QBE offshoring plan hits a setback
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.
Frequently Asked Questions about this Article…
QBE plans to outsource its Australian IT development and testing work to Accenture and MphasiS in India as part of a broader cost‑cutting campaign. The offshoring push is one element of an initiative to save at least US$250 million (about $272 million) by 2015.
The article says the changes were expected to cost about 100 domestic jobs. QBE has not given a final total. The Finance Sector Union reported QBE sent 135 jobs to India this year, while QBE said about 70% of those impacted had been redeployed or were in a redeployment program, with redeployment rates possibly lower among IT staff.
Yes. State authorities have raised privacy concerns and taken a firm line about sending certain insurance operations and sensitive workers‑compensation data overseas. QBE has held meetings with regulators and retained extra staff in Australia to comply with strict state rules.
Sources said the Australian Prudential Regulation Authority (APRA) is believed to have accepted the outsourcing plan, but several state and federal regulators had still not approved it late last month. QBE’s spokeswoman did not confirm whether final regulatory approval had been received.
QBE's spokeswoman said the IT outsourcing plan did not involve transferring data to the company's group shared services centre overseas and that QBE treats data security and privacy seriously. However, WorkSafe Victoria explicitly does not allow its agents to store data relating to employers or injured workers outside Australia, and WorkCover NSW does not allow customer‑facing scheme functions to be located offshore—so some data and functions must remain onshore.
Yes. The position taken by state authorities on data storage and offshore customer functions could influence other insurers such as IAG and Suncorp if they look to outsource operations. APRA has also cautioned banks about storing customers' financial data overseas as the sector pursues cost savings.
The article notes the handover to contractors was set to take place next month, but several regulators had not yet approved the plan late last month—an internal point that QBE had flagged as a potential risk to the timetable.
Investors should note that the IT outsourcing is part of a wider campaign to cut costs and save at least US$250 million by 2015. Regulatory and privacy constraints—especially state rules on workers‑compensation and customer‑facing functions—could limit how much can be offshored and affect the timing and magnitude of expected savings. Also watch for disclosure on final approvals, job impacts, and any operational changes QBE announces.
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