QBE offshoring plan hits a setback

QBE's move to outsource key information technology functions has been hit by privacy concerns, with state authorities holding a firm line and saying certain insurance operations cannot be sent overseas.

As part of a cost-cutting drive, QBE plans to outsource its Australian IT development and testing to Accenture and MphasiS in India, in changes expected to cost about 100 domestic jobs.

Since the cuts were announced earlier this year, BusinessDay understands QBE has held meetings with state and federal regulators over the plan and the insurance company is now retaining some extra staff in Australia in order to comply with Victoria's strict policy on workers compensation insurance data.

Several regulators had still not approved the outsourcing plan late last month, even though the handover to contractors is set to take place next month - a point that was flagged within QBE as a potential risk.

While the Australian Prudential Regulation Authority is believed to have accepted the outsourcing plan, sources inside QBE said the insurer had changed its initial plans in order to meet strict state standards about sensitive data being sent overseas.

QBE is an "authorised agent" of both WorkSafe Victoria and WorkCover NSW - meaning it administers policies but premiums are set by the state authorities.

It is understood QBE has held meetings with WorkSafe Victoria that broached the prospect of storing data in an online "cloud", but the agency had a strict "line-in-the-sand" approach to data being sent overseas.

A spokesman for WorkSafe Victoria said: "WorkSafe does not allow any of its agents to store any data relating to employers or injured workers outside of Australia."

A WorkCover NSW spokesman did not say if information could be stored overseas, but said: "WorkCover NSW does not allow the customer-facing functions of scheme agents to be located offshore."

With many financial firms looking to cut costs, the position of state authorities could impact other insurers, including IAG and Suncorp, in their efforts to cut costs if they decide to outsource operations.

APRA has also cautioned banks about storing customers' financial data overseas, as the sector eyes cost savings in a bid to bolster slowing profits.

A QBE Australia spokeswoman said the IT outsourcing plan did not involve transferring any data to the company's group shared services centre overseas. "At all times QBE treats the security of all data very seriously and we manage our business with reference to privacy and other data regulations."

She did not say whether the plan had received final approval from regulators.

QBE's IT outsourcing is part of a broader campaign to save at least $US250 million ($272 million) by 2015, which includes an offshoring push.

The company has not said how many staff and contractors will lose their jobs due to IT outsourcing, but the Finance Sector Union says the company has sent 135 jobs to India this year.

The QBE spokeswoman said that at the time of this month's presentation, about 70 per cent of the people who had been impacted by the offshoring changes had either been redeployed or were in the "redeployment program".

However, she said redeployment rates could be lower among IT staff.