Pressure is mounting on the UK life insurance market to become more efficient, as well as offer better value to shareholders and customers.
As a result, life insurance companies are increasingly turning to third-party actuarial consultants. However, our report suggests this appointment process can be vastly improved.
Our research indicates insurance companies are focusing on cost and brand when seeking external consultants, rather than factors based on skills, delivery, cultural fit, location and experience. All of which is likely to result in poor value for the insurance company.
When appointing an actuarial consultant, life insurance companies should make sure it aligns with the organisation’s objectives and those of their customers. Value for money means more than basic cost, and as our report suggests, by better understanding the value a consultant relationship adds to a business, the better the appointment process, and the better the results.
"The way many life insurance companies run their appointment process is inherently flawed and, in many cases, based on arbitrary decision-making. Formal tendering that focuses on costs will often fail to deliver value for money or a return on investment – declared as two of the principal objectives in appointing consultants."
Why appoint a new consultant?
Consultants are generally appointed as a result of an ad hoc review (59%), an instruction by the board (58%) or because internal resources have failed to resolve a particular problem (54%). These all point to a need to solve a specific problem – or series of problems – within that business. This suggests that consultants have specialised skillsets that should be the key differentiator in a selection exercise. However, these other qualities are likely to remain ‘ideals’ if the process of appointing a consultant focuses upon ‘price’.