Reducing costs and stimulating corporate growth can be a tough proposition for insurance companies. Often, reducing costs only serves to inhibit growth as a reduction in spending undermines targeted growth areas.A new study released by three insurance industry technology providers delves into the challenge life and annuity insurers are facing as they strive to remove costs from the equation while ensuring corporate prosperity, as defined by profitability.
The study, titled "Walking The Tightrope: Improving Profitability While Reducing Costs," was conducted by three Canadian technology providers: SOLCORP, Toronto; DSPA Software, Mississauga, Ont.; and Whitehill Technologies, Moncton, New Brunswick.
The survey of 30 life and annuity carrier-s-a majority with more than $100 million in annual premiums--focuses on the fact that insurers are faced with a dubious task of reducing costs while achieving growth.
Many insurers operate with a high cost structure, which in turn has impaired their ability to grow revenue through new and competitively priced products. This high cost structure also undermines their ability to expand operations through new markets or distribution channels.
"We set out to get an in-depth picture of what is keeping life and annuity insurance executives up at night, and we've succeeded with this survey," says Mark Cline, senior vice president, strategy and global initiatives, for SOLCORP.
"The report details insurers' challenges, priorities and strategies," he says. "It's an invaluable resource for life and annuity executives who need to improve their company's bottom line and get a handle on what their industry peers are doing."
The survey, conducted from April through July 2004, focuses on six core areas: business challenges, customer service, distribution channels, products, regulatory issues and IT/BPO outsourcing.
The survey reveals that 77% of respondents rate growing market share and reducing costs as high priorities. Other objectives seen as highly important include improving the efficiency and effectiveness of distribution channels (70%), improving product profitability (63%), and improving customer service (60%).
The most common strategies used to improve customer service are implementation of Web-based customer self-service (69%) and initiatives to consolidate customer data (69%).
Respondents say customer data located in multiple silos within the organization is one of the most important challenges in improving customer service (50% rate this of high importance; 25% of medium importance).
The survey also reveals that 76% of respondents are pleased with how their IT staffs are meeting the business objectives of their organizations.
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