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The gloss has come off offshored call centres recently, with reports in the media highlighting wage inflation and customer dissatisfaction. Insurer opinion is divided but Guy Anker finds that India remains a popular location for call centres

Tabloid hysteria over the export of insurance jobs, and other financial services positions, has dominated debate on the issue since GRE became one of the first UK insurance companies to move operations abroad in 1997.

Much of the attention has focused on the high number of redundancies among UK call centre staff and the closure of customer service centres across the country.

However, it is not just the national and regional press crying foul over outsourcing abroad. In early June, Swinton published research suggesting 67% of customers would not buy a policy from an insurance company whose customer service centre was based abroad. The broker also revealed that 72% of those surveyed expected the service provided by offshore call centres to be worse than that provided by a UK-based operation.

Anticipated poor service levels are not the only thing reportedly threatening off-shored call centres, however; there were suggestions by outsourcing firm LogicaCMG in May that wage inflation was threatening India's prominence as an offshore location. This was denied by Axa and Norwich Union, which both claimed that while there was a noticeable increase in wages, in real terms it did not come close to the levels seen in the UK.

Yet if wages are rising, at what point will they begin to impact on relocation altogether? Another question the insurance industry will have to ask itself is whether relatively low costs and a highly skilled labour force are attractive enough to warrant shifting call centre operations from Birmingham to Bangalore, or is the perceived drop in customer service levels, as suggested by Swinton, enough to prevent such migration?

Fortis operations director Shaun Astley says: "The jury is still out on offshore call centres." On one side of the fence sit companies with well-established customer-facing operations abroad, such as Norwich Union, Zurich and Allianz Cornhill. They are joined by the likes of Axa and Royal & Sun Alliance, which are both piloting projects that may eventually see some of their call centre jobs relocated to India.

Relocation package

The Royal-Bank-of-Scotland-owned trio - Churchill, Direct Line and NIG - are firmly against offshoring, as are Co-operative Insurance Society and Pinnacle Insurance. But why? While wage inflation in India has been mentioned, it appears that this is not enough to threaten insurers' moves offshore, and it is not disputed by any of the major insurers that it is still cost-effective to relocate abroad.

"There is definitely wage inflation in India of between 10% and 15%," says Girish Paranjpe, head of financial services at outsource firm Wipro. "But it is still a lot cheaper to employ staff there than it is in the UK."

Even so, Mr Astley believes cost should not be put above customer service.

"If the motivation to move is just for cost, then we don't agree with outsourcing," he says. "Our customers are unconvinced by offshoring, judging by research we've carried out. Many see a degradation of service."

And judging from other pro-UK firms, the crucial issue centres on customer satisfaction. To some, overseas call centres do not provide adequate service levels. "It is important that your staff are motivated and it is easier to motivate your staff when there are short lines of communication," according to a CIS spokesman. "We feel the fact that customers can see you have a UK-based call centre is positive and is something to boast about. It is a perceived idea that you get a better service in the UK."

This is echoed by RBS spokeswoman Gill Murphy. "We are UK-based because we feel that is the best way," she says. "The focus is on better customer service and we feel the UK provides that."

Such claims, however, are disputed by those who are pro-offshore. "There is a view that UK consumers are concerned about speaking to people in India but that is not translating to our bottom line," says NU director of customer services Shaun Medows. He concedes a small percentage of customers may not approach NU because the company has made it clear it is conducting much of its customer-facing operations from abroad, but he challenges Swinton's claims that 67% of customers would not buy a policy from an insurance company if they based their call centre overseas. "As long as people get the service they want they don't care," he insists.

Home and abroad

Insurers are also quick to point out that UK call centres sometimes provide poor customer service. After all, many employees are often students, school-leavers and housewives looking to earn money without necessarily being committed to long-term employment. This is reflected by high staff turnover in many UK operations, and contrasted by the large number of Indian workers who are highly-motivated graduates.

"You can get great service in the UK and you can get bad service," claims Lin Wood, Zurich's director of customer services. She adds that, in some cases, expectations are higher for offshore call centres to provide a better service: "People will forgive a mistake in the UK more easily."

Wipro's client engagement manager, Ajoy Menon, thinks one of the advantages of Indian employees is their work ethic. "Indian call centre workers tend to be highly motivated because of their lifestyles," he says. "Many work very hard because they are conscious about performing well at work and that is a priority."

What creates good customer service? It is not enough to state that one set of workers are well educated and another are more in touch with customers' lifestyles - this is not enough to facilitate high customer satisfaction levels. According to Axa, it is all about the training. "There is no reason Indian customer service should be any lower than in the UK," says a spokeswoman. "It depends how the individuals are taught and how they are prepared for their roles."

So does it really matter where that training takes place? Natalie Moreau, general sales manager for Financial Telemarketing Services, which handles Pinnacle Insurance's call centre, believes it does. "You need people who are trained regularly and it is going to be harder from a remote location," she insists. Another reason Pinnacle is against offshore call centres is the difficulty in monitoring staff performance. Motor and travel provider Mondial also believes there is often a lack of knowledge among staff abroad about the terms and conditions of policies, which again comes down to training.

Software provider SunGard Availability Services points to potential business interruption difficulties for offshore operations. "Not everywhere has the same level of infrastructure as the UK," claims UK managing director Keith Tilley. "The availability of power and telecoms is not necessarily as reliable. Also, consider the impact of local disruptions such as flooding and droughts, which are much more severe than any weather problems in the UK, and the effect they would have on running the operation."

Even those companies that are committed to offshoring have warned the industry to be cautious about how much work it sends abroad. Direct marketing firm Premier Line, which handles 25% of Allianz Cornhill's small and medium-sized enterprise policies, says only basic calls should be handled by overseas agents. Managing director Barrie Wells explains: "Many of the calls we direct to India do not require knowledge of UK lifestyles - they are the simple calls. We would not send the more complex calls to India or Eastern Europe (where the company operates from Prague)."

Indeed, Premier Line is one of the first insurance companies to explore Eastern Europe. It is considering moving some operations to South Africa, due to the close alignment of time zones and culture.

Language barrier

If others follow suit, will this threaten India's prominence? Not according to NU, which says language barriers in Eastern Europe may prove too big a hurdle. It also thinks that China, which Zurich claims is looking to become a leading offshore location for UK insurance companies, does not have the same mix of resources as India.

Although NU admits that South Africa could be an attractive location in future, India's prominence appears safe, according to many insurers.

"The Indian workforce is very customer focused and keen to learn," says the Axa spokeswoman. "The country also has leading-edge technology, far ahead of its rivals."

What may threaten the future of offshore call centres, however, is another form of technology. According to Mondial's head of client service, Steve Hook, basic calls will be handled by automated voice recognition within five years. When coupled with Mr Wells' assertion that it is basic calls that are located offshore, overseas call centres could face competition.

However, it is still early days for offshore customer-facing operations.

And with so many arguments and counter-arguments flying about, it appears the jury is still out on their future. What most insurers do agree on is that the UK call centre landscape is not under threat. This is due to the danger of relocating complicated calls and, ultimately, the importance of maintaining a presence in your home country.


The Financial Services Authority maintains that the same grip should be maintained over what is being outsourced as that which is in-house.

Insurance companies and intermediaries need to demonstrate high standards; for example, if there is an interruption to business, what measures would need to be introduced to deal with it?

The FSA does not inhibit outsourcing but if the service is not delivered properly it will take the issue up with the firm, just as it would in the UK. The FSA believes that the senior management of an insurance company or intermediary must have control over the actions of the outsourcing company. And if there is a problem with the outsource company, this will be taken up with the insurance company. Spot checks are sometimes conducted and, in the case of complaints, an explanation from the insurance company will be sought.

If the insurance company is undertaking a regulated activity, the FSA needs to know who is doing the outsourcing. It also needs a break clause so that the outsource company can be replaced if it is not performing well.

Staff training does not necessarily come under the FSA's remit - it depends if people are being trained for a regulated activity. Often the call centre staff are conducting basic work the FSA does not have authority over, and it is the obligation of the outsource company to train its staff.

The FSA gets reports from the insurance companies, such as balance sheets, and requires them to report on the outsource arrangements - people are not sent abroad to check. Instead, the regulator finds out what is going on by talking to company directors and getting reports, and also by picking up complaints and conducting supervision.

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