TCS sees Diligenta turnaround, eyes US insurance market

Tata Consultancy Services (TCS) says it has seen a "turnaround" in fortunes of Diligenta, the UK business process subsidiary with large wins in recent months and has begun offering its services to insurance companies in the US, which is a larger market.

Diligenta was set up in 2005 to offer business process services for the life and pensions insurance industry in the UK. It administers closed-book pensions and annuities for insurers, a model where it gets initial revenue and slows down as policies get closed. Since its $2.2 billion deal in 2011 from UK insurer Friends Life, it struggled to get newer deals, prompting the company to place a new CEO Daniel Praveen in 2015.

In September, Diligenta won a 15-year deal with Scottish Widows, the life and pensions business of Lloyds Banking Group (LBG), which mandated taking over 1,000 people on its rolls and providing end-to-end policy administration for over four million policyholders.

"The growth what we expected was lagging behind. We have announced two deals already; we are now processing more than 10 million insurance policies in the UK alone and our ambition is to grow it about 20-25 million policies as quickly as we can and opportunity is there," said N Ganapathy Subramaniam, Chief Operating Officer at TCS in an interview last week. "We are working on few other large deals."

Diligenta reported a profit of Rs 8 crore on revenue of Rs 1,485 crore in 2016-17, according to the TCS annual report for the year.

"We were looking at only closed books and now we are processing both closed and open books. Today, if you look at the insurance marketplace in the UK, there are other small players and not doing well," Subramaniam said. "When we started, other players also jumped in. When the industry saw a lull period, we stayed committed and the other players were gone. Now we are recognised as number one outsourcer of the insurance industry in the UK."

TCS has been embracing automation, offering a model where insurance clients pay for each transaction than the traditional model of people deployed, enabling to generate higher margins at scale. The efficiency at scale also helps it to edge out smaller players in the market, allowing to engage with clients over a longer term.

"We are happy with that we stayed invested. I think this year and next year we will do well. These are all long-term deals 7-10-15 years and could be 100s of millions of pounds," said Subramaniam.

India's largest IT outsourcer has already begun to take the Diligenta model to insurance companies in markets such as the US, where the parent already has a long-term relationship. This also helps it to bet on newer business models using platforms to deliver services as the industry witnesses technology shifts and a decline in traditional outsourcing deals.

"Diligenta is a two-layer service model. If you go and create that kind of a service, you will essentially create scale and make sure you have one or two players left rather than a huge number of players. Nowhere they will be able to sustain it," he said.