‘Outsourcing is one of the most effective options L&P insurers are pursuing to make their operations cost effective.’
The global life and pensions (L&P) insurance business process outsourcing (BPO) market will grow at 10-12 percent in the next few years, reaching US$2.3 billion by 2017, according to Everest Group, a consulting and research firm focused on strategic IT, business services and sourcing. As political environments in the US and United Kingdom stabilize, new contract signings are expected to experience revival. Also, contracts worth approximately US$450 million will be up for renewal over the next three years.
Amid political uncertainties in the United States (due to the presidential election) and the United Kingdom (due to Brexit), the year 2015 witnessed a lower number of new contract signings compared to 2014; nevertheless, the market continued to expand steadily, driven by scope expansion of existing contracts.
In the future, evolving buyer demands will shape the market as buyers seek more efficient operations—both for cost control and compliance reasons—and more sophisticated digital services for consumers. In response, service providers will differentiate themselves by offering efficient platforms for policy administration, strengthening capabilities around digital customer acquisition, and leveraging robotic process automation (RPA). (Everest Group reports that RPA can yield incremental cost reduction that can range anywhere from 15 percent for offshore operations to as high as 45 percent for onshore operations.)
“Outsourcing is one of the most effective options L&P insurers are pursuing to make their operations cost effective,” said Skand Bhargava, practice director, Business Process Services, at Everest Group. “Outsourcing also helps insurers strengthen their presence in the digital space in order to meet the demands of the modern-day consumer.
“Buyers are looking for one-stop solutions, so service providers with the capabilities to offer end-to-end coverage of the value chain will gain momentum. In addition, buyers are looking beyond just the bottom-line impact and are focusing on top-line performance. Service providers that can help buyers improve their top-line and act as business-transformation partners will remain differentiated in the market.”
These results and other findings are explored in a recently published Everest Group report: “L&P Insurance BPO – Annual Report 2016: Breaking New Grounds.”
This research examines the global non-voice, third-party L&P insurance BPO market. It provides detailed analysis of market size and growth, solution characteristics, emerging trends and the service provider landscape.
Other key findings in the report:
- North America and the United Kingdom continue to be key geographies in the L&P insurance BPO market, with the majority of growth coming from the North American region.
- Increasing adoption of automation, along with higher adoption of platform-based solutions within L&P insurance contracts, is reducing the FTE-intensive play in rule-based processes such as policy servicing.
- Providers are strengthening capabilities around value-added services such as RPA, digitalization and analytics via organic and inorganic routes.
- Regulators across the globe have been enacting a spate of laws, thereby causing a massive upheaval in the insurance sector. Insurance companies need help in setting up the systems required to support compliance with these regulations, which creates an opportunity for insurance BPO providers.
- Adoption of outsourcing continues to increase among small- and mid-sized buyers, driven by two key reasons: (1) small- and mid-sized buyers typically lack technology platforms for L&P insurance operations, and (2) small- and mid-sized buyers seek cost-effective solutions for running operations in order to remain competitive in the market.
- Small- and mid-sized buyers now account for more than half of the contractual activity in the L&P insurance BPO market, both by the number of contract signed and by the average contract value (ACV) of signed contracts.
- Policy servicing and reporting continues to account for the bulk of processes managed by service providers. Claims process remains the second most dominant portion.