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Health & Welfare outsourcing drives global benefits administration BPO market

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01 Sep 2006 | (News)

NelsonHall's latest HR Outsourcing study reveals that the increasing trend towards outsourcing health & welfare administration in North America is driving overall growth in the global market for benefits administration.

The imperative to reduce healthcare costs is driving health & welfare outsourcing, a global market which will more than double, to $9.4Bn by 2010.

Overall, the benefits administration market consists of health & welfare, pensions administration, flexible benefits administration, and Consolidated Omnibus Budget Reconciliation Act (COBRA) services. Growth in these services combined will be 10% CAGR over the next few years, taking the overall global market to over $22Bn by 2010.

Global pensions administration growth will be driven by an increasing trend to outsource Defined Benefit (DB) pension plans due to freezing of these plans, plus an increasing trend to outsource Defined Contribution (DC) plans, as companies re-examine pension administration methods due to change from both DB to DC plans.

Growth within flexible benefits administration is strong due to an increase in popularity amongst multi-national organizations in Europe. These companies are looking to develop loyalty amongst their employees by providing flexible benefits to suit employee circumstances.

Hewitt Associates is the global and North American market leader, with 11% and 12% share respectively, but retirement organizations such as Fidelity, CitiStreet, VanGuard and Trowe Price are looking to increase their share of the top ten.

Players stronger in mainland Europe include Hewitt in the Netherlands, following their 2005 pensions administration acquisition from Royal Phillips Electronics, and Mercer, who recently purchased Swiss outfit Pendia.

Critical success factors for the benefits administration market overall include:

  • The ability to assist organizations in making benefits a key method for instilling loyalty within the workforce
  • The ability to offer cost savings of between 10% to 15%, potentially higher for Total Benefit Outsourcing (TBO)
  • Access to, and strong developmental control over, integrated software that utilizes one database for all participants of retirement and health & welfare plans, improving interfaces with other HR packages

Source: NelsonHall

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