Aon Outsources London Market Processing Operations to Xchanging

August 14, 2006

In a major step towards bringing electronic processing to the London market, Aon Limited (also known as Aon U.K.), the British division of Aon Corp., and Xchanging, the London-based business processing services company, have entered into a partnership arrangement with an initial 10-year service contract, effective Sept. 1.

“The ground-breaking deal, involving the outsourcing of Aon’s Client Operations division (which handles current and legacy insurance claims administration and processing, as well as accounting and settlement for clients within Aon’s reinsurance division and its specialist and wholesale units), will transform and evolve the way Aon conducts its business in the London insurance market,” said the announcement.

Aon said the goal of the arrangement is to “focus on its core areas of expertise and deliver differentiated levels of service to its clients. The initiative further demonstrates Aon’s and Xchanging’s status as leaders in London market reform.”

Aon’s deal with Xchanging, which had been anticipated, is a breakthrough in the sense that the world’s second largest brokerage and risk management provider is now firmly committed to full electronic integration of its London market processing operations. The company first announced its decision earlier this year (See IJ Website June 23).

In addition to the outsourcing contract with Xchanging, Aon’s decision has proved a breakthrough in lowering costs. In June U.K.-based RI3K, which has pioneered and implemented one of the London market’s most successful electronic trading platforms, announced that it would cut fees for underwriters using its electronic marketplace by 80 percent. Alex Letts, RI3K’s Chief Executive commented: “Last year we made a commitment to the market that as volumes grew we would work towards a £50 price point. Recent activity around broker distribution has allowed us to bite the bullet and make the move in a single step.” He indicated that Aon’s decision was the most important single factor.

Describing how the arrangement with Xchanging will work, Aon said: “Cambridge Solutions Ltd., a leading offshore process and technology skills company, is the incumbent off-shore service provider to Aon UK for claims processing. Cambridge continues to be the exclusive supplier and will expand the offshore services it provides to the new Xchanging/Aon partnership.

“As part of the agreement, more than 500 employees, based primarily in Romford, Leicester and Glasgow, will transfer from Aon to Xchanging. The partnership agreement is based on Xchanging’s unique Enterprise Partnership model(a) approach to the outsourcing, which is designed to handle complexity, minimize any disruption and to start-up with an ‘as-is’ business as usual for Aon, while assuming the delivery risk and ensuring guaranteed savings to Aon. The partnership will also leverage the significant talents and capabilities of the transferring employees in order to create a platform to offer market-facing services to the London Market and the larger insurance industry.”

David Mead, Group Operations Director, Aon Limited, commented: “Our strategy at Aon is the realignment of our business more closely around our client needs and core areas of expertise. By partnering with Xchanging, we will improve the overall client experience, delivering greater levels of service and efficiency, while offering our transferring employees the opportunity to work with Xchanging, a world-class business processing services company.”

Clive Buesnel, Executive Director at Xchanging, said of the deal, “Aon is a very important and exciting win for Xchanging. It’s a great partnership and a landmark for us, Aon and the industry. It optimizes the value chain and as a result we will be able to transform the way business processing is done in the London market, thereby strengthening London’s competitiveness in an increasingly global insurance market. We are absolutely delighted to be providing processing services for yet another premier global brand, adding Aon to our portfolio of long-term partners who, like Aon, are all leaders in their industries.”

Satyen Patel, Executive Vice Chairman, Cambridge Solutions Ltd., added: “We consider this innovative partnership to be a ground-breaking one. It leverages the complementary strengths of each partner effectively and provides continuity to an established offshore-outsourcing relationship that Cambridge Solutions Ltd. enjoys with Aon UK. More importantly, Cambridge now looks forward to working with Xchanging to service the broader London Insurance Market.”

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