Although life insurers and annuity manufacturers have done much to reduce expenses, they may have ample room for cost cutting.

The average life insurance company has reduced expenses from $170 per $1,000 in total annual premium in 2004 to $147 per $1,000 in 2006, according to consultants at Deloitte Development L.L.C., a unit of Deloitte & Touche USA L.L.P., New York.

But the Deloitte consultants say many life insurers are continuing to lower costs by accelerating service and reducing the number of transactions.

Whereas the average life insurer paid $1.82 in new business processing expenses per $1,000 in policy face amount, the lowest-cost carriers averaged just $1.26 per $1,000, the consultants say.

For a new policy of $5 million or more, the average number of days to delivery was about 45 days industry-wide, compared to less than 40 days for the low-cost group.

The Web and voice-response software are examples to two tools for cutting costs, the consultants say.

In the area of annuity sales, expenses have declined sharply in recent years as a percentage of deposits, but customer service processing costs per contract have risen, the consultants note.

Lowering the likelihood that an annuity contract will be returned because the vendor deemed that the application was not in good order could lead to significant cuts in expenses, the consultants say.

Outsourcing and improved use of electronic capabilities, such as fund transfers and allocation changes, also could help, the consultants contend.