Adopting a digital platform-first operating model is key to L&A insurers remaining agile, efficient, and customer-centric in the post-COVID-19 era
The Life & Annuities (L&A) insurance segment experienced a growth in premiums of 2.0% to 2.5% in 2019, but this is expected to drop to -3.5% to -1.5% through 2020 as a result of the COVID-19 crisis, according to Everest Group. However, long-term industry growth fundamentals remain robust amidst the COVID-19 turmoil, albeit with concerns on investment income shock, demand shock, and claims shock leading to near-term financial distress. As the coronavirus crisis abates, the L&A industry segment will invest in IT to drive cost efficiency and improve user experiences, contributing to a modest 0.9% compound annual growth rate (CAGR) of L&A IT outsourcing through 2022.
Everest Group projects that IT spending hotspots for L&A insurers in the future will include omnichannel digital solutions for customers, digital tools for agent enablement, shifting legacy applications to modern platforms, automation, analytics, Robotic Process Automation (RPA), and Application Programming Interface (API) solutions to integrate third-party services.
Everest Group advises L&A insurers to focus on the following IT priorities to ensure future success:
- Investing both in platforms to drive long-term cost transformation and in technology solutions such as automation, analytics, and cloud for improved process efficiency and compliance.
- Capturing the digital channels opportunity:
- – Improving the online research and shopping experience.
- – Balancing human and digital touchpoints in the sales journey.
- – Enabling agents/brokers with digital tools.
- Modernizing legacy platforms and IT infrastructure.
- Investing in analytics solutions for effective risk assessment to improve product pricing.
- Attracting enough young talent to build skills of the future and build domain understanding to replace an aging workforce.
“Above all, L&A insurers need to double down on user experience and efficiency, and that’s why adopting a modern platform-first operating model is crucial to the future success of the L&A insurer,” said Ronak Doshi, vice president at Everest Group. “Digital capability platforms support ecosystem interaction via microservices and APIs, enabling customized business processes, analytics solutions, and cross-selling and up-selling across multiple customer segments. L&A insurers can also reduce costs by carving out non-core operations in a Business-Processes-as-a-Service model. L&A insurers who explore these operating models now with an end-goal of becoming more agile, efficient and customer-centric will be best positioned to succeed in a post-COVID-19 world.”
These recommendations are discussed in more detail in Everest Group’s new report, “Life & Annuities (L&A) Insurance State of the Market 2020: Platform-first Model to Simplify and Rationalize Systems for Rapid Cost Take-out.“
In this report Everest Group offers a detailed analysis of the L&A insurance industry, analyzing the forces shaping the industry’s future, especially in the light of the COVID-19 pandemic. The report also highlights the implications for key insurance functions and recommends strategies for L&A insurers to thrive in the next normal.
***Visit Everest Group’s COVID-19 page for a Global Service Delivery tracker, recent reports, webinars, and more.***
Selected Highlights of L&A Insurance IT Outsourcing Market:
- Insurance IT services spend grew at a compound annual growth rate (CAGR) of 2.4% from 2017-2019, reaching a total of US$115.8 billion. The Global Business Services (GBS) portion was $66.8 billion, and the outsourcing IT services portion was $49 billion.
- The outsourcing IT services spend of $49 billion comprises $4.1 billion for the reinsurance segment, $24.2 billion for Property & Casualty insurance, and $20.7 billion for L&A insurance.
- Geographically, North America accounted for the largest portion of the IT services spend at $28.4 billion, followed by the United Kingdom with $6.4 billion, and Rest of Europe at $7.9 billion. Asia Pacific (APAC) is the region projected to experience the fastest growth in the future.
About Everest Group
Everest Group is a consulting and research firm focused on strategic IT, business services, engineering services, and sourcing. Our clients include leading global enterprises, service providers, and investors. Through our research-informed insights and deep experience, we guide clients in their journeys to achieve heightened operational and financial performance, accelerated value delivery, and high-impact business outcomes. Details and in-depth content are available at http://www.everestgrp.com/.