Companies outsourcing call centre and processing work to cheaper countries risk damaging their brands and losing customers, a report warned yesterday.
Offshoring is taking place across several industries and particularly in insurance and banking, with Royal & SunAlliance this week becoming the latest insurer to announce plans to move work to India.
The report by the investment bank JP Morgan into the costs of running insurance companies highlighted why offshoring is being used to cut costs but notes the problems this can lead to.
It warns that insurers may face pressure from the government - and unions - to make more subdued announce ments about transferring jobs to India. "High domestic redundancies can also damage an insurer's brand, in our view," JP Morgan said.
But the analysts conclude that while insurers have made repeated pledges to cut costs, this has not yet started to feed into their financial figures. This leads them to warn that the 1.5% cap on the charges insurers can levy on customers for stakeholder products is not high enough as insurers have a 1.49% expense ratio.
A survey of customers' attitudes towards offshoring has found that 33% of them would change their financial services provider if their bank or insurer said it was moving some operations offshore. But the survey by the Troika consultancy found that only 4% customers had actually done so.
Jill Treanor The Guardian