It appears that global insurer QBE Insurance's (ASX: QBE) plan to deliver at least $250 million in annual cost saving, primarily through an operational transformation which will see a hub in the Philippines provide support to the global organisation has hit a slight snag.
According to a report in The Sydney Morning Herald, several state-based regulators have raised concerns with QBE over its plan to outsource certain information technology (IT) functions. The report suggests issues of privacy were the main concern, which has led QBE to retain staff in Australia to appease these authorities about the storage of personal data overseas.
QBE's experience has potential ramifications for other corporates who may be looking to offshore services, particularly IT related, in an attempt to cut costs. Given the private nature of the data which insurers such as Insurance Australia Group (ASX: IAG) and Suncorp (ASX: SUN) and the banks possess, it's likely they could face similar issue and may have to refine their cost-cutting strategies too.
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Motley Fool contributor Tim McArthur owns shares in QBE Insurance.
