11-27-16 Blog: Reversing the Standard FTE Staffing Model for Competitive Advantage

Reversing the Standard FTE Staffing Model for Competitive Advantage

November 27, 2016 | Justin Davies

Until recently, traditional market wisdom was that insurance and reinsurance pricing moved in cycles. But the era of fairly predictable market cycles has expired with few believing it will return in a recognizable form.

So with the continuing soft market, low return on investments and little likelihood of a return to the traditional pricing cycle, what choice do insurers and reinsurers have?

Running an insurance or reinsurance company necessarily involves a wide range of processes and supporting staff. For example, as one of the world’s most expensive cities, London is experiencing high and rising insurance costs associated with its sky high offices, increasingly high wages, and the threat of a sharp hike in business rates.

Most of the London market operates on a standard model where approximately 30-40% of FTE staff are revenue generators and 60-70% of employees support them. Several companies a moving staff to satellite offices outside of the city – but is this enough? What if the standard model were reversed?

One forward looking global organization has done this, setting a revolutionary model where over 70% of their FTE staff are revenue generators and contracting a domain expert provider to undertake almost all of their middle and back office services. This model has allowed them to grow at an unprecedented rate and accelerate time to profitability.

Costs associated with recruitment, training, office and IT infrastructure have been significantly reduced. They have been able to be more agile in scaling up (or down) with new products and services in response to market demand. Whilst it is difficult for an established business to replicate this model in its entirety, their success should be a benchmark for others in the wider industry including London.

But, in order to grow the business, companies should consider the emerging trend of leveraging managed services for some of their non-revenue generating function to business partners, particularly to those who are domain experts. Xceedance is well situated to support such a business model.