Insurance BPO Market Undergoing Revival

The adoption pattern across geographies and insurance segments is changing and so are the BPO solutions, notes a new report issued by Everest Group, a global services advisory firm. The research study, which analyzes the third-party insurance BPO market across the life & pensions (L&P) and property & casualty (P&C) segments, notes that this is reflected across multiple dimensions, such as scope of services, technology requirements, global sourcing, and pricing structures, among others.

The BPO industry, especially in insurance, has long been a mainstay within the banking, financial services, insurance (BFSI) market. According to Everest Group, the value proposition around managing growth and cost pressures, addressing changing consumer behavior needs, and effectively dealing with operational pain points increasingly drives insurance companies to adopt insurance BPO.

Further, with the economic crisis a shadowy reminder of the need to manage growth and maintain cost controls, insurers are re-evaluating the scope of services available to them. Other drivers include changing consumer behavior, operational issues and scaling challenges and technology-related issues, a changing regulatory environment and resultant cost of compliance, notes Everest Group.

These findings relate to those discussed at its recent Customer Advisory Board (CAB) meeting in Chicago, where senior executives representing 12 insurance companies using Innovation Group's software and BPO solutions discussed the need for transformation, innovation and collaboration, as well as the significant ongoing impact strategically and competitively of using both software and BPO solutions.

The focus of the CAB meeting was on the industry "new normal," discussing how companies must proactively assess and define approaches to the fast-paced business, distribution, customer, outsourcing and technology changes to create competitive, yet sustainable, customer and business value.

The Innovation Group’s featured speaker, Karlyn Carnahan, principal, Insurance, at Novarica, explained how the economic changes of the last few years have been a catalyst for change. From Novarica’s latest research, the issues insurers are facing include how they are using technology investments to add new business capabilities, replace core systems, improve underwriting with analytics, and simplifying process with portals; the need for ongoing, sustainable innovation; the increasing importance of data, and most importantly, the criticality of collaboration with customers, agents and solution providers.

“An overriding trend and key to competitive positioning in the industry is collaboration, whether with customers, agents or partners, because the business is changing so fast and insurers do not have all the ideas or solutions to respond to those changes," said Carnahan.

Other issues that tend to constrain insurance BPO decisions include risk management issues, operational challenges in transitioning, complexity of stakeholder management and decision making, and the lack of organizational maturity for outsourcing in some insurers, notes the Everest Group report.

Everest maintains that service providers need to align their offerings and make the necessary investments to address these changing requirements and capture the significant untapped potential.