InsurTech Trailblazers: Underwriting | Market Insights™
June 8, 2017
InsurTech Trailblazers: Underwriting
InsurTech Trailblazers: Underwriting
InsurTech Trailblazers: Sales & Distribution Channel Management
InsurTech Trailblazers: Product Development
From an initial list of 100+ startups, Everest Group narrowed the field to 40 firms based on their ability to address insurers’ specific business priorities across value chain tenets
Insurers are facing a triple mandate “grow, optimize, and defend” in order to generate sustained value for all stakeholders. Many are turning to technology to help them meet these goals.
Some issues never seem to go away, including business users’ demands for IT departments delivering against business needs — and doing it quickly to gain or sustain a competitive advantage. Legacy infrastructure and processes make it difficult to achieve. It reminds me of a friend’s dachshund who incurred a slipped disc. The back of a dachshund, of course, is elongated. She could no longer jump or sprint, and when trying to walk straight, the front half of her body went straight forward, but the back half awkwardly took a more roundabout swerve to the left. IT departments still organized in a traditional, function-based construct are like the injured dachshund — unable to move quickly and straight to address business needs and having to swerve and do workarounds for new technologies. Read more at Peter’s CIO online blog.
Market uncertainty reduced insurance ITO new deal activity by 30 percent in 2015, but demand for digital technologies is expected to increase by 15-20 percent going forward.
The number of new application outsourcing (AO) deals in the insurance sector have fallen precipitously for two straight years, with year-on-year losses of 14 percent and 30 percent in 2014 and 2015 respectively. The total contract value (TCV) of large deals fell in 2015 to $820 million, the lowest level since 2011, according to Everest Group, a consulting and research firm focused on strategic IT, business services and sourcing.
But the demand for digital will turn the tide. Everest Group predicts that demand for digital technologies will increase by 15-20 percent as insurers look to address the evolving customer needs for digital experiences, and this demand will reenergize a long-stagnated insurance ITO market.
“Over 90 percent of insurers agree that adoption of digital technologies is a priority as they seek to grow, optimize and defend their business,” said Jimit Arora, partner and leader of the IT Services research practice at Everest Group. “Digital technology is vital to understanding customer data, improving customer engagement and loyalty, and launching products and services faster than the competition. Unfortunately, 90 percent of insurers also cite significant restraints to digital adoption such as limited budgets, security concerns and a lack of organizational preparedness. The impetus to overcome these constraints will only become stronger as insurers face a ‘disrupt or be disrupted’ ultimatum in the marketplace.”
These findings and more are explored in Everest Group’s recently published report, “IT Outsourcing in Insurance – Annual Report 2016: Disrupt or be Disrupted.” The report analyzes the current market trends and their implications for application services outsourcing in the global insurance sector. Topics include industry challenges, key investment themes, market dynamics and the outlook for 2017.
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Other key findings:
CCO investments in technology and staffing are centered on the growing customer need for an integrated digital experience.
Technology is the leading investment theme in the contact center outsourcing (CCO) industry, followed by scale. Enabler technologies accounted for about three-fourths of the reported investments in 2014-2015, with analytics, automation, and multi-channel tools being the major areas of investments, according to new research from Everest Group, a consulting and research firm focused on strategic IT, business services, and sourcing.
“Contact centers across the world are moving into the digital era with a focus on enhanced customer experience in a multi-channel environment,” said Katrina Menzigian, vice president at Everest Group. “Service providers are responding by shifting their value proposition from the traditional, FTE-based focus on cost containment and implementation to an emphasis on providing insights and innovation to enhance the customer experience.”
Another aspect of the CCO market marking a notable increase in 2015 was onshoring activity, as buyers increased their focus on improving service quality and demonstrated a preference for agents located close to customers. In 2015, the percentage of CCO contracts with significant onshore delivery rose to 53 percent, as compared to 35 percent in 2010 and 49 percent in 2013. This trend also has led to the growth in adoption of a work-at-home agents model, which incurs lower operational costs than onshore full-time-equivalents (FTEs).
Otherwise, movements in the market were modest in scale. Experiencing a period of transition, the global CCO market grew at a rate of 4 percent in 2015 to reach US$75-78 billion. The global contact center spend stands at US$300-320 billion, of which third-party outsourcing accounts for approximately 25 percent.
These findings and more are discussed in “Contact Center Outsourcing Annual Report 2016: The Rise of Digital Contact Centers – Clear Evidence that Real Change is Underway.”
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Adoption of digital is creating a new pecking order of technology savvy life sciences firms led by Astra Zeneca, Johnson & Johnson, Novartis, Pfizer, Roche and Sanofi.
Fewer than 15 percent of all life sciences transactions signed in 2015 had an element of digital services in their scope; nevertheless, digital technologies are the pivotal driver for life sciences companies as they restructure to become leaner and pursue agility in operations to drive new product development, according to Everest Group, a consulting and research firm focused on strategic IT, business services and sourcing.
To illustrate this point, Everest Group profiled 15 global pharmaceutical companies regarding their digital functionality and business impact. In “Life Sciences IT Industry: An Assessment of the Market Opportunity and APEX MatrixAssessment,” Everest Group identifies Astra Zeneca, Johnson & Johnson, Novartis, Pfizer, Roche, and Sanofi as industry leaders.
This new research from Everest Group indicates that the key market trends driving digital adoption include the rising number of “born digital” healthcare consumers, the need for operational efficiencies and cost optimization, and the movement towards data-driven, personalized, evidence-based medicine.
The life sciences industry’s data-rich environment (including scientific, clinical and operational data) coupled with its many market challenges make analytics a key lever to provide real-time, actionable insights and improve operational efficiency. Analytics presents value in three key areas for life sciences organizations: cost reduction, top-line growth, and risk and compliance management.
Driven by the focus on analytics and infrastructure services, recent life sciences ITO deals focus on datacenter, end-user computing, and databases/middleware services, as well as application, development and maintenance (ADM) and enterprise resource planning (ERP).
“Most of the 2015 IT outsourcing contracts in the life sciences that did include digital services, did so as an add on to existing contracts, with a focus on remodeling existing ADM agreements,” said Jimit Arora, partner at Everest Group. “Digitally native contracts in life sciences are still a rarity, but we will see an increase in these contracts in the future. In fact, the adoption of digital is creating a new pecking order of technology savvy firms, with those that successfully use digital technology to both drive internal operations and customer-focused channels—i.e., digital for efficiency and digital for growth—leading the way.”
Other key findings:
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