Insurers are reorienting their IT operating models to reduce costs and unlock efficiencies and also weaponizing technology to simplify and improve consumer experience; however, digital talent is in short supply
The coronavirus pandemic has dealt a hard blow to the insurance industry, and the economic outlook for the near term is still uncertain. In addition to facing revenue and profitability declines, insurers must now deliver compelling online experiences to sustain and grow their customer base. According to Everest Group, IT investment maturity is playing a crucial role in insurers’ recovery strategies, particularly as they battle to reduce costs and digitally innovate at the same time.
First, to achieve cost savings and resiliency, insurers are taking a defensive stance, reevaluating key levers of their IT operating model. Everest Group has identified the five most prominent approaches insurers are using:
- Selling non-core technology assets
- Increasing IT outsourcing
- Balancing offshoring levels
- Consolidating the IT supplier portfolio
- Scaling agile methodologies across the organization
Secondly, to create competitive advantage and gain market share, insurers are seeking digital innovation from their internal IT teams and their sourcing providers. Adoption of cloud, platforms, and digital solutions may enable recovery and future success; however, the workforce to guide those efforts is in short supply. Everest Group research indicates the unmet demand for digital talent is as high as 25%.
“The digital talent gap is a significant challenge in the insurance industry,” said Ronak Doshi, vice president, Information Technology Services, at Everest Group. “Twenty-eight percent of the workforce in the insurance industry is nearing retirement, taking with them valuable institutional knowledge that can be lost if not passed along to younger employees. But only 4% of millennials are interested in working in insurance technology roles because of the negative perception they have about the industry being slow to adopt technology and having an antiquated culture. To attract the type of digital talent needed to build a more profitable future, insurers must make themselves appealing by offering disruptive work, robust training, attractive employee propositions, and agile and collaborate ways of working.”
Everest Group examines each of these areas in more detail in its recently published report, “Insurance IT Services – State of the Market 2021: Future-readying Insurance Business Through Continuous Digital Unraveling.”
Summary of Key Findings:
- The quest for cost transformation and resiliency continues for insurance enterprises as the coronavirus pandemic slowly abates, prompting insurers to trim their technology asset portfolio and focus on strategic competencies.
- Insurance enterprises are reevaluating their entire IT operating model and sourcing strategy to drive higher outsourcing activity, finely balance their sourcing location footprint, and consolidate their IT supplier portfolio.
- While adopting Agile principles and a customer-first culture remains a key priority for insurers, the focus is now shifting to scaled Agile developments across insurance enterprises and digitizing their IT operating model.
- Insurance enterprises are staying away from touching their core systems and are instead investing in optimizing service interactions to transform experience management. The focus for insurers is moving from continuous modernization to continuous simplification.
- Insurers are weaponizing technology to drive growth and differentiation. Investments in composable technology platforms, value chain-specific solutions, and nurturing digital talent are the top insurer priorities in the near term.
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/