During February and March 1999, LSOS and PVE Actuarial conducted jointly the first Study and Survey into the outsourcing activities of Life, Superannuation and Fund Management Companies. The results were most interesting and The Australian Financial Review published the following article. Order the full survey here.

Staff cutbacks lead to more outsourcing

Friday, April 30, 1999 THE AUSTRALIAN FINANCIAL REVIEW (Reproduced with permission)©1999 AFR Simon Hoyle

A major shortage of skilled personnel is emerging in the life insurance and superannuation industries, sparking an explosion in the use of outsourced services as companies struggle to cope with stresses caused by rationalisation, cost cutting and a rapidly changing marketplace.

A survey of the insurance, superannuation and fund management companies found that all survey respondents were currently using outsourcing services.

It found a 20 per cent rise in the use of outsourcing over the Past two years. Respondents said they planned to increase their use of outsourcing services further, and expected their usage to "grow significantly over the next five years due to the increasing need for skills and the necessity to support back-office routine work".

Companies identified taxation, distribution, information technology, legal, project management and administration as the areas of their businesses that would be among the next to move to outsourcing.

The survey, undertaken jointly by Life & Superannuation Outsourcing Services (LSOS) and PVE Actuarial Services during April and May this year, found the main reason companies used outsourced services were to cover the shortage of skills possessed in-house, to help cope with one-off projects and to keep a rein on costs.

"Many life and super companies, have shed thousands of highly- qualified staff "

The managing director of LSOS, Mr Chris Medin, said a spate of mergers and acquisitions in the industry had led to companies shedding full-time staff and cutting costs aggressively. "Many life and superannuation companies, in their quest to create economies of scale following their restructures, have shed thousands of highly qualified and experienced staff in recent years, many of whom are lost to the industry forever," Mr. Medin said. "The life insurance industry is a changing character. Life insurance companies are becoming fund managers, because that's where the money is. In the process, they are shedding some of their employees on the life side.

"In that process, combined with the mergers and acquisitions, there's a tremendous pressure-cooker environment. They all feel they need to perform harder than they have. Their output has to be quicker and faster than it used to be."

Mr Medin said the survey showed conclusively that senior and line managers in the life, super and fund management businesses were faced with constant pressure to lift productivity, but to do so in an environment of "continuous budget cuts [and] frozen staff levels, compounded by inherited legacy products [and] regulatory changes". "All life and superannuation companies are suffering from critical backlogs of work that their overstretched in-house resources cannot address quickly and easily," he said. The rationale behind the establishment of LSOS last July was to provide to companies with shortages and work overloads access to individuals who had the experience to help.

In setting the business up Mr Medin has pulled together the services of other industry personnel, including life insurance underwriting and claims specialist Mr Andrew Davidson, business development and sales manager Mr James Downie, systems administration specialist, Mr Gerry Swann and actuary Mr Graham Osborn.

Mr Medin said the chance to continue an involvement in the industry was appealing to an increasing number of senior industry participants.

"I know many people who have had many, many years of experience and they are just fed up with it," Mr Medin said. "They just walk away, which is a shame. That's something I went through I thought I've always wanted to do my own thing. But when I thought about it I decided I enjoyed doing what I am doing."