Friends Life signs £1.37bn deal with TCS subsidiary

15-year deal with Diligenta will see the migration and consolidation of legacy mainframe platforms

Insurance company Friends Life has signed a deal worth £1.37bn over 15 years with pension and insurance industry service provider Diligenta, a subsidiary of Indian IT outsourcing company Tata Consultancy Services (TCS).

The deal, which will be effective as of 1 March 2012, will see Diligenta provide customer service and IT functions for the company.

All Friends Life's 3.2 million policies will be migrated from the company's legacy mainframe systems and onto Diligenta's in-house and proprietary database and content management system, Bancs.

Friends Life chose Diligent to consolidate three key platforms and 140 systems surrounding those platforms that it inherited when it acquired Friends Provident, Axa Life UK and the BHA business from BUPA.

Running the separate platforms and systems was very costly, and one motivator for the deal was the opportunity is presented to reduce system maintenance costs, according to David Hynam, chief operating officer for Friends Life.

"We chose Diligenta for two reasons: the Bancs platform is good, reliable and well proven, and the company has a strong track record of making policy migrations work – it had migrated something like 3.4 million policies for the Phoenix Group [the UK's largest closed life and pension fund consolidator].

Hynam said Friends Life needed a technology specialist to help it with its IT overhaul. "We needed a partner. After all, we're a pensions and insurance company not a technology company. And we decided that to derisk the consolidation process we would take on a partner to do the the admin and technology involved in the migration," he said.

Hynam explained that costs reduction is built into the contract, so as closed book policies fall away – these are policies that are no longer sold but are still on the books – the costs are reduced.

Many of the inherited policies of Friends Life were closed. Traditionally, hardware and application maintenance costs for systems that hold closed policies are high because they run on older legacy systems that have seen little investment.

Hynam explained that the Bancs system is a modular system that can handle a wide range of very different products including bonds, individual and corporate pensions, and individual protection products.

"These very different product types all feed through onto the one ledger," said Hynam.

As part of the deal, about 1,900 Friends Life roles will transfer to Diligenta. Friends Life is currently in consultation with a union and the staff will be transferred according to TUPE guidelines.

The companies were in discussions for a year before the deal was signed.

The deal is the fourth big UK insurance deal for Diligenta since it was set up in 2005, the others being with Phoenix, Pearl Group and Sun Life Financial Canada.