Insurers must outsource more

Consultants Accenture has said European insurers such as Allianz and Axa need to cut costs, outsource more and boost revenue from emerging markets as the recession in their home markets deepens, Bloomberg reports.

Thomas Meyer, managing director for Accenture’s insurance practice in Europe, Africa and Latin America said: “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 in-house.” In contrast, “car manufacturers nowadays only handle about 15% themselves,” he said.

“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.

Outsource underwriting

Smaller insurers could benefit from outsourcing underwriting, Meyer said. “In the past many smaller insurers simply followed big players such as Allianz in their underwriting,” he said. “That could be a model for the future, but eventually it would lead to further consolidation.”

Administrative costs in reinsurance or commercial insurance for global clients could be cut by as much as 30%, if functions such as policy and claims processing are made more efficient and duplicated functions are eliminated, he said.