Actuarial Outsourcing: A viable solution for your talent/skills shortage?
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Well-managed actuarial outsourcing offers a viable solution to meet the increasing demand for actuarial resources
By Subhash Khanna and Shamit Gupta
Outsourcing is not new to the life insurance industry. For many years, life insurance companies have been outsourcing their non-core business processes and some aspects of business-as-usual (BAU) actuarial processes, policy administration and customer services to third-party vendors. The life insurance industry has an advanced understanding of what it takes to establish an effective outsourcing model to manage these standardised processes. Outsourcing of non-core process-oriented business functions, which requires only rule-based monitoring and tick-box service level agreements to comply with the business requirements, has achieved reasonable success in the past. However, when it comes to core actuarial functions, outsourcing has generally not received enough consideration by life insurers. Perceptions around quality and cost are often considered roadblocks to actuarial outsourcing.
As the global life insurance industry grapples with changes to financial reporting standards, regulatory regimes and a challenging business environment, companies are reconsidering the outsourcing of core actuarial functions. The resourcing needs of life insurance companies’ actuarial teams are increasing, and companies are looking outwards to meet the growing demand. The following factors are driving the demand for actuarial outsourcing services:
- Cost savings
- The ease of scaling teams at short notice
- A shortage of local skills
- Access to expertise
- Keeping pace with the volume of regulatory changes
- Focus on other strategic initiatives
While the requirement for actuarial outsourcing services continues to trend upwards, there is scope for life insurance companies to think of actuarial outsourcing in a more strategic manner and with a long-term view. In this article, we discuss some of the key risks to consider when outsourcing actuarial processes and how companies can mitigate these risks.
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