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Release date: Sep 2010
This HfS Research report is co-authored by one of our analysts, Reetika Joshi. The report investigates the global insurance BPO market and today's providers’ capabilities to empower insurers by integrating and transforming processes, tools, technology, as well as risk strategies. We have analysed the trends in global insurers outsourcing BPO services to service providers in offshore locations such as India. The report outlines:
- the major services outsourced
- the service provider landscape
- brief profiles of key service providers
- discussion of trends in outsourcing over the next few years
Key issues addressed include the fact that the global insurance industry faces a challenging and unprecedented market environment; insurance premiums are falling, and insurance firms’ profitability is nowhere near the pre-recession era. Added to this, insurers in the US and Europe need to battle several regulatory and compliance requirements in the next few years.
The US healthcare reform calls for innovation in risk/price modeling for insurers who will cater to whole new segments of customers in 2014. Similarly, the Solvency II regime has brought risk management and disclosure to the forefront of the European insurance industry.
Compliance is already driving up documentation and administrative workload, and there is a shortage of risk analysts and actuaries to take on the higher level work. Insurers now have an urgent need to manage enterprise risk by harmonizing market, credit, operations and organizational security. In this scenario, outsourcing of select business processes is a highly viable strategy, as several insurers are discovering today. And expense reduction is only one angle; it is no longer the only important reason driving the insurance segment to outsource.
Providers are now business partners, offering to diagnose current and future resource requirements with a focus on efficiency, not cost arbitrage. Outsourcing is increasingly empowering insurers by integrating and transforming processes, tools, technology, as well as risk strategies. These are the major points of discussion we cover in this new HfS Research report, relating to global insurance BPO:
- Western Europe and North America make up for more than two-thirds of the insurance market. In terms of outsourcing, while North America is by far the most aggressive, there is now greater traction from the UK and continental European insurers.
- Primary insurers make up the majority of offshored business, followed by reinsurance companies and intermediaries.
- The selection of processes to offshore is extremely strategic, and depends on the comfort, confidence and outsourcing maturity of each insurer, and their orientation of core and non-core processes.
- At the outset, insurance companies were more open to outsourcing simple data entry processing, outbound sales, claims processing, billing and settlement, and policy servicing. Five years ago, the focus was to outsource task-based activities. Insurers are now viewing functional outsourcing as a viable option (e.g., entire claims administration process).
- India and the Philippines emerge as the strongest offshore destinations. India will continue to maintain the top spot for the next five to seven years. Certain services within the voice segment are slowly moving to the Philippines, but it is a small component of the growing volumes of offshore business that India is witnessing.
- Offshore BPO providers have evolved their insurance practices, and now possess strong domain expertise and technical know-how, coupled with great orientation toward foreign regulatory environments. This has encouraged stronger confidence among overseas clients, and in the last few years, major vendors have slowly moved up the value chain to address opportunities in customer support, underwriting, extensive analytics and actuarial support services.
- There is a cautious loosening of purse strings by the insurance carriers this year as they seek solutions which will help augment their top-line and improve their bottom-line as well. Providers are seeing a renewed vigor by insurers, to bring about business process efficiencies and seek greater return on investment from their already outsourced engagements.
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