Earlier this month, in one of the more complex transactions concluded in recent times,
UK insurance major Aviva that was running some of its insurance and back-office processes through build-operate-transfer contracts with three vendors in India, sold the entire operations to WNS Global Services for a consideration of $228 million. In addition, WNS also received a commitment from Aviva that is expected to generate $1 billion in revenues over a 100-month period.
In an interview Aviva Global Services chairperson and
Norwich Union Life COO, Cathryn Riley, talks about why Aviva decided to sell the operations rather than run them itself, and its future plans with WNS.
You initially transferred two of your facilities, one in Sri Lanka from WNS and one in Bangalore from 24x7. Why did you decide to sell instead of transferring the rest?
Let me go back in time to when we first set up in
India about five years back under the build-operate-transfer model. The model enabled us to have a low-risk rapid entry and also benefit from the expertise of established partners over here. That has been a very successful venture but a lot has changed both in our market and in the BPO (
business process outsourcing) market since. Over the last five years, we have seen the benefits of a hybrid-operating model because some facilities were with our partners and some, we had transferred. We felt it would be right to do a strategic review of the best model we should have for the next 5-10 years.
Was the review also part of the original plan or did something trigger it?
It came about later. Any sensible company takes the opportunity to step back and think about what the strategy should be after a period of five years. It’s a good, sensible business practice. When we started out on our journey, we had an open mind. We didn’t start the strategic review with the intention of doing this.
There have been a couple of studies talking about the high costs of captives and captives not being as efficient as third-party operations. Did some of these factors influence your review?
As part of the review, we looked at what was going on in the marketplace with our competitors — we looked at costs but not only at that. This wasn’t only about whether we could run this as efficiently as WNS, there were other factors as well. But I think it’s fair to say we’ve seen the benefit WNS’ expertise. They’ve been helping us over the last few years to run an efficient operation and help us manage our processes — that was one of the considerations. There were others: financial, customers, people...
What are the kind of services you’ve been doing from India and what will it be going ahead?
They range from finance and accounting, actuarial services,
customer service, claims, and back office administration. We don’t intend changing that. We are looking to develop Bangalore as a centre of excellence for liability claims and Pune for motor claims. We’ll see more of a trend towards centres of excellence in line with what is happening in UK. The sale to WNS in no way changes our commitment to offshoring. Signing a 100-month deal (with WNS), in fact, underlines our commitment.
Do you expect outsourcing in insurance to pick up? Compared to the rest of banking and financial services, insurance is still small.
I don’t think insurance is different from any other industry. You’re right; banking has been a hit, which is fairly typical. Many of our UK competitors are now here. But one of the things that’s differentiated us is the way we’ve jointly managed our relationships. From day one, we’ve had very strong partnerships, whereas some other companies have been more hands off. It’s not just about coming here but how we’ve operated that’s given us competitive advantage. That has enabled our partners to understand what is it we want, what our strategic imperatives are, and to be able to keep pace with processes, practices, and changes at all levels. That marks us out from the competition.
Has there been a rise in the backlash against outsourcing in the US or the UK?
There has been some backlash over call centre operations, not so much in other areas. We as a company have been in the forefront of offshoring. We’ve been very public about our offshoring and very proud of it. The fact is, service speaks for itself. We continue to seek and listen to our customers’ feedback and work accordingly but I think the perception of the noise in UK is greater than what it really is.
What is the amount of offshoring you’ve done in the last five years?
We have around 6,000 employees here. The market was very different then from what it is now. It was a relatively immature market. We weren’t able to come in and say, this vendor is the best. We selected vendors we felt we could work in a partnership with to build something. No one vendor had one particular process. It was a low risk model for us and we were able to learn a lot from each of those of vendors. Now we’ve got something that we’re very proud of and something we intend to build on in the future.
Did you look at the option of outsourcing BPO work to your IT services vendors, Wipro and Tata Consultancy Services?
We looked into it. But we were more comfortable with the existing arrangement. We had a very successful model and we wanted to build on it. I know that is the trend to combine business outsourcing with IT, but it is more the trend in thought than in practice. I’m not sure how successful that’s been yet. But it’s something we’re aware of and which we’ll keep in mind.
Source: Shivapriya/P P Thimmaya, The Economic Times
