“We’ve experienced good growth over the last ten years, and we’re looking to expand further,” said Stewart McCulloch, head of UK and insurance operations for London-based service provider Xchanging.
That’s something of an understatement. The company might best be described as the “insider’s outsourcer.” Founder David Andrews, one of the early pioneers in the formation of outsourcing for business data processing, sought to bring the benefits of modern technology to what was at the time a very old fashioned industry.
Starting with Lloyd’s, one of the original investors in Xchanging, he began introducing modern technology, and, the by no means easy task, of convincing the London market to adopt it.
Xchanging has averaged “around 14 percent annual growth,” said McCulloch. Its clients – in addition to Lloyd’s – include “nearly all of the London market, Lloyd’s MGA’s and insurance companies,” as well as British Aerospace (BAe), Deutsche Bank and a number of others.
Its success is based on results. As an example McCulloch explained that 10 years ago it normally took around 10 days to settle all of the premium payments on an insurance contract, and required dealing with three separate agencies. “It now takes about three days, and only one agency is involved.”
As a result, both premium and claims payments move through the market more rapidly, and, in accordance with the Financial Services Authority’s (FSA) regulations, the transactions create a transparent trail that can be verified.
McCulloch pointed out two additional factors that make using Xchanging’s systems valuable. “It’s increasingly important to move funds quickly,” he said. More rapid processing means that working capital becomes available quicker. The system also assures open verification of counterparty risks, an increasing concern during the ongoing financial crisis.
The use of an advanced processing system is particularly valuable for Lloyd’s, as it’s a subscription market, not an insurance company. While each risk is handled by the lead agent, there are a number of “subscribers,” i.e. other syndicates who have agreed to accept certain portions of certain risks. Each one is therefore a counterparty with a need to be informed of the risks, and the claims. Xchanging provides much of that information.
Although Xchanging was established in London, “less than half of our clients are now UK companies,” McCullough said.
That expansion received a big boost last October, when Xchanging announced that it had agreed to acquire 75 percent of the fully diluted share capital of the Indian outsourcing company Cambridge Solutions. Xchanging described Cambridge as “an international BPO and IT services provider with a global presence through offices in eight countries across four continents with approximately 4,500 employees.”
Xchanging is in the process of integrating Cambridge into its operations. Andrews is now the CEO, and has indicated it will remain an Indian company. However, “it gives us both a business processing and an IT platform in the U.S. as well as Australia,” McCulloch explained.
“We also expect to continue growing. Insurance is a “healthy business,” he added. It deals with “risks and liabilities, areas where our expertise should be highly valued.”
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