in

‘cleaner’ claims & significantly reduced denials

Further rules added based on claims experience/denials

Registration/Scheduling application helps reduce patient wait times and captures all necessary patient information

Image & Workflow system to manage electronic access to correspondence, appeals, paper etc

Web based dashboard gives window to operations -status of claims batches submitted and ports to patient financial ledger

Summary

• Changing nature of Insurance BPO work…

– Simple � Rule-based � Knowledge based

• The way beyond could be to map the customer view innovatively…

• BPO: US model…UK-Europe model…

Australian model…Innovative/hybrid?

Questions?

NIIT Technologies Pty. LtdLevel 1, 51 Walker Street, North Sydney, NSW 2060

Stewart EvansSales DirectorTel : +61-2-9963-0098Mobile: +61-4-1915-8870Stevart.evans@niit-tech.com

NIIT SmartServe Ltd223-224, Udyog Vihar Ph-I, Gurgaon Haryana – 122002, INDIA.

Dhiraj DolwaniAssociate Vice President OperationsTel : +91-124-4002701Mobile: +91-9811098654dhirajd@niitsmartserve.com