Product Type: Market Research Report
Published by: Datamonitor
Published: June 2009
Product Code: R313-52387Description Introduction
In response to the economic downturn, insurers have focused on short-term savings. However, economic downturns always turn into periods of expansion. Regardless of whether a recovery is months or years away, the smart insurers are planning for a future where expenses need to be tightly controlled and opportunities can only be exploited by companies with flexible operations.
Scope- The report discusses the market challenges facing both life and non-life insurers.
- Application outsourcing, infrastructure outsourcing and business process outsourcing is discussed in detail.
Highlights
As the economy recovers, the benefits of functional outsourcing will be marginalized. Therefore, in order to make meaningful improvements, insurers will need to re-engineer their business processes and improve their technology assets.
The suspension of variable annuity products presents a great opportunity for BPO providers. Closed books of business that is, a block of policies that are still in force but no longer being actively sold are often the logical starting point for insurers considering outsourcing.
Moving forward, Datamonitor believes that few insurance captives will be established, while the rate of divestitures will increase. This provides vendors with not only greater sales opportunities, but also the potential to acquire the assets of dismantled captives.
Reasons to Purchase- Gain insight into the market challenges facing insurers, and how the effective use of outsourcing is being used to mitigate these challenges.
- Learn about the market strategies of key vendors serving the insurance vertical.
Table of Contents - Overview
- Catalyst
- Summary
- Key Messages
- The economic downturn is driving short-term, tactical cost savings initiatives
- Having coped with the downturn, insurers will prepare for the rebound
- Greater use of rule-based underwriting will enable outsourcers to move up the food chain
- A variable cost structure allows insurers to scale up and down in tandem with the market
- Vendors should not give up on bundled service offerings, despite limited adoption to date
- Table of Contents
- Table of figures
- Table of tables
- Market Opporunity
- The economic downturn is driving short-term, tactical cost savings initiatives
- Mega deals have given way to functional outsourcing engagements
- Asset sales are attractive to cash strapped insurers
- Systems consolidation will drive application and infrastructure outsourcing
- Past wave of acquisitions is driving consolidation projects
- Insurers are also looking to consolidate systems across geographies
- Having coped with the downturn, insurers will prepare for the rebound
- After removing immediate costs, insurers will realize greater savings with BTO
- Top-line growth will equal-if not surpass-cost cutting as a key strategy
- Brining new products to market in a timely manner
- Territorial expansion
- The credit market will thaw and M&A activity will return
- Closed variable annuities books will lead to big BPO deals in the future
- Greater use of rule-based underwriting will enable outsourcers to move up the food chain
- Captives have lost their appeal, boosting the value proposition for pure play outsourcing
- Government intervention and increased regulation adds uncertainty to future growth
- Impact on the Insurer
- Outsourcing enables insurers to reduce costs and respond quickly to market changes
- A variable cost structure can allow insurers to scale up and down with the market
- Insurers that migrate to an outsourcer's policy administration platform can react to changing regulations
- Outsourcing enables insurers to focus on core competencies
- Outsourcing engagements need to be properly managed from scoping through termination
- The first step in a successful engagement is outsourcing the proper activities
- Prepare for changes and be certain to develop and adhere to a communications program
- Vendor over-dependency, particularly in BPO, is a real risk that can be mitigated with an exit strategy
- BPO can potentially diminish the customer and/or agent relationship
- Competitive Landscape
- A brief look at the balance between ITO and BPO, and how that balance is changing
- Vendor profiles
- Accenture
- Affiliated Computer Services (ACS)
- Computer Science Corporation (CSC)
- IBM
- Infosys Technologies
- Patni Computer Systems
- Perot Systems
- Tata Consultancy Services (TCS)
- WNS (Holdings) Limited
- Go to Market
- Domain expertise is essential for capturing insurance-specific BPO
- Vendors should not give up on bundled service offerings, despite limited adoption to date
- A diverse delivery network can be a competitive advantage
- A global delivery network can help alleviate some fears among insurers
- Transformative engagements require a right-shore strategy
- Third party advisors are assets that should be engaged
- Recommendations
- Gain a balanced portfolio of open and closed books
- Focus on gaining and improving platform IP
- Build a diverse delivery network
- APPENDIX
- Methodology
- Further reading
- Ask the analyst
- Datamonitor consulting
- Disclaimer
- List of Tables
- Table 1: Mega outsourcing deals in insurance, 2007-present
- Table 2: Announced outsourcing deal value, insurance vertical, select vendors 2000 - Q1 2009
- List of Figures
- Figure 1: Cost savings trump revenue growth
- Figure 2: Outsourcing adoption in the insurance industry
- Figure 3: Adoption of underwriting BPO
- Figure 4: A framework for choosing what to outsource and what to retain in-house
- Figure 5: Benefits/risks balance for outsourcing
- Figure 6: Estimated revenue split between ITO and BPO from the insurance vertical, select vendors
- Figure 7: Overview of vendors profiled
- Figure 8: Timeline of NaviSys and Genelco
- Figure 9: Outsourcing adoption, broken down between insurance-specific and horizontal processes
- Figure 10: Sourcing considerations for functional and transformative engagements
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