INSURANCE
Sun Life tests underwriting in India; First time firm has
assessed Canadian applicants offshore
16 November 2005
The Globe and Mail
B4
TORONTO -- Sun Life Financial Inc. has launched a pilot project this month to underwrite some of its Canadian life insurance policies in India, the first step in what could be a significant "offshoring" of back office work to the world's second most populous country.
The insurer recently created a service and technology centre in Bangalore, India's high-tech capital, where it will set up a local management team to take charge of things such as IT outsourcing and possibly even call centres. Additionally, a small group of professionals there will take a stab at underwriting Canadian insurance policies, an effort that, if successful, could lead to much of this work eventually being done in India. Underwriters are paid to evaluate people who are applying for insurance coverage.
James Prieur, Sun Life's president and the executive directly in charge of Asian operations, said the new centre will attempt to capitalize on a labour market that is young, highly skilled, and - perhaps most important - cheap. University graduates with an MBA degree can often be hired for as little as $18,000 a year, he noted.
"Developing that capacity is very important in the long run," Mr. Prieur told a gathering at the insurer's investor day conference yesterday in Toronto. "This is a significant opportunity for the organization as a whole, and it's one we're pursuing aggressively."
Sun Life employs more than 100 underwriters in Canada, and processes approximately 125,000 policies each year. It's not clear how much of this work will be moved to India, but one official said the plan is to significantly ramp up the business if the pilot runs smoothly.
Sun Life already operates one outsourcing centre in Ireland, but this Indian initiative would mark the first time the company has assessed Canadian insurance applicants in another country.
Chief executive officer Donald Stewart said the decision to look at outsourcing more of its IT and insurance administrative functions to India was motivated more by time than by cost. Given the time difference between the two countries, he said it is possible to work on a file in Canada during the day, and then pass it off to the Indian operations, where it can be handled during the night. That is one of the primary reasons Sun Life is attempting to build standardized systems for areas such as underwriting.
"If you only do it for costs, that tends to be not as well based a business," he said. "What has attracted many of us about Asian opportunities is the 24-hour day. For the longest time, the potential of being able to keep moving 7/24 or even 6/24 has been phenomenally attractive in economic terms."
Mr. Stewart pointed out that the division of labour can flow in both directions, saying the Canadian office may be able to help its Indian counterpart with underwriting assignments during particularly busy periods. However, he said the IT outsourcing has greater potential to provide the company with sizable cost savings. The initiative is not expected to make any meaningful contributions in the short term.
Sun Life has embarked on a major expansion of its life insurance business in India, where it is currently the No. 2-ranked private sector player by market share. However, in terms of its sheer size - measured by number of agents and branches - it is quickly losing ground to competitors.
The company is trying to redress that by adding 750 agents a month over the next year, which should boost its total numbers to over 20,000. Because of this growth, however, Sun Life cautioned it will not break even until 2007, a year later than expected.
Mr. Stewart said Sun Life will probably look to grow organically over the next few years - that is, without making acquisitions - in developing markets like India and China. If Sun Life does pursue a major deal, it will likely be in the U.S. market. Mr. Stewart, who has indicated he would be willing to commit roughly $500-million to a purchase, suggested yesterday this target could be stretched to the $1-billion mark if the right target was in sight. Most observers expect a deal would occur in the variable annuities sector, although Mr. Stewart said he would not rule out an acquisition in the individual life, asset management, or group businesses.
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