Although 60% of insurers believe customer experience delivery would have the highest impact on competitive positioning, many don’t pursue progressive CX or other digital strategies because they are shackled by legacy IT infrastructure
Although 60% of insurers believe improving customer experience (CX) would have the highest impact on their competitive positioning, many don’t pursue progressive CX strategies because they are shackled by legacy IT infrastructure. According to Everest Group, the solution to this dilemma is clear: To enable core modernization and subsequent digital transformation, life and pensions (L&P) insurers should establish strategic business process as a service (BPaaS) partnerships with third-party IT and business process service providers.
“L&P insurers know that to remain competitive they need to evolve to customer demands, especially to the demands of the millennial segment, but they are stymied by legacy infrastructure that restricts their ability to innovate and modernize,” said Skand Bhargava, practice director, Business Process Services, at Everest Group.
“It’s no wonder insurers are slow to modernize: revamping infrastructure is expensive, time consuming for overstretched internal resources, disruptive to business continuity, and sometimes a stretch for in-house talent. Plus, unfortunately, many decision makers place undo consideration on sunk costs,” explained Bhargava. “An insurer’s best path forward is to partner with BPaaS providers to free themselves from the burden of legacy without capital-intensive investments. Service providers can fill the gap and help establish the business case for adopting modernization efforts.”
Many leading insurers are beginning to see the advantages of the BPaaS approach. The L&P insurance sourcing market in 2018 reached US$2.6 billion, with 44% represented by BPaaS engagements. The compound annual growth rate of the L&P insurance BPaaS market from 2015 to 2018 was 12-14%.
These findings are discussed in more detail in “Life and Pensions (L&P) Insurance BPO Annual Report 2020: Escape Legacy and Embrace Digital through BPaaS.” This report deep dives into the looming need for modernizing legacy architectures in the Life and Pensions (L&P) insurance industry and its relevance for the industry’s overall digital transformation. Further, it puts forward the case for BPaaS in L&P insurance and how digitalization can make a significant impact through platform modernization efforts.
In the report, Everest Group cites numerous examples of L&P insurers who successfully tapped third-party partners for core modernization initiatives in the past few years:
- DXC partnered with Metlife to take over the administration of seven million closed block policies onto its platform and streamline customer service (2016).
- TCS partnered with M&G Prudential to migrate 5.8 million policies from insurer’s multiple legacy systems and consolidate those on its BaNCS platform (2018).
- TCS partnered with Transamerica to convert insurer’s policies from legacy platforms to its proprietary platform to help accelerate digitalization of policy administration (2018).
- DXC partnered with Brighthouse Financial to support the transition of the latter’s 1.3 million in-force policies from multiple legacy systems onto a more consolidated IT infrastructure (2018).
- Atos extended its previous partnership with Aegon to migrate and administer the insurer’s 1.4 million closed block policies on a modern platform. While Atos does not own a policy administration platform, it partnered with Sapiens for the latter’s technology (2018).
- Infosys partnered with Pan-American Life Insurance Group to provide administration services for the insurer’s new Indexed Universal Life product on its VPAS platform (2019).
- SE2 partnered with Nassau Financial Group to convert and administer policies on its digital platform (2019).
Everest Group also stresses that BPaaS forms a foundation for future scaling of digital transformation efforts. “The ultimate goal of BPaaS investments should be to create a connected digital ecosystem on top of a modern, unified platform architecture in order to drive stakeholder experience,” said Bhargava. “By leveraging BPaaS to shift away from legacy systems and siloed units of operation, insurers can take build a platform that enables them to implement the digital technologies that are going to be critical to drive the next level of impact.”
About Everest Group
Everest Group is a consulting and research firm focused on strategic IT, business services, engineering services, and sourcing. We are trusted advisors to senior executives of leading enterprises, providers, and investors. Our firm helps clients improve operational and financial performance through a hands-on process that supports them in making well-informed decisions that deliver high-impact results and achieve sustained value. Our insight and guidance empowers clients to improve organizational efficiency, effectiveness, agility and responsiveness. What sets Everest Group apart is the integration of deep sourcing knowledge, problem-solving skills and original research. Details and in-depth content are available at http://www.everestgrp.com.