Top Application and Digital Services (ADS) in Property & Casualty (P&C) Insurance Services
In the last few years, the Property and Casualty (P&C) insurance industry has experienced numerous challenges due to the pandemic, regional geopolitical conflicts, and strained macroeconomic conditions. Today, to stay ahead of the competition and maintain business resilience and profitability, insurance carriers are partnering with providers to modernize their existing technology landscape and support evolving talent needs. Recognizing this opportunity, providers are investing in talent skilling initiatives, efficient business solutions, improved delivery capabilities in geopolitically stable regions, and digital transformation strategies to address carriers’ evolving business needs.
In this report, we assess the capabilities of 21 Application and Digital Services (ADS) providers and feature them on Everest Group’s ADS in P&C Insurance PEAK Matrix®. The study will enable buyers to choose the best-fit provider based on their sourcing considerations, while providers will be able to benchmark their performance against each other.
Assess 21 ADS providers in the P&C insurance market on Everest Group’s Products PEAK Matrix® evaluation framework
List the characteristics of Leaders, Major Contenders, and Aspirants in the P&C insurance ADS market
Examine the ADS providers’ offerings, along with their vision, product capabilities, adoption characteristics across geographies, case studies, partnerships, and investments
The PEAK Matrix® provides an objective, data-driven assessment of service and technology providers based on their overall capability and market impact across different global services markets, classifying them into three categories: Leaders, Major Contenders, and Aspirants.
Global Business Services (GBS) organizations have a big opportunity to champion Environment, Social, and Governance (ESG) in banking and financial services (BFS) institutions. To learn about six ways GBS organizations can help enterprises reach their ESG goals and unlock greater value, read on.
ESG is creating new opportunities for BFS Global Business Services organizations. Fast-evolving consumer awareness about social, political, and environmental values, emerging regulations, and increased demand for sustainable financial products are pressuring BFS firms to prioritize ESG goals in operations and employment.
Let’s explore the significant role GBS units can play in enabling ESG for enterprises.
ESG products and services emerge
To meet new customer and investor expectations along with regulatory mandates, BFS organizations are building ESG products and services – such as green loans, sustainability-linked loans, and carbon-neutral banking – to make their operations sustainable.
Capital market firms are embracing green underwriting, while asset and wealth managers are steadily moving toward ESG investing. These organizations are also focusing on workplace diversity, pay equity, and good governance structure to meet their ESG aspirations.
This has created a big opportunity for GBS organizations to move from being measured for their labor arbitrage and cost efficiency to the value they can deliver to enterprises. These units can become vital to the enterprise’s ESG agenda by expanding their sustainable service offerings and conducting ESG-specific due diligence and risk assessment. GBS centers’ strong visibility across the enterprise’s functions, operations, and capabilities to support their ESG initiatives will drive this new focus.
Six ways GBS organizations can support enterprise ESG goals and commitments
As BFS organizations increasingly look for ways to support and grow their businesses with an impact-driven mindset, GBS organizations should be at the forefront of defining and internalizing ESG goals.
The new environment has opened up many avenues for GBS organizations to maximize the value they can deliver and become ESG enablers for their enterprises. For a deep dive into the opportunities summarized below, please read our newly released research.
See how GBS organizations can promote ESG initiatives within the enterprise in the image below.
GBS organizations can enable the following key opportunities for BFS firms:
Enhance sustainable investing practices – Support enterprise banks by running/enhancing sustainable investment initiatives, such as portfolio optimization and expansion, and positive and negative screening of these portfolios
Develop new sustainable products – Identify feasible opportunities to expand the green product portfolio for their respective enterprises following the regulatory and competitive landscape
Proactive ESG risk monitoring – Build on their roles in supporting enterprises in managing various risk types such as liquidity, credit, and operational so GBS can be leveraged as specialist ESG risk management centers by enterprises
ESG performance tracking and reporting – Set up dedicated ESG performance reporting teams at GBS centers, which, in turn, will own the management and execution of ESG performance tracking and reporting tasks
ESG compliance reporting – Track ESG-specific regulatory developments across different countries where the enterprise has an operational footprint. Accordingly, it can assess the impact of newly introduced mandates or disclosures requirements on the enterprise’s existing compliance processes
Implement ESG commitments of the enterprise – Undertake sustainability initiatives to integrate the ESG goals of the enterprise across its own operations, people, and functions. For example, a leading US investment bank committed to incorporating sustainability-focused features such as energy-efficient lighting and minimized water consumption policies in its new technology base in Poland. Similarly, a major European bank’s GBS center has been working since 2009 on a Train Green Program aimed at creating sustainability awareness among school children
Call to action for BFS GBS leaders
As GBS organizations take on more strategic roles, it becomes imperative for them to step up and become ESG enablers for their enterprises. To do this, GBS leadership must champion the development of ESG-specific capabilities and prioritize initiatives to drive enterprises’ ESG agendas, while embedding ESG and sustainability practices into their service delivery and operations.
Open banking – a system that provides third-party access to financial data through application programming interfaces (APIs) – has unlocked digital financial innovation and disruption. Its next evolution – open finance – holds the promise to greatly enhance the customer experience and empower users of financial services. Read on for more on our latest open banking research.
A combination of government regulation and market forces has created a growing demand for open financial data to build an expanded provider ecosystem beyond banks and financial institutions to also include non-financial platforms, FinTechs, and payment facilitators.
According to the recent forecast by the Open Banking Implementation Entity (OBIE), more than 6 million individuals and businesses in the United Kingdom regularly use open banking services. Payment volumes on open banking-related services increased dramatically to around 21.1 million transactions over the six months through March 2022, compared to 6.1 million during the same period.
The first wave of open banking has given customers and third parties easy digital access to their financial data from banks and other traditional financial institutions. This has solved critical issues for customers by ensuring better account visibility and convenient payment access.
In the next stage of open finance, an individual’s entire financial footprint, such as mortgages, savings, pensions, insurance, and credit, can be opened up to trusted third-party APIs with consumer consent. Brazil is expected to move into this final stage of its four-part implementation of open banking by the end of the year.
Open finance offers the following key benefits:
Improved customer experience – By opening access to financial instruments, personal financing, and asset and wealth management, companies can create personalized products and services to meet customer needs
More inclusive – Open finance has addressed the critical need of making financial practices more accessible and provides simplified banking for a large portion of the unbanked population in growing geographies
Greater transparency – Open finance lifts the veil for customers on their financial options, giving them clearer insights into their full financial pictures
Customer empowerment – Banking customers are better informed to decide if their current providers or services are best for them, giving them greater financial freedom
Open banking research findings
Let’s take a look at how banks and financial institutions, FinTechs, small- and mid-sized businesses, and banking and financial services (BFS) providers will be impacted by this powerful trend:
Banks and financial institutions
Data architecture will need to be redesigned to help banks manage data securely, quickly, and efficiently. Firms will use an API-based microservices approach to make data more accessible, thereby enhancing digital agility.
For example, US Bank and Plaid announced a partnership in 2021 to connect the bank’s customers to third-party accounts. Plaid will provide the open APIs to initiate third-party payments between the bank and financial apps such as Robinhood and Venmo.
This approach also allows banks to leverage their data internally. Bankers and traders can access personalized front-end applications.
The potential to develop new API-led products with relative ease is another exciting benefit. New API products can create additional direct monetization streams and access to newer customer segments. This can lead to better customer lifetime value and predictably improve long-term profitability. Barclays, for instance, enabled account aggregation in their mobile banking app to allow customers to view other bank accounts within the same app.
FinTechs
Open banking has produced a space for FinTechs to innovate in a sector otherwise dominated by traditional banks. It has created countless opportunities for competition and collaboration. Some examples include:
Payment infrastructure provider Dapi and FinTech firm Afterbanks launched real-time account and data aggregation services via an API in Mexico in 2021
Prometeo, an open banking platform provider, launched its payment API for the Latin American market enabling efficient exchanges using API connectivity and providing a single access point to information and payments
As illustrated below, the FinTech ecosystem has morphed into three distinct categories: challengers (direct competitors that have built digital-only banks and financial institutions), collaborators (partners with traditional banks to leverage open APIs), and enablers (infrastructure and platform support providers):
Small- and mid-sized enterprises
Open banking creates efficient and seamless business processes for small- and mid-sized enterprises (SMEs) and can assist in effectively delivering accounting, payroll management, and auditing services. For example:
Mexican FinTech Kavak offers same-day application and loan approval to customers
Neobank Plurall launched its services in Columbia and focused on improving the financial inclusion of SMEs
BFS firms
Adoption of open banking poses some challenges for BFS firms that fall broadly under these categories, as illustrated below:
Change management and business alignment
As banks adopt a customer-centric approach and align their business strategies with customer engagement, they will need to expand their offerings to position themselves as end-to-end customer experience enablers
Banks must widely market their own APIs to developers for wider adoption across various open banking platforms being built
Extending offerings beyond the regulatory mandate
Enterprises should not limit their open banking capabilities to what is mandated by regulators but venture beyond to gain a competitive advantage. They should offer more APIs and undertake integration with new sales channels
Data security and privacy should take center stage in all branding efforts to earn consumers’ confidence
Augmenting the value proposition
Banks must focus on giving customers greater control over their data and enhancing the customer experience by providing more convenient payment methods, account aggregation services, and tailored product offerings as incentives to adopt open banking
Managing the shortage of trained talent
Access to the required skills for scaled open banking adoption is hampered by a demand-supply gap that requires BFS enterprises to pay a heavy premium for talent
Financial institutions must focus on workforce hiring, training, and revamping to equip their employees to contribute to the digital metamorphosis powered by open banking
To learn more about our open banking research and discuss your experiences in these emerging areas, contact [email protected], and [email protected]. Follow our webinars and blogs to learn more about upcoming technologies and trends.
With increased cyber attacks and data breaches post-pandemic, cyber insurance to protect against the rising digital threats is growing in demand. Cyber insurers can benefit by partnering with service providers to seize opportunities for growth and profitability in this fast-growing market. Read on to learn how.
Cybersecurity continues to be a top priority for enterprises across all industries, primarily driven by increased cyber attacks and data breaches in the wake of COVID-19. Enterprises are increasingly strengthening firm-wide cyber defenses and turning to cyber insurance as a mitigating measure to counter the rising threats in today’s increasingly digitized world.
In particular, the pandemic has accelerated the severity, frequency, and complexity of ransomware attacks. Data from the US Treasury Department’s Financial Crimes Enforcement Network (FinCEN) suggests the total value of suspicious activity reported in ransomware-related incidents during the first six months of 2021 was US$590 million, more than the US$416 million reported for all of 2020. The frequency has also gone up, with 658 ransomware-related suspicious incidents being reported during the first six months of 2021, representing a 30% increase from the total reports filed for 2020.
Costs associated with cyber attacks also are rising. According to the IBM Cost of a Data Breach Report, the average data breach costs rose from US$3.86 million to US$4.24 million in 2021.
All of these factors have led to a substantial increase in cyber insurance pricing across the world. An analysis by Marsh shows US cyber insurance pricing increased 96% year-over-year during the third quarter of 2021, which also represented a 40 percentage point increase from the second quarter of the year.
Image 1: US insurance market pricing change – overall commercial vs cyber insurance segments
US cyber insurance market provides significant growth opportunities
Direct premiums for US-domiciled insurers stood at US$2.75 billion in 2020 – less than 1% of the overall direct written premium in the US property and casualty (P&C) insurance market – reflecting the runaway growth in cyber insurance. This segment has also grown at a decent pace over the last five years, registering a compound annual growth rate (CAGR) of 13.3% during that period.
Standalone cyber insurance policies are gaining prominence and have seen faster adoption than packaged policies sold as add-ons to other insurance products/policies. This can be attributed to enterprises’ need for broader coverage and a better understanding of policy terms and costs.
While most carriers have mainly serviced corporate clients, they are now starting to focus on the retail segment by providing standalone cyber insurance products that have typically been sold as add-ons to homeowners insurance. For example, Chubb recently launched Blink, a new personal cyber protection offering that covers expenses related to identity theft, fraudulent wire transfer, cyberbullying, and ransomware extortion.
Insurers are also offering joint go-to-market (GTM) products to provide comprehensive cyber risk management solutions to enterprises. In 2021, Allianz and Munich Re partnered with Google Cloud to launch a solution for Google Cloud customers that combines the risk-transfer expertise of Allianz and Munich Re with Google’s security capabilities to provide clients tailored coverage.
Advent of insurtechs in the cyber insurance market segment
The insurtech space has recently witnessed increased activity where most newcomers are catering to specific segments like small to medium enterprises. Insurtechs are leveraging their tech capabilities to make the underwriting process more streamlined and automated while incumbents continue to face legacy issues.
However, insurtechs lack the capital resources of their traditional counterparts and hence are forming alliances with traditional insurers to combine their respective capabilities. Some insurtechs are also offering coverage on behalf of incumbents through the Managing General Agent (MGA) model.
Cowbell Cyber, a full-stack insurer providing cyber coverage to SMEs, raised US$100 million this March to expand its go-to-market channels and increase investments in data science, underwriting, risk engineering, and claims management
At-Bay, a cyber insurtech MGA, announced a partnership in September 2021 with Microsoft to offer data-driven cyber insurance coverage to Microsoft 365 customers
Challenges for insurers in a hardening cyber market
While cyber insurers have experienced significant top-line growth, profitability remains a major concern as payouts have outstripped premium growth. The increased payouts have led to higher loss ratios. The loss ratio for US cyber insurers increased from a 42% average during 2015-19 to 73% by 2020. Insurers are responding by narrowing the cyber coverage scope and limiting cyber capacity. They also are imposing sublimits for ransomware coverage and adding coinsurance requirements to cyber policies.
How can cyber insurers benefit from BPS partnerships?
Partnering with Business Process Services (BPS) providers can help cyber insurers in the following ways:
Providing underwriting talent: As the adoption of cyber insurance grows, it will also lead to higher volumes for carriers. Service providers can provide support by standardizing parts of the underwriting process to enable carriers to handle increased work volumes. This can include deploying straight-through processing by standardizing the intake process and applying rule-based engines for low-premium policies to free up time for underwriters to focus on larger policies. They can also take over non-core pre- and post-underwriting work and help create scalable Centers of Excellence (CoEs) at profitable locations.
Enabling technology: As carriers tighten their underwriting requirements with an increased focus on analyzing enterprises’ history of ransomware incidents and cyber breaches, they will heavily rely on third-party tools and public data sources to evaluate the insureds’ level of risk. This provides an opportunity for service providers to work with carriers to provide such tools and applications to help them assess risks associated with a particular firm.
Ensuring compliance: Amid the ever-evolving cyber threat landscape, governments and regulators across the globe are introducing new cybersecurity-focused legislation. The US Congress passed a new cybersecurity law in March mandating critical infrastructure entities to report cybersecurity incidents and ransomware payments to the relevant authority within 72 and 24 hours, respectively. Service providers can support carriers on various compliance-related matters. While some providers have compliance-specific expertise in licensing and filings, others have dedicated teams for compliance review and obligations. Third-party BPS providers can leverage these resources and work with carriers to ensure compliance.
Partnerships critical to the cyber insurance market’s future
As carriers seek growth in the cyber insurance market, they will need to strike the right balance to also achieve profitability. At the same time, service providers will have to keep up with the evolving market and appropriately build their cyber capabilities.
By working together, carriers and service providers can address some of the current market challenges and capitalize on the opportunities in the cyber insurance space to achieve sustainable growth.
