Cost-savings, customer experience, and opportunity to steer top-line growth drive L&P insurers’ demand for next-gen technology, InsurTech partnerships
The global life and pensions (L&P) insurance business process outsourcing (BPO) market grew at an 8 percent compound annual growth rate in 2016, similar to 2015. Growth is expected to be at 9 to 11 percent over the next few years, according to Everest Group. This steady growth rate is buoyed by margin pressures on insurers who continue to find offshoring attractive for cost savings and is simultaneously dampened by the continuing political uncertainties in the United Kingdom, which leads the market and accounts for almost half of the global revenue.
Although the growth rate is steady, the L&P insurance BPO market is witnessing numerous changes:
- Customers’ expectations are changing, and demand for omni-channel customer experience is rising.
- Buyers are looking for end-to-end partnerships for faster time-to-market and enhancing customer servicing.
- There are constant regulatory shifts, and thus services such as regulatory reporting and risk management are more in demand.
- Outsourcing is increasingly being viewed not only as a cost-saving opportunity but also as a source of business transformation.
- The market is seeing an increasing emphasis on more complex and judgment-intensive work, such as analytics, risk management, actuarial and regulatory reporting.
- Robotic Process Automation (RPA) has raised the potential for cost savings and efficiency and is steadily gaining traction in the industry.
- Innovation is also being seen in pricing, with traditional pricing models such as FTE-based and fixed-fee models being gradually replaced by outcome-based pricing models.
“In the advanced insurance markets, premium growth has been stagnant but costs are rising, which puts considerable margin pressures on insurers. Further, for top-line revenue expansion insurers must now cater to the evolving needs of their customer base,” said Skand Bhargava, practice director, Business Process Services, at Everest Group. “In fact, the key value propositions for major service providers in 2016 were based on modern platform offerings and augmented customer service delivery capabilities. In 2018, we’ll see insurers bringing in more product innovations, leveraging partnerships with InsurTech firms.”
These findings are explored in a recently published Everest Group report: “L&P Insurance BPO: Move or Miss—Innovation, Execution and Adoption of Digital Insurance.”
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.
***Download a complimentary, 11-page abstract of the report here.**
Other key findings in the report:
- The market continues to be primarily concentrated in North America and the United Kingdom. While the United Kingdom accounts for a lion’s share of the market, growth is primarily being driven by North America.
- Uncertainty around regulatory regimes continues to persist, and insurers will need to invest in flexible systems to ensure compliance and reporting.
- Discussions around the relevance of next-generation technologies—AI, Blockchain, and IoT—in L&P insurance have intensified, and some implementations have also been initiated by insurers in partnerships with InsurTechs and technology providers.
- Service providers are simultaneously strengthening capabilities around value-added services—such as RPA, digitalization, analytics, risk management, and regulatory reporting—via organic and inorganic routes.