Survey of Asset Managers Identify Top Mistakes by Insurance Companies

(January 12, 2011) — A recent survey of insurance asset managers has noted the top mistakes insurance companies make, providing recommendations on how to avoid them.

The most frequently cited suggestion for insurance companies: Provide a better description up front in the request for proposal (RFP).

David Homes, a partner at strategic consulting firm Eager, Davis & Holmes and Research Director for the Insurance Asset Outsourcing Exchange, has been tracking insurance companies and their relationships with investment managers since the early 1990s. “An important part of the RFP document is the description of the insurance company’s investment needs and expectations associated with the mandate being outsourced,” he noted in a statement. “Getting a good understanding at the beginning of the RFP process helps focus investment managers’ response toward specific needs and can improve the likelihood that an insurance company will identify the best investment manager for a specific situation. Unfortunately, this part of the RFP document is often underdeveloped.”

Survey respondents added that insurance firms could better communicate a clear timeline for the RFP process, and they identified a minimum of thirty days as reasonable.

Additional findings showed insurance companies are increasing their use of investment consultants. “Because investment consultants typically use RFPs in the search process, they are contributing to the trend (of increased RFP use),” explains Holmes. “The manager selection process is evolving to meet insurance companies’ investment needs, which are more complex than just a few years ago.”

The survey was conducted by the Insurance Asset Outsourcing Exchange and is based upon the responses of 14 leading insurance asset managers.

A report last month by the same firm showed investment managers are also seeing an increase in the number of requests for proposals (RFPs) from insurance companies seeking third party services as the manager selection process evolves to meet increasingly complex investment needs. Holmes noted that he has seen that the insurance selection process has become more structured yet also more complex as investment needs have grown, adding that the increase in the activity of RFPs reflects the heightened proclivity among insurance firms to outsource management.