Growing competitiveness within the insurance industry is forcing providers to review their strategic internal processes constantly, in order to keep unit costs low and speed up transactions.

UK insurer CGU and HSBC first forged a strategic alliance three years ago to push forward CGU's objective of ensuring that its financial and accounting systems became as efficient as possible. As the completion of the merger with Norwich Union moves nearer – creating the UK's largest insurance group – the results have exceeded all expectations.

CGU asked HSBC to help review its core activities in the finance department as it was felt this could improve the already fairly robust systems to make them more cost-effective – as well as making things easier for customers to do business with CGU. With more than 20 million direct debit transactions processed every year – and this figure growing fast – CGU knew that something had to be done long before it was actually necessary.

The motivation behind the alliance with HSBC was to keep ahead of growing business projections without letting customer service levels slip in any way.

Strategic advances

The strategy had two distinct elements. First, it focused on the core activities carried out in our back office and how to improve these through the adoption of quicker and more cost-effective ebusiness solutions. Second, CGU wanted to enhance levels of customer service and satisfaction still further as a result of the first tranche of improvements.

Several weeks were spent analysing CGU's day-to-day financial and accounting operating systems. Three years ago, CGU was looking for a range of benefits from its banking relationships. It wanted a truly integrated partnership that could produce a high-quality service to customers by being both forward-thinking and innovative. Furthermore, CGU wanted to be at the forefront of technological developments.

HSBC has exceeded these expectations – and the brief. As a team, we have been able to look at all of CGU's systems, both internally and externally.

Phase One of the project was to increase automation via a mainframe-to-mainframe connection with HSBC. The processing of direct debits was streamlined with the introduction of AUDDIS – an automated system that allows banks and direct debit originators to process instructions more efficiently by reducing paperwork and the possibility of human error. It also allows some users to highlight the first and last collection from customers' account statements.

Essentially, AUDDIS ensures the speedy, electronic delivery of direct debits. Being able to feed transaction data to our host system directly has improved customer service beyond recognition and has enabled our finance team to move away from processing transactions and to concentrate on adding value to the business.

At CGU, these enhancements have merged seamlessly with existing set-ups in spite of the increase in volume as a result of the earlier merger of General Accident and Commercial Union. And disruption to business has been minimised.

CGU has managed to drive down costs while bringing the unpaid rate down to a best in class 0.75% – a full 25% improvement on the figure before the installation of the AUDDIS system. This is an impressive saving for both parties.

Phase Two involved rolling out a truly paperless direct debit, allowing direct debit payments to be created without the need for any form of paper instruction, via the internet or phone.

A customer can fill in a life insurance policy online, key in their direct debit details and be covered from that moment. There is no need to sign anything. Working closely with its bankers, CGU has now taken direct debits as far as possible under the current guidelines.

CGU is actively lobbying BACS to review and change its rules now that the public is more than happy to give personnal details over the telephone as well as make electronic payments.

The third phase has been the outsourcing of processing through a range of services provided by HSBC specifically to speed up payments and collections, while at the same time taking non-income generating costs out of the business.

Banking on improvement

Due to an increase in business during the period, CGU receives more than double the volume of transactions it did before. Meanwhile, it has reduced the number of employees required to handle transactions.

Thanks to HSBC, the staff at CGU no longer have to print cheques or undertake many laborious banking-related activities. These are rightfully the province of bankers, and HSBC has taken over these activities leaving CGU staff free to improve customer service, and reduce total costs. These are moves that the company hopes will add to shareholder value.

CGU believes that creating a close working partnership between a corporation and its banker is vital for success. Having a clear timetable to achieve objectives is equally essential to achieving this success.

Other positive spin-offs from the restructuring processes have been within the company's vast call centres. Operators can now obtain instant, updated reports on the status of a direct debit at the touch of button – an effective and speedy tool for the company and customers alike.

The end result has been twofold. CGU's total bank charges have remained static even though the volume of business has more than doubled. As a business moving forward, CGU continues to benefit from significant cost savings, which ultimately helps to keep down the costs of customer policies, and CGU feels it can excel at customer service.

The successes as a result of the alliance between CGU and HSBC are especially important in the light of the merger of Norwich Union and CGU and demonstrates what can be achieved as a result of a corporate partnership.