Expense Ratio Reduction

We'll identify opportunities for cost reduction in your operations and will map out your path to a better bottom line.

Problem Statement - In terms of trends, the financial position of many companies has been deteriorating for several years. In a desperate bid to reduce expense ratios, companies have resorted to making decisions about reducing costs without the proper insight required to make an educated decision. As a result, many of these decisions have not brought forth the amount of savings that were anticipated. This has caused adverse and unnecessary consequences to the company operations. While there is not one single factor responsible for the current conditions, the cumulative combined effect of the following must be considered.

• Lack of knowledge and insight into how to properly apply technologies such as the Internet has prevented companies from realizing cost-efficiencies that can bring a significant improvement to their bottom line.
• As a result of competition and controls over insurance premium rates, premium revenue has not kept pace with rising claim costs resulting in growing underwriting losses. Claim expenses have risen significantly in addition to other expenses.
• Revenues from investment portfolios have declined, making it more difficult for insurers to generate the income necessary to offset underwriting losses. However, the decline in investment returns is not the largest factor in explaining the pressure on premiums.
• Weak profits have contributed to a declining return on equity and companies have experienced erosion in capital levels. The challenges parent organizations face in raising new capital as well as justifying capital injections into an industry that is producing low returns has further exacerbated such pressures. As a result, many companies are approaching the minimum capital target threshold.

Right Approach - In the past 20 years, the banking industry has achieved a 20% reduction in its efficiency ratio; however, the industry has not experienced a similar cost improvement. Management should adopt a holistic approach to improve their expense ratio, whereby they analyze costs by each operational area. They should then pursue the “lowest hanging fruit” allowing them to achieve “common” operational efficiencies by streamlining collections, imaging, claim handling, payments and customer service through the use of new technology or the outsourcing of back-office operations.

Info724 Expense Ratio Reduction Analysis Offering
Info724 provides a short-term service at an affordable price to fulfill this need for a small to medium-sized company. Some of our key activities are:

• Analyze each core operational area for “hidden thieves” and facilitate the transfer of cross-industry benchmarks for cost and operational efficiencies.
• Introduction of industry best practice approaches so as to not “reinvent the wheel”, which saves you time and money.
• Identify and document the top three most controllable cost components of the 'Expense Ratio' while improving customer service and retention.
• Identify targeted opportunities to reduce your expense ratio by leveraging the Internet.