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A new report has revealed the top three triggers causing UK life insurance firms to retender their use of consultants. The ‘Perspectives on Value’ report, which researches views of 100 leading figures across 45 UK life insurance companies, identified ad hoc reviews, board instruction and a failure of delivery as the three key reasons to re-evaluate consultant relationships.
When asked what were the top triggers leading to a retendering process, 59% of respondents cited ad hoc review, 58% stated a board directive, while 54% stated an inability to overcome a crisis point on a specific initiative. A change in market conditions (53%), underperformance (51%) and actuarial team changes (42%) were also seen as determining factors.
Scott Eason, points out that...
"...these triggers all point to a need to solve a specific problem – or series of challenges – within these businesses. This suggests consultants with specialised skillsets to overcome these problems are being overlooked during the selection exercise."
Despite a need for a differentiated set of expertise, the report confirmed ‘cost savings’ was the primary performance indicator consultants are judged on. More than half (63%) of respondents stated cost savings was a key driver in the use of consultants.
Unfortunately, a significant take-away from the report is that important qualities such as expertise and independent thinking are likely to remain ideals if the process of appointing a consultant focuses on price. The survey shows there is an inherent tension between a company executive’s wish to appoint the best consultant for any given job and that desire being subordinate to economic factors.
According to the survey, over the past year, risk management (51%), regulatory reporting (39%) and technology review (38%) have been the areas of highest demand for respondents and over half of companies are expecting to spend more on actuarial consultants this year compared to last year.
Given the importance of these key business areas, getting the best consultant to assist in delivering company goals is essential. A focus primarily on cost and brand may be preventing this objective from being achieved.