Life offices could save up to £1.5bn each year if they adopted more efficient administration and back-office systems, says software provider Marlborough Stirling.
An analysis by the company of the FSA's 2002 returns reveals that life offices are spending more than £30 a year to administer each individual policy on their books, up from£28 in 2001 and £25.50 in 2000.
It says that companies should be aiming to cut costs to around half of this amount.
Marlborough says if companies could cut out some of the waste in their admin procedures, the Treasury's proposed 1 per cent price cap for its suite of stakeholder products would not seem nearly so imposing.
It says life offices and financial services providers generally need a major overhaul of back-office systems, with few taking advantage of systems based on modern technology.
Head of life & pension propositions Brian Please says: “As charge capping becomes more prevalent, companies must become more efficient in all parts of their business, policy administration in particular, or risk losing their competitive edge.”
Direct Life & Pensions sales & marketing director Richard Verdin says: “I would expect Marlborough Stirling to say something like that as it is in their interests to do so. Most intermediaries would look at the variety of systems that are available from life offices and conclude that they only confuse the marketplace.”