How to deal with heightened consolidation in the UK insurance industry

Expert management is needed to deliver successful outcomes

How to deal with heightened consolidation in the UK insurance industry

Insurance News


Press speculation over further consolidation in the P&C insurance sector is heating up as merger and acquisition (M&A) activity continues to increase. The growing rate of consolidation in the sector is being attributed to several competing pressures facing the industry, including: increasing competition, ongoing cost pressures, inefficient legacy technology, mounting regulatory requirements, and uninspiring financial performance. Large insurance players are aware that they cannot achieve their strategic objectives through organic growth strategies alone. They are looking to M&A and partnerships as their path to achieving their strategic objectives of scale and sustainable long-term growth.

A merger is not a silver bullet, however, and brings with it a fresh set of obstacles. Newly merged companies have to grapple with operating in a new assemblage of markets and countries, complying with multiple sets of regulations, and rationalising their various legacy and cloud-based technology systems.

A staggering 70% of M&As in the sector are unable to deliver the expected operational synergies. This is a critical component to the success of mergers, and failure to achieve the optimum level of integration between merged companies can lead to costly operational impediments. In fact, poor integration has a systemic effect and can directly affect customer experience, staff engagement, and the bottom line by up to 75%.

To deliver operational excellence and meet desired outcomes more quickly, merged companies often turn to solution providers with extensive knowledge of the insurance space. These providers can leverage their data and domain expertise and their strong functional knowledge of the insurance sector on behalf of newly merged companies. These players have developed a holistic framework to work out the optimal operating model for their customers and can then apply tried-and-tested technology to optimise processes and deliver business outcomes and insights.

‘Day 1’ plans are critical to ensuring that potential customer issues are avoided and the market sees the two entities as an immediate cohesive unit. The first step towards achieving operational excellence is to figure out what the target operating model would look like and what the inefficiencies are in current processes. A formal benefit tracking framework can then be put in place to ensure that new processes are followed and that there is a unified way to track progress. Detailed project plans should then be created to identify any interdependencies at an early stage and confirm that the relevant buy-in and resources are available to deliver the desired outcomes.

On top of this, formal project governance is critical to make sure that projects are executed as planned and within budget. Synergies need to be tracked and reported against forecast, and robust remediation plans need to be put in place where synergy has not been achieved. 

For example, EXL partnered with a leading insurer to successfully support the largest insurance acquisition in the UK. They were engaged from the beginning to support the integration of the claims, operations, finance, actuarial, risk, rebranding, HR, and product functions. To begin with, they developed a governance structure and escalation matrix to guarantee quick decision-making, and clear and precise communication plans for all functions throughout the whole merger process. A sign-off matrix was created for each phase of the programme with key issues highlighted, and timelines for integration put in place. A detailed migration plan was then sanctioned, with key metrics to track success and a schedule for regular reporting.

By leveraging an extensive foundation of domain and data expertise, and infusing it with the five building blocks of transformation – customer interaction, artificial intelligence, dynamic analytics, advanced technologies, and digital products – optimal operational excellence can be achieved. Once agile and intelligent operations have been realised, these levers can continue to drive digital transformation by reimagining customer journeys with the ultimate goal of improving revenue growth and securing long-term sustainable profitability out of a merger.

Nigel Edwards, SVP of insurance and head of UK and Europe at EXL, talks about consolidation in the Property and Casualty (P&C) insurance sector and how merged companies might be losing out in this opinion article. The views expressed are not necessarily those of Insurance Business

Related Stories

Keep up with the latest news and events

Join our mailing list, it’s free!