News that Accenture Life Insurance Services has won an eight-year business process outsourcing (BPO) agreement with BNP Paribas Cardif may be a sign that the European life insurance and pensions market is set for increased outsourcing activity.
BNP Paribas Cardif, the life, property and casualty insurance subsidiary of BNP Paribas, has a strong international focus, generating nearly half of its premiums outside of France, with a particular focus on emerging markets including Taiwan, Russia, Ukraine, Turkey, Brazil, Chile and India. Insurance is sold principally through intermediaries and bancassurance channels.
Accenture will manage an important portfolio of BNP Paribas Cardif’s group life insurance policies business in France, including the administrative management of the insurer’s call centres and ancillary accounting operations.
According to Daniele Presutti, managing director of Accenture Life Insurance Services, the life insurance industry is undergoing fundamental change, driven by increased regulation and risk management pressure and more volatile markets. This provides an opportunity for some insurers to gain market share. Outsourcing can help them strengthen capabilities to reach their objectives.
Services to be provided by Accenture include policy administration, call centre services, ancillary accounting and enhancement of the current life processing platform.
Accenture has made no mention of any staff transferring under the Acquired Rights Directive. This legislation aims to protect employees when businesses are restructured, including in cases of outsourcing, but which often adds complexity, cost and risk to the execution of an outsourcing transaction, especially for services crossing country borders.
One interesting detail is that the scope of the Accenture/Cardif deal includes new insurance business. In the UK, traditionally, third party administration deals have focused on the outsourcing of processes in support of closed books, coupled with aggressive cost saving models, following the aggregation model pioneered by Clive Cowdery’s Resolution and subsequently taken up by Phoenix Life and others.
This announcement comes at a time when commentators have been suggesting that the UK market has reached relative levels of saturation and maturity, with large insurers such as Phoenix, Resolution, Prudential and Co-operative Financial Services having previously outsourced the administration of their books of business to the likes of Diligenta and Capita. Capita has a strong record of contract wins in the sector and says it has approximately 22% of the total UK market for insurance clients such as Zurich Financial Services.
It could be argued that Capita is currently suffering from indigestion as it grapples with the complexities of managing these large books of business, such as the need to transform the underlying technology on which the individual policies are administered. This has given the other main UK player, Diligenta (a wholly owned subsidiary of Tata Consultancy Services) the opportunity to increase its own share of the market.

Diligenta has impressed recently with its successful consolidation of multiple legacy systems onto a single integrated cloud-based system based on the TCS BaNCS Insurance platform. Diligenta built its business around a large contract with Phoenix in 2005, and subsequently its 2010 acquisition of UISL, the former L&P business of Unisys, which enabled it to pick up work for Old Mutual in the process. The end of 2011 saw Diligenta sign a 15-year, £1.37 billion deal with Friends Life under which some 1,900 employees are expected to transfer to Diligenta under TUPE (the UK’s version of the Acquired Rights Directive).

Other players include:

 International Financial Data Services (the State Street/ DST Systems joint venture) which entered the sector in 2010 with its acquisition of Percana Group headquartered in Dublin and is also reported to be working with Phoenix

 Swiss Re, which in 2007 took on the responsibility for 12 million life & pension policies under an outsourcing arrangement with Aviva, which included 3 million active premium paying policies

 The Indian outsourcer HCL Technologies, which in 2008 acquired Liberata Financial Services and subsequently inked a long-term deal with Equitable Life worth an estimated £125 million.

Although announced in 2009, the contract did not start until March 2011. Equitable Life expects to make cost savings of approximately £8 million in the first full year of the contract and will reduce its provision for future costs by over £100 million through committed savings and cost predictability under the contract.

The recent Friends Life deal with Diligenta and the BNP Paribas Cardif deal with Accenture suggest there’s still life in this sector with large savings to be gained. Friends Life, for example, reported expected savings of £60m per annum from 2015 with one-off costs of £230m, although a robust approach to contracting supported by ongoing service management and governance is needed to ensure that the promised savings actually materialise.

Source:http://www.sourcingfocus.com/site/opinionsitem/4857/