A passage to India

How do you feel about having business you place with a UK company being processed in India? Do you have any doubts or fears? These are questions that cannot be avoided as, in 2005, it will become increasingly difficult to find a major insurer to work on some aspect of your business that is not employing staff somewhere on the vast Indian subcontinent. Many of the issues that brokers have badgered insurers about for years centre around poor service, especially slow turnaround and inaccuracies in policy documentation. Often, part of the solution to these problems lies in the deployment of a larger, better-qualified workforce to tackle these back-office tasks. Insurers are finding this workforce in India.

Some large insurers, notably RBS Insurance, Groupama and Halifax General Insurance, are trying to hold out against the offshoring tide but most are going with it. Royal & SunAlliance recently announced that it is joining the exodus by adding 1100 jobs to its existing, experimental 100-strong team in Bangalore. In October, Allianz Cornhill boss Andrew Torrance was in Bangalore to open a 400-staff processing centre and Axa is putting the finishing touches to a 1000-seat office in Pune. Zurich and Prudential already have well-established operations in India.

Leading the way

Leading the charge - both in terms of numbers and intellectually - is Norwich Union. It has taken on itself the mantle of advocate for offshoring to the subcontinent and currently employs 3700 people there; this will rise to 4500 by the end of 2005 and to 7000 by the end of 2007.

NU is proud of its achievements in India and has been busily showing them off to key UK contacts, including four well-known figures from the UK broking market. Chris Blackham (Layton Blackham), Grant Ellis (The Broker Network), Joe Kelliher (Kerry London) and David Slade (Perkins Slade) were guests of NU in India at the end of last year, following hard on the heels of a party of UK financial journalists.

NU has three centres in India: 1000 people are employed at Noida, just outside Delhi, 550 people in Bangalore and just over 1800 in Pune. Most of them are working for Norwich Union Insurance, although some of the telesales staff in Bangalore are working for Aviva's Canadian subsidiary.

There is also a team of 100 accountants plus support staff being recruited in Colombo, Sri Lanka. This latest facility is a clear indication of where offshoring is heading - on a relentless march up the value chain.

First impressions

The brokers were universally impressed by what they saw in India, with any doubts they may have harboured beforehand swept away.

Blackham summed it up: "We were particularly impressed with Pune. I felt as if I had stepped into the future, whereas I had expected to be taking a step into the past." Ellis formed much the same impression: "The offices in Pune are better than anything I have seen in the UK. I was blown away by the business side and by the people who have an attitude you would struggle to emulate here in the UK." Slade echoed these thoughts: "I was absolutely knocked sideways by the operation at Pune, especially by the people. I wish I could employ people like that in the UK." And Kelliher similarly came away singing the praises of the Pune operation: "I found the set-up and the calibre of the staff very impressive. The facilities there are second to none. They are state of the art."

These comments will come as music to the ears of Vikram Talwar, chief executive of EXL Service, which operates the Pune offices for NU. "We are only interested in the best. It (NU's Pune office) is a world-class facility, which is very important to us. We want to provide the very best working environment for our people and also ensure that no one gets the idea that this is a second-rate operation or a sweatshop."

EXL also operates some of NU's other facilities in Bangalore and at Noida on a build, operate and transfer model, which means that they set up the facility, recruit the staff for NU, run it for two years and then transfer the whole lot to NU, although everyone working at these centres already identifies 100% with NU as their employer.

Cost savings and quality

The key driver for offshoring is the prospect of huge cost savings, of course, but the quality and productivity arguments cannot be overlooked.

The average initial saving usually quoted for a major offshoring project is 50%, although NU claims only a 40% saving because it has invested so heavily in training and infrastructure. On top of that come the productivity benefits of employing a better-quality workforce and this argument is persuasive, as the brokers who have seen it for themselves confirm.

The Pune office handles a high volume of mid-term adjustments, renewals and policy preparation on intermediated commercial business and has been doing so since March 2004. The results are stunning, says Ellis: "On mid-term adjustments accuracy rates of 99% to 100% are being achieved. Indeed, they were disappointed when any errors at all were found. This compares with a general industry average of a 30% to 40% error rate. You cannot have any complaints when faced with that quality of service. I think it will raise standards everywhere."

Slade was also quick to praise the quality of work: "I need the documentation to be right first time and that is what the people here can deliver."

So, the quality argument is persuasive but can it be maintained as more UK and US firms arrive in India? The facts speak for themselves.

The labour pool is huge. India is producing one million graduates a year and many go on to take Master of Business Administration degrees or similar.

NU recruits between 6% and 8% of applicants - all graduates - for a new call centre and 15% if it is a back-office processing centre. NU will have interviewed around 25,000 people for the 1800 jobs in its latest centre in Pune. The reason for the difference in recruitment rates is that the standards of spoken English required (including clarity of accent) are higher for those working on the telephones than those just doing back-office work.

Once appointed, employees undergo three phases of training lasting about eight weeks in total. The first is linguistic and involves polishing up what are already very good English skills, especially eliminating mother-tongue influences from their accents, and developing 'listening skills'.

This is followed by courses on British culture and the differences in the insurance markets. Finally comes four weeks of product training, which, for staff handling life business, will include relevant Financial-Services-Authority-specified qualifications. All staff undertake the linguistic skills element even if they are not going to be dealing with the public as they will have to call NU offices and brokers in the UK.

The staff are very able and highly motivated. They manifestly enjoy their work, borne out by the staff turnover rate of 22.8% in Bangalore, compared to a typical UK call centre average of 30% to 35%. This is aided by NU's policy of paying slightly above-the-average salaries for call-centre staff so they get roughly the equivalent of a newly qualified teacher.

A happy workforce

The people certainly impressed Blackham: "They were better spoken, more polite, better rounded than many people you would find employed in similar jobs in the UK." Ellis, too, was full of praise: "They have a workforce that smiles all the time and genuinely celebrates each other's achievements. They were very knowledgeable and asked us some very intelligent questions about regulation and the FSA."

They also take abuse in their stride: "We teach the advisers that it is not personal," said Sean Egan, chief operating officer of Aviva offshore services, who is currently based in Pune for 18 months. "It is a much smaller problem than you might imagine as people just care that the job is done well not where it is done. Our worst period was after the 118 number change in the UK; an appalling service was being offered and it reflected badly on everybody out here."

The facilities are first class with subsidised canteens, free gyms, leisure facilities, medical rooms and a travel centre. The Bangalore centre is in a modern technology park with a shopping centre that is Western in feel and a far cry from the teeming, noisy, chaotic streets of central Bangalore, a city of 12 million people. The offices are palaces compared to where people live, even the middle-class graduates that offshore operations recruit. It is a highly desirable environment in which to work and jobs there are prized.

NU's Indian ventures currently operate during UK working hours, with shifts - usually lasting eight hours - starting from 1:30pm local (Indian) time, with the last shift finishing at 2:30am. As more back-office work is transferred to India, NU hopes to introduce more work during daylight hours for its Indian staff. All staff are picked up from their homes by car and taken back at the end of their shifts. The operators, 24/7 Customer in Bangalore, EXL and WNS in Pune, run large fleets of cars and transport is the third-highest budget heading after staff and buildings. Egan explains: "The taxi service is not negotiable out here and has become a very important part of the package. It is actually a legal requirement to provide transport for women workers outside of normal hours so we do it for all staff."

There are other noticeable differences from the UK. Power supplies are unreliable in India so the Delhi and Bangalore centres run off their own generators. At Pune the supply from the grid is better, although Thursday is often 'no power day' and, while visiting during mid-morning on a Thursday, it duly cut out but the back-up generators cut in within a few seconds.

A prestige environment

The Pune office is the prestige development for NU in India. It is situated over four floors of a brand-new block in a major development called Magarpatta City on the outskirts of Pune. The brains behind the four-million-square-feet development is Satish Magar and he has a vision of a modern technology park setting new standards: "We are looking to create something very new here. We want the very best in office facilities, IT infrastructure and residential accommodation all on one site. The whole development should be finished in about three years. We have one million square feet open, and another million nearly ready. It will be a win-win situation for everybody involved."

When finished, there will be 40,000 people working on the site, about 10,000 to 15,000 in support roles, and 50,000 people living in 12,000 apartments surrounding the technology park.

A school has already been built alongside the office development.

The speed of development in India is one of the reasons why it is so attractive to UK insurers, as Shaun Meadows, NU's director of customer service projects, explained: "When we came out here at the beginning of January this was virtually just a hole in the ground. I found it hard to believe that it would be finished, equipped and staffed by the end of July but it was. You just could not create a new centre on that scale in that time span in the UK."

Perhaps the most telling endorsement came from Kelliher: "We have looked at it (offshoring) within Kerry London for the last 18 months. Now, having been to India and seen for myself what can be achieved, I can see us setting up something out there. We need to remain competitive to survive long term and, if we can get the cost savings and level of professionalism I have seen out there, then it becomes an easy decision."