Closed blocks outsourcing

How life insurers can reduce cost and improve focus

The life insurance industry has a unique opportunity to outsource its closed blocks of business to support a more efficient cost structure to service the portfolio, to better manage its talent and to enable focus on current and future products. Executing such a transaction can be risky, though, and needs to be tightly managed. Outsourcing closed blocks may not be right for every insurer, or for every product, and it is important to conduct an objective and thorough assessment of the opportunity.

Reduce cost and improve focus

‚ÄčLife insurance is a business in which customers are serviced long after the sale and carriers are constantly developing new products and reconfiguring their offerings. Therefore, life insurance carriers spend a significant portion of their capacity servicing products that are discontinued, but still have active policyholders. Such products are collectively known as a "closed block".

Servicing closed blocks can be inefficient from a cost and resource perspective. Outsourcing allows the insurer to focus its resources on new products that are aligned to its overall strategy. For these reasons, life insurers may want to analyze the suitability of outsourcing these services. The concept of outsourcing closed blocks is not new, and in fact multiple service providers have gained significant experience in executing such complex migrations. In light of recent improvements in service providers' ability to migrate closed blocks from insurers' systems to the providers' own systems, it may be the right time to revisit this option.

This paper looks at the challenge of servicing insurance closed blocks and analyzes the opportunity to outsource this process and derive greater operational efficiency.

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