Life insurers are failing to find value for money in actuarial consultants due to intrinsic weaknesses in the hiring process, a survey by Barnett Waddingham has uncovered.
It found that most companies assess the value of consultants based on "cost savings", with "return on investment" and "governance savings" also cited often by the 45 UK insurers surveyed.
And this focus on price is reflected in just 7% of the respondents having outsourced most of their work without a formal tender process over the last year.
But Barnett Waddingham said this approach is "fundamentally flawed", and distracts companies from other qualities such as skills, delivery, experience, cultural fit and location.
"These other qualities are likely to remain 'ideals' if the process of appointing a consultant focuses upon 'price'," head of insurance consulting, Scott Eason, said.
"By placing value for money above basic cost, life insurance companies should better understand the value a consultant relationship adds to the business.
"This may mean a move away from formal tendering to longer-term, trusted provider relationships to help them achieve their aims."
The researchers also found that consultants are often targeted on their ability to make "public noise" through appearances at conferences and advertising, which can incur high costs.
This focuses attention on high-profile consultancies. However, the survey indicated that larger firms often provide significantly less value for money than medium-sized ones.
Eason said targeting consultants based on brand could lead to companies hiring someone who is not best suited to the project, and may fail to forge a successful long-term relationship.
"Insurance companies must assess consultants against their skills, not just their profile within the industry," he continued.
"With the demand for external actuarial consultants set to increase over the next three years, now is the time to correct any weakness in the selection process."