Around the world: North America lags behind other regions when it comes to platform consolidation.

The need to consolidate legacy life insurance platforms is well recognized by North American firms, but doubts about when, how and precisely what to do have hindered progress toward this goal. This state of affairs will need to change rapidly in order for companies to face new and intense competitive pressures, meet growing demands for product innovation and take advantage of the massive wealth transfer occurring within the baby-boom generation.

Accenture's recent review of the consolidations of life systems around the globe shows companies in other geographies have made significantly more progress than their North American counterparts. That experience provides useful lessons in terms of both approaches to consolidation and the probability of success.

As the North American population ages over the next five to 10 years, vast numbers of individuals will transfer wealth from accummulation instruments to income-generating vehicles such as annuities and long-term-care protection products, driving demand for product innovation. Retail banks, which have achieved a 10% cost-ratio reduction between 1982 and 2005, pose an increasingly efficient threat to life insurers, whose expense ratios have remained essentially flat.

In this environment, success, if not mere survival, requires life insurers to become low-cost producers with variable cost bases and the people, processes and technology to support that model.

But NorthAmerican life insurers have fallen behind at acquiring these capabilities. Approximately half of the European respondents to a recent Accenture survey reported having consolidated their systems, compared to only one quarter of North American firms.

The disparity may be attributable to a variety of factors including prospective industry consolidation. For example, European firms were three times more likely than North American companies to say they expected to be part of a merger or acquisition within two years. Platform consolidation also may be a greater challenge in North America than in Europe. Only 20% of European companies report having 11 or more product platforms, compared to 34% of NorthAmerican firms.

Whatever the cause of the relatively slow progress in North America, the rewards of plat form consolidation are universally apparent. According to the survey:

* Insurers that consolidated saw a 19% reduction in operating costs, 25% reduction in information technology costs and 35% increase in speed-to-market with new products.

* The 45% that used business process outsourcing were 26% more likely to report high levels of satisfaction and 16% more likely to report cost-reduction benefits than companies that didn't use outsourcing.

The European experience clearly demonstrates the potential for both IT and business process savings.

That's encouraging news for North American life insurers that urgently need to deliver innovative products and reduce costs in order to compete against banks and other financial institutions. But it's also a warning for NorthAmerican companies. While the globalization of the insurance market is still in its early stages, the progress of consolidation in European systems is a potential threat to all companies that compete for North American market share and to the smaller number of companies seeking to compete for opportunities in Asia.

North American life insurers seeking competitive parity and, ultimately, global advantage would do well to study the experience of their European counterparts and leading retail financial service providers.

Dave Hollander, a Best's Review contributor, is the global head of Accenture's life insurance practice and is based in Philadelphia. He can he reached at [e-mail].