Closed book acquisitions refer to purchasing life insurance and pension portfolios that are no longer actively marketed or sold by the original provider. This strategy allows acquisitive life insurance companies to purchase these "closed books" to create a pool of similar books over which product governance and management can be aligned. However, closed book acquirers face significant pressure to ensure excellent customer service and positive outcomes, operating efficiently through economy of scale and book synergy, maintaining regulatory compliance and acquiring new business. Successfully managing these areas is crucial.
- Customer Service – Providing excellent service to all customers is paramount for closed book acquirers to adhere to consumer duty regulation, retain policyholders and uphold their reputation. This includes timely responses to inquiries, transparent communication regarding policy details and changes, and effective handling of claims, retirement processes and other service requests. Challenges may arise due to legacy systems, outdated processes or insufficient resources and inconsistent customer support models.
- Policy Administration – Efficient policy administration is essential for managing a large portfolio of insurance policies. This involves tasks such as premium and contribution management, investment management, underwriting, claims and money out processing. Closed book acquirers often inherit diverse policy systems and data formats from acquired portfolios, leading to complexity and inefficiencies in administration. Streamlining these processes and reducing reliance on dated and poorly supported technology is crucial to minimize errors, reduce operational costs and ensure compliance with regulatory requirements.
- Managing run off cost pressures – While closed book life insurers focus on managing existing policies, they must also pursue opportunities to offset policy run off cost pressures. This may involve acquiring additional closed books, entering new markets or launching new product offerings. Allocating resources and attention to these initiatives while managing day-to-day operations can be challenging, leading to missed opportunities or slow progress.
Outsourcing can be a strategic solution for closed book acquirers to address the challenges of customer service, policy administration and opportunities to offset policy run off pressure. By partnering with specialized outsourced service providers, companies can leverage expertise, technology and scalability to improve efficiency and refocus internal resources on core priorities.
Best Practices for Outsourcing
When choosing an outsourcing partner, conduct thorough due diligence considering industry experience, reputation, track record and other factors such as transformation capability. Clearly define service level agreements (SLAs) and key performance indicators (KPIs) to ensure accountability and measure the success of outsourcing arrangements. Foster open communication and collaboration between internal teams and outsourcing partners to ensure alignment of goals and objectives. Finally, as part of the ongoing partnership, regularly evaluate the effectiveness of your outsourcing strategies and adjust as needed to optimize results.
Managing the pressure trio of customer service, policy administration and managing policy run off is crucial for the success of closed book acquirers in the insurance industry. By embracing outsourcing as a strategic tool, companies can overcome challenges, improve operational efficiency, and drive sustainable growth in a competitive market landscape.
To learn more about how outsourcing can help you relieve pressure, explore our life and pensions solutions or contact us.
