Handshake (Image: iStock)

An acquisition in the insurance industry is a complex and challenging undertaking — whether a company buys a small block of business or a large insurance carrier.

From the integration of major processes and core teams, to system upgrades and the development of new operating models, the completion of any successful acquisition deal requires careful planning.

(Related: Culture Shock: How to Manage a Successful Merger)

For agents, the uncertainties when a deal is announced can result in a multitude of concerns. Everything from how claims are reported to HR processes may change. These issues and others are often exacerbated when too few qualified M&A managers are available to help champion agents throughout the integration process.

Today, it is impossible for companies to be completely prepared for all the hurdles they will encounter when an acquisition takes place. However, they can increase the likelihood of success by developing a proactive plan that identifies potential issues and then taking the necessary steps in which to strategically approach them.

The following are five best practices for life and annuity insurers to consider when entering an acquisition:

  1. Establish clear goals and objectives. You cannot experience success if you do not set specific goals and objectives as to what you want to accomplish. It is this key information that becomes the driving force behind the creation of a strategic operating model, allowing you to clearly identify where you want to go and then decide exactly how you are going to get there.
  1. Consider the legal requirements. Transitional service agreements can be extremely difficult to manage if they are not properly defined. This can lead to severe financial penalties to buyers who miss the deadlines. It can also create disputes between the buyer and seller with carriers risking the disruption of the seller’s business.
  1. Encourage enterprise-wide collaboration. Forging productive working relationships with all members of the acquired company throughout the acquisition process is vital. Carriers need contributions from and benefit from collaborating with operations, IT, legal, compliance, and audit departments.
  1. Coordinate closely with the seller. The integration of buyer-seller teams is essential to identify the acquired company’s constraints and to explore resources it might have to help ease the transition process. This includes integration with the seller’s actuarial and compliance teams.
  1. Consider using a third-party administrator (TPA). TPAs offer carriers deep industry knowledge, the latest emerging technologies, and a variable cost model. In lieu of carriers spending millions of dollars to construct new systems or attempting to adapt to outdated legacy systems, enlisting the help of a TPA can help lower the cost of onboarding, provide industry expertise, and lower unit costs.

When considering an acquisition, life and annuity insurers may find themselves better primed for success if they can:

  • Establish strong, enterprise-wide communications early in the acquisition, and keep the momentum going throughout the process to align company cultures and improve transition/coordination from the very beginning.
  • Use TPAs to help reduce operating costs and to provide access to critical digital technologies to better reach policyholders across channels, increase growth, and to boost the customer experience.
  • Identify key stakeholders at the very start of the acquisition process, and begin to build relationships through team integration.
  • Stay on top of transitional service agreement requirements, including how the transitional service agreement will be transitioned once the buyer is able to assume managerial responsibilities.

As more insurers enter into acquisition opportunities, the more strategic their efforts must be to overcome specific challenges. This includes taking a proactive approach, along with a commitment to investing in the right technology to achieve long-term success and profitability.

— For more of our life and annuity deal coverage, see our Active Shoppers archive, on ThinkAdvisor.


Mary Anne Durall (Photo: SE2)

Mary Anne Durall is senior vice president of delivery services at SE2.