In this article, we examine how shared service centres (SSCs) remain an important part of the transformation actuary’s toolkit and the key factors for practitioners to consider. First, let’s consider what an SSC is - at its core an SSC simply seeks to consolidate a group of tasks, processes and/or operations into a centralised location such that the SSC then becomes an internal service provider to the rest of the business. Whilst historically SSCs have typically been used to consolidate and deliver low-value, back-office type tasks, we strongly believe they have a place in the actuarial arena especially for large and complex insurance groups.
We recognise that some groups will already have adopted the SSC model for non-actuarial operations, whereas others will be running a more federated and de-centralised operation. Our experience suggests that firms do not typically tend to “go first” with actuarial when it comes to setting up SSCs, however, many firms are increasingly looking at expanding successful existing SSCs to capture more of their actuarial requirements. We first examine some of the typical drivers we see, as well as the key factors firms should consider maximising the likelihood of success when deploying an SSC framework for actuarial services.
Typical drivers for using an SSC in Actuarial
We tend to see common characteristics for those firms where an SSC model would either be beneficial, or where firms have actively considered or executed an SSC led approach. These include:
- A lack of clarity on actuarial requirements – many firms do not have a strong understanding of what is delivered by their actuarial teams, for what purpose, and who accountability and responsibility for such requirements ultimately sits with. This inevitably results in duplicated effort across sub-teams and multiple variations on a common theme which arguably wouldn’t be necessary with the right disciplines and leadership in place.
- A siloed “product” first mindset – some firms have a somewhat dated approach to the way they organise their actuarial teams which means that they end up with large sub actuarial teams focusing on the end-to-end actuarial process for a single or small group of similar products. Often, this leads to a collection of processes that are sub-optimal with no view of common “modules” across the company.
- A group structure with significant autonomy delegated to business units – several groups have arguably delegated too much autonomy down to actuarial teams at business unit level. This excessive autonomy often results in unjustifiable divergences in approach, such as differences in assumptions and methodologies. Additionally, it leads actuaries to independently create processes "from scratch," rather than utilizing a group-led approach that would identify common core actuarial processes applicable to all business units.
- A consensus that actuarial talent is being wasted – many firms don’t get full value from their actuarial staff, not by choice, but because actuaries are hindered by having to operate disparate, sub-optimal systems and processes often wrapped with large estates of manual workarounds. An SSC approach can often help to release valuable actuarial time and redeploy it to the things that matter.
Key initial steps for SSC roll-out
Where a firm is exploring an actuarial SSC, the key steps to consider include:
- What is the problem statement that the SSC is seeking to address, and the corresponding end-state vision - is it a cost agenda, control agenda, talent agenda or a working day timetable acceleration matter? The key is to ensure unanimous clarity and executive stakeholder buy-in to ensure that there is common consensus – without this, our experience suggests that firms rarely manage to realise the benefits of their investments.
- Mobilisation of a multi-disciplinary, executive sponsored programme management office – this office sets the schedule and the tone of the SSC transformation but also keeps track of progress across the numerous initiatives underlying the programme. The office will facilitate design of the end-state, formulation of the pipeline of improvements and interventions split by actions, owners, and monetary impacts and they will ensure that all stakeholders have a single transparent view of the progress of each initiative owner. Firms must ensure that there is representation from all key disciplines including legal, HR, risk and finance and actuarial given the broad remit and personnel related implications of an SSC model.
- Actuarial service catalogue – an exercise to ascertain the existing collection of services (and supporting systems and processes) currently carried out by the actuarial teams such that a full picture can be built from the “bottom-up” and an informed view formed for the scope perimeter setting exercise.
- Scope perimeter concept testing – the central office will need to work with the group and business units to develop an initial recommendation for the in scope and out of scope actuarial services for the SSC. This will naturally be an iterative process, one which we strongly advise firms to undertake with the necessary time and attention. The separation and decomposition of existing actuarial processes, along with the supporting people and systems, will ultimately be the key factor in driving the success of the programme.
- SSC design – once the scope perimeter is agreed, an exercise will need to be run by the central office to build out the design features of the SSCs including matters such as:
a. Geographic considerations: evaluate various locations (nearshore and offshore) based on factors such as labour costs, expertise and talent, language proficiency, time zones, and infrastructure.
b. Skills mapping: carry out a skills mapping exercise within the chosen geographic locations given the intended scope perimeter where typically, an actuarial SSC will require a blend of actuarial, project management, data analytics and processing and general mathematical skills.
c. Technology and automation: SSCs will typically seek to automate repetitive tasks, improve accuracy, and enhance productivity through application of workflow automation technology and low-code solutions. The design phase will need to include a tech and automation strategy covering tooling decisions for automation but also more broadly for the actuarial infrastructure.
d. Balance of knowledge and expertise – an SSC will typically capture those actuarial requirements which are largely agnostic to the local actuarial market but ultimately, the SSC design work will need to strike a balance to ensure the right local actuarial market, regulatory and product related expertise are retained where they’re needed outside of the SCC’s scope perimeter.
e. Division of responsibilities: a RACI matrix will need to be developed to ensure clarity on the actuarial responsibilities transferred to the SSC and those retained by existing actuarial teams such that detailed hand-off schedules can ultimately be developed.
f. First pass actuarial service level agreement (SLA): given the scope perimeter decisions, the central office should draw up “first pass” SLA’s which capture the specific service items including what each service is trying to accomplish, the depth of analysis, frequency, delivery timing for the finance timetable and key dependencies. These SLA’s will ultimately require significant iteration with existing actuarial teams.
g. Change management framework: A set of principles and a framework for how actuarial SSC will accommodate changes in actuarial requirements when they inevitably arise.
h. Recapture planning: A framework which sets out the likely approach of how actuarial services could be transferred back out of the SSC and recaptured locally within actuarial teams due to performance issues or other triggers.
Our experience shows that those insurers who prioritise their efforts on a thorough and holistic enterprise-wide approach to their SSC design will typically be the most successful in the long-term. Using this phase of the SSC journey to build consensus and buy-in from senior leadership will be critical prior to any form of detailed transition planning.
Insurers should assess their unique context and operational needs to determine whether an SSC approach for actuarial aligns with their overall strategy. Our experience suggests that pure labour arbitrage is no longer the sole driver for firms considering an actuarial SSC. Rather firms are increasingly seeing an SSC as an opportunity to reset local actuarial service levels and refocus their costly and valuable actuaries on the activities which drive commercial business benefit.
The transition to an SSC model requires very strong leadership and clarity of thought on the long-term objectives being sought. We believe it remains a core tool which leaders can use to align their actuarial capabilities to their business requirements, and we would welcome your views on this.
We would love to hear your views on the perspectives we have shared. Please reach out to find out more about how we can support your organisation.
