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Buy Rather than Build Continues to be a Key Theme in Insurance BPO in EMEA

Be it in support of healthcare, the London market or consulting capabilities, the U.K. insurance BPO market is seeing a lot of acquisitive action from four major players who have already made significant acquisitions in the H1 2014. 

Starting with two of the most acquisitive vendors in insurance BPO: Innovation Group and Quindell continue to build operational scale

Earlier this month, Andy Roberts spelled out that much of Innovation’s efforts in the first half of the year  have been spent raising money in the London market to be deployed on three major acquisitions in support of the Innovation Group’s home and auto BPO businesses. One of these three is still under wraps and is due to be announced in the coming months; the others are:

  • A U.K. motor: Cash-worth Ltd. (manages a motor repair network), acquired for £11.5m in February. This acquisition makes Innovation one of the top three managers of vehicle repair claims in the U.K. Second to Germany, the U.K. is Innovation Group’s second largest geography for P&C BPO activity overall; however, this is largely due to its property business which makes up over 50% of total U.K. revenues. In auto insurance BPO, the U.K. is the second smallest of Innovation’s markets. This acquisition demonstrates Innovation’s commitment to the U.K. auto insurance market and suggests an increased focus on growing this line of business in 2014
  • A U.K. wet perils acquisition: LAS Claims Management Ltd. acquired for £35m. Innovation has strong capabilities in the dry perils market, but that’s only a fraction of the size of wet peril insurance market. Though this acquisition is initially in support of Innovation’s U.K. property BPO market, it is hoping to enter the wet perils market in Australia next year, and then the U.S.

An even more acquisitive company is Quindell, which recently had to contend with the consequences of a ‘shorting attack’ in April. Though acquisition activity has quietened down since the spree of H1 2013 when it made six acquisitions, it does continue to be a major part of its strategy, despite it being part of the reason for its failure to list on the main LSE.

In January Quindell acquired ACH Group for £5m to enhance its personal injury and accident legal services offering, and in April it was awarded a telematics contract by the RAC which involves setting up a JV ‘Connected Car Solutions’ (CCS), owned 51% by Quindell. CCS is targeting around 4m paying subscribers in the U.K. and Canada. 

Innovation and Quindell’s acquisitions have been in support of increasing operational scale of existing P&C BPO offerings.

Elsewhere, other vendors are acquiring to gain specific expertise.

EXL and Xchanging acquire for technology and consultancy

EXL recently acquired Blue Slate Solutions, a 35-FTE strong consultancy headquartered in Albany, NY focused on healthcare payers and insurers. Blue Slate will increase EXL's onshore consulting presence in the U.S. and its domain knowledge in the health insurance sector. (See separate blog by NelsonHall Healthcare analyst, Todd Harrington: ‘EXL Acquires Blue Slate Solutions to Enhance Business Process Analytics in the Healthcare Payer Sector’)

One of the two acquisitions announced by Xchanging earlier this month is the European operations of AgencyPort, which provides software to P&C and health insurance markets, including for exposure modelling and risk analysis – two new products for Xchanging. There were three further key motivators for the acquisition:

  • Growth in existing markets: supporting Xchanging’s strategy of investment in technology, IP and growth of the insurance business globally, in particular in P&C insurance
  • Potential for cross-sell/up-sell opportunities between Xuber and Agencyport Europe’s client base
  • Growth in new markets: notably in health insurance market. This was not a significant factor in the acquisition, but rather a complimentary one.

The second of Xchanging’s acquisitions, is U.K.-headquartered Total Objects, bought for £21m. This is also to enhance software capabilities, in this case in support of Xchanging’s Binder 360 offering, launched earlier this year BinderCloud is a managed service developed by Total Objects which enables the loading, validating and storing of bordereau data. There is also the possibility that the Xuber platform and products will be combined with the cloud-based offerings of Total Objects in future, for the development of a new product roadmap which would serve markets including:

  • Retail and wholesale broking
  • Outwards reinsurance
  • MGA markets.

“Build rather than Buy” happening for anti-fraud capabilities

The problem of fraud in insurance is now a huge issue, with an estimated cost to the P&C industry topping $30bn a year. And some BPO service providers are developing new proprietary tools for fraud detection. Hexaware, for example, launched last month ‘iFraudEngine’ an analytics tool for the detection of fraud in the process claims lifecycle with a view to reducing the number of false claims payments to ~10%.

Expect to see more acquisition activity in the next year in EMEA

We can expect to see further acquisitive behaviour from the likes of Xchanging and EXL in support of insurance BPO. Within EMEA, the U.K. will continue to be its focus for insurance BPO, Continental Europe proving too challenging right now. Xchanging is looking to make further acquisitions in the commercial insurance space around home, auto or travel insurance. A decision, maybe even the acquisition itself, is likely by the end of the year.

Likewise, EXL’s insurance BPO practice is also high on the list of the company’s investment priorities in EMEA – also around P&C. At EXL, the target insurance segment is auto BPO, again largely coming out of the U.K. At the moment EXL does not currently have a delivery presence for auto insurance BPO in Europe, but part of its European strategy is to acquire a capability, potentially a multi-industry outfit, but certainly with an insurance facility, in support of the P&C BPO business; auto BPO will be at the forefront of this.

(Coincidentally, NelsonHall will be shortly publishing a NEAT Market Assessment and on P&C BPO in the automotive sector. For details, contact [email protected])

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