Breathing Life into Insurance | Article

Unisys’ Insurance Business Process Utility Advances

old bookWhen Royal & SunAlliance (RSA), one of the world’s largest international insurance groups, decided to close sales for its UK life business line and focus only on its property and casualty business line, it still needed to cost-effectively maintain customer service levels for its 2.4 million existing life policies even though the closed book would shrink revenues, impact employee motivation, and create staffing issues (such as key man dependency in a highly technical process environment).

Another large insurance company, domiciled outside the United Kingdom, wanted to expand its existing small operation in the UK; but emerging regulations made expansion cost prohibitive. Furthermore, a changed situation necessitated that the company move from its UK facility. Not wanting to risk disrupting its product development cycles or eroding its high level of customer service support, its executives began looking at alternatives for administering the UK open book of business.

Both companies, realizing it would be practically impossible to internally provide the operational capabilities they needed in these scenarios, turned to Unisys Insurance Services Limited (UISL) in 2003 to help them break through their limitations. Those decisions added more resources and expertise to UISL’s value proposition, firmly establishing the company as the largest provider of managed insurance administration services in the United Kingdom and raising the stakes for other outsourcers.

Flashback

Unisys set up its subsidiary operation, UISL, in 2001 to provide processing support to Abbey Life Assurance Company Limited (which had 40 years of successfully delivering life and pension products in the UK). Abbey Life’s parent, Lloyds TSB Group plc, had closed the insurer to new business in 2000 when Lloyds chose to focus its development efforts and resources on its key brand, Scottish Widows, a mutual insurance company it had recently acquired.

Like RSA in 2003, Abbey Life evaluated its options for supporting its closed book operations and chose outsourcing. Since the closed book business would be declining over time, Abbey Life needed to move away from a fixed-cost structure. Plus, the company needed to migrate 1.75 million policies from 18 disparate 30-year-old IT systems onto one platform. State-of-the-art technology would not only help in reducing costs, but it also would increase customer service levels by enabling consultants to identify a customer’s entire portfolio of policies without having to access multiple systems. Add three other important facets to the list of provider selection criteria:

  1. Abbey Life didn’t want to be squeezed into a provider’s existing one-size-fits-all model
  2. It wanted the benefit of continual cost reduction over time
  3. It wanted excellent career opportunities for Abbey Life’s employees

Finding a provider who could deliver against all those objectives was not easy, recalls Neil Tointon, Abbey Life’s Director of Operations. UISL had the greatest value proposition among the eight providers considered.

UISL brought to the table its proprietary life and pension software solutions, Unisys’ renowned expertise in managing outsourced payment processing operations, and proven change management strategies. Abbey Life brought to the table its 1,000-strong workforce with a wealth of insurance expertise, whose career-expansion opportunities took a gigantic leap when they transferred to UISL. Together, their resource synergies have resulted in measurable cost savings and operational improvements for Abbey Life and improved customer service levels for its policyholders.

Can-do Attitude

Within a week after transition, says Tointon, the former Abbey Life employees were re-energized and had a renewed self image. Satisfaction surveys of Abbey Life’s customers showed a dramatic increase in service levels in the first 15 months of the outsourced arrangement.

Sidebar: Best Practice #1

Life insurance companies usually have a fragmented view of service delivery, states John Connor, business development director at UISL. For its end-to-end services, UISL had to reconstruct measurements to compare service on an apples-to-apples basis. Even so, Lloyds TSB Group places such a strong priority emphasis on customer service and care that in 2003 it raised the service level expectations – after UISL’s two-year track record of operational excellence. The new service level agreements – with approximately 60+ monthly metrics – have been consistently achieved. Tointon reports that UISL consistently achieves in excess of 98% even where the service level threshold is 95%.

The provider continues to be responsive to Abbey Life’s evolving needs. Tointon cites, as an example, a “past business review” project to meet requirements of the UK Financial Services Authority. UISL provided short-notice support for tasks including copying records reconstructed from microfilm/microfiche, calculation of historical surrender values, plus back-scanning and other activities to ensure ongoing service can be maintained.

“UISL’s whole culture is about good service and can-do approaches,” comments Tointon. “They want us to be more than satisfied – they want us to be happy! We’ve had other outsourcing experiences in the past where people didn’t deliver on their commitments. But UISL has delivered even more than we thought they would.”

Global Insurance Footprint

Sidebar: Best Practice #2

Unisys approaches business transformation from a vertical perspective. Building on its deep domain knowledge in a particular industry, it adds end-to-end capabilities including consulting, systems integration, applications (which can be tailored to product-specific demands), outsourcing, infrastructure and technology, along with operational excellence. Unisys brings all these capabilities to bear on client business challenges through an approach called “3D Visible Enterprise (3D-VE). This methodology can reveal the cause-effect relationships between business vision, business operations, and the IT systems that support them.

Unisys creates 3D-VE “blueprints” that can be repeated, extended, and adapted to individual client needs. At Abbey Life, for example, Unisys implemented a range of process and organizational changes in the first 18 months of the Abbey Life contract to increase staff productivity by 60%, from under 3,000 policies per head to more than 5,000. These improvements were largely without the deployment of technology. Unisys knew that it had to raise the bar further to fulfill the client requirements to integrate legacy systems and simplify Abbey’s operating model.

UISL’s Connor explains, “We applied our 3D-VE approach of looking at all processes that support UISL’s vision and strategy. One of the key ways we amended them was by migrating systems to our proprietary insurance administration application, already implemented in a number of companies. This has resulted in further improvements of 35%, with policies managed per head increasing to 7,000. In addition, we’ve achieved significant knock-on savings in the total cost of ownership as the legacy systems are retired.”

Because the Abbey Life product portfolio mirrors that of the UK life and pensions business as a whole, Unisys has now created a solution it can rapidly re-deploy on subsequent engagements for other firms.

Unisys also has added to the model such capabilities as systems integration expertise, benchmarked service levels, and best-practice operations, along with process modeling tools for open books of business. UISL works with its open-book clients to ensure successful product launches. Insurance enterprises outsourcing to UISL transfer risks associated with their business volumes but retain control through joint business planning sessions and transparent delivery of services.

The blueprinting approach also helps Unisys effectively leverage its global experience in related operations, such as business process outsourcing services for healthcare/Medicaid administration in several US states. Also, Abbey Life’s parent, Lloyds TSB, along with Barclays, had been a partner with Unisys in a joint venture that created a new payment processing business line: intelligent Processing Solutions Ltd (iPSL), which processes nearly 70% of all checks in the UK. In addition, Unisys transferred its experience in the UK to become the largest check processor in Australia through Unisys Payment Services Ltd (UPSL).

The UISL blueprint model is now set for expansion in Asia-Pacific and continental Europe, as well as the United States, establishing subsidiaries to handle significant regional differences in product sets, distribution intermediaries and labor laws.

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