Armonk, New York-based IBM will pay an undisclosed sum to acquire Greenville, South Carolina-based LIS from parent company RBC Insurance, which is the insurance subsidiary of the Royal Bank of Canada.
IBM will take on some 700 LIS staff as part of the deal, and launch a new division handling life and annuity policy processing contact center management, policy administration, and claims processing. LIS claims to provide BPO services for approximately 12 insurers worldwide including Fortis Family and Merrill Lynch Life Insurance Company, and claims to handle some four million policies on behalf of its clients.
Following the sale, RBC Insurance will enter into a long-term contract with IBM to provide BPO services for RBC’s 600-person US business covering contact center management, policy administration, claims management, and payment receipt and reconciliation services.
As well as providing processing services, LIS also develops insurance software within its Genelco Software Solutions division, which develops Genelco life +, a web portal for administering life and health insurance and annuities, and reinsurance services.
Katherine Hegmann, general manager of IBM Global Business Transformation outsourcing, said: Life insurance processing and managed operations is expected to represent a $2 billion market globally by 2005, and this acquisition…adds new skills and processing capabilities, significantly strengthening our policy management, claims administration and payment receipt and reconciliation capabilities. As a result, IBM will be able to provide a broader spectrum of services for the insurance sector, covering LIS’s core vertical skills in insurance claims, with IBM’s horizontal BPO services in call center management, finance and accounting, human resources, and procurement outsourcing.
IBM will also be hoping to pitch LIS’s claims processing services to its own insurance client base, which includes companies such as Skandia, Mitsui Mutual, AXA Sun Life, Manulife Financial, Meiji Life Insurance, and Parion. Each of these IT outsourcing contracts is valued at over $500 million.
However, this is a belated move into insurance processing by IBM. It will face significant competition from more established rivals such as Perot Systems, Unisys, CGI Group, and market leader CSC, which has a list of some 200 banking, life, annuity, pensions, and property and general insurance clients representing about $7 billion in annual claims processing. It also has some 300 healthcare clients, representing 30 million insured members for which it processes 150 million claims annually.
