Digital transformation in claims processing is becoming increasingly mission-critical for P&C insurers — so much so, in fact, that it may no longer be optional. By digitizing the claims process, insurers can offer a superior customer experience that allows them to stay competitive in today’s digital-first world.
Research from Everest Group shows that approximately 35% of P&C insurers’ priorities across claims management are focused on enhancing the customer experience. Read what Vanshika Notani, Senior Analyst, Insurance Technology Services, and Aaditya Jain, VP, BFSI Technology Services say about the increasing customer demean and the need to create a better customer experience through digital tools.
The insurance industry has been relatively slow in adopting digital measures due to regulatory constraints and product complexities. However, carriers are embracing the change to become risk mitigators. With the exponential rise in claims costs and unprecedented levels of underwriting losses during these challenging times, the need for value maximization, resource optimization, and achieving agility and scalability has become increasingly urgent.
In the past, insurers have embraced cloud technology as one of the prominent technologies. They are aware of the cloud’s potential, which has prompted them to strategize and build new business models that can withstand an unpredictable future. As insurers embark on their next growth phase, the cloud industry is expected to drive cloud spending to future-proof the technology estate, monetize data to generate alternate revenue streams, and rethink value delivery to end customers.
In this report, we assess 35 IT service providers for their cloud services capabilities featured on the Cloud Services in Insurance PEAK Matrix® Assessment 2023. 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.
In this report, we:
Assess 35 leading cloud services providers for the insurance industry using Everest Group’s Solutions PEAK Matrix® evaluation framework
Examine the market impact and vision and capabilities of the cloud services providers for insurance enterprises
Identify and categorize providers as Leaders, Major Contenders, and Aspirantsr
Study providers’ key strengths and limitations
Scope
Industry: insurance
Geography: global
The assessment is based on Everest Group’s annual RFI process for calendar year 2023, interactions with leading cloud services providers, client reference checks, and an ongoing analysis of the cloud services market
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.
Enterprises have been increasingly turning to P&C insurance BPS providers during the recession to address elevated operating costs resulting from heightened inflation, which has led to increased claims expenses and rate adjustments for various P&C products. Cost reduction has once again become the foremost reason for outsourcing, along with the pursuit of operational efficiency to achieve improved business results. Additionally, there have also been delays in decision making from key enterprise leaders for handing out transformational projects.
Nevertheless, P&C insurance BPS providers are actively seeking opportunities for expansion by enhancing their capabilities in less frequently outsourced areas such as underwriting, actuarial analysis, and claims processing, all of which represent substantial cost centers for enterprises. Additionally, they are presenting transformational initiatives to initial adopters of outsourcing who have yet to fully realize the advantages of partnering with BPS providers to boost efficiency and cut costs, enabling them to sustain and improve growth in a challenging environment.
In this report, we assess 21 P&C insurance Business Process Services (BPS) providers and position them on Everest Group’s PEAK Matrix® framework as Leaders, Major Contenders, and Aspirants. Each provider profile provides a comprehensive picture of its vision, delivery capabilities, market success, and key strengths and limitations. The report also examines the global P&C insurance BPS market and its provider landscape. The study will assist key stakeholders, such as insurance enterprises, service providers, and technology providers, to understand the current state of the P&C insurance BPS market.
This report features 21 P&C service provider profiles, and includes:
Providers’ relative positioning on Everest Group’s PEAK Matrix® for P&C insurance BPS
Providers’ market impact
The evaluation of providers’ vision and capabilities across key dimensions
Scope:
Industry: P&C insurance BPS
Geography: global
In this report, we only cover vertical-specific P&C operations and have omitted horizontal business processes, such as Finance and Accounting (F&A), Human Resources (HR), procurement, and contact center
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.
Facing headwinds in most verticals like BFSI, tech, and telecom, two of the country’s top IT firms recently signed deals in agribusiness, thus diversifying their revenue stream.
Peter Bendor-Samuel, CEO at Everest Group, said that the uncertainty and increased geopolitical risk is influencing agribusiness companies in much the same way that COVID exposed the weakness in legacy systems and people-driven process.
Embracing sustainability in the insurance industry is not just a choice, but a necessity for a resilient future. By integrating Environmental, Social, and Governance considerations into their practices, insurers can mitigate risks and foster long-term value for customers, shareholders, and the planet.
Sustainability has been a pivotal issue for years, but the recent conditions induced by the storm of the COVID-19 pandemic’s economic effects and the escalating climate change impacts across the world have increased pressure on industries across the globe to be aware of their Environmental, Social, and Governance (ESG) footprint. The financial services sector has not been behind in the race to drive the global sustainability agenda, largely driven by the BFS industry in the past. However, over the past few years, the insurance industry, being a key player in this sector, has also recognized the importance and urgency of embracing various practices in its operations to contribute to a sustainable planet. By integrating sustainability into various aspects of their operations, insurers are not only mitigating risks associated with climate change and environmental degradation but also fostering long-term resilience and contributing to a more sustainable future. This blog will explore how the insurance industry is driving the sustainable change through technological investments, product innovation, business processes, and disclosures.
With the increasing pressure from regulatory authorities, customers, employees, shareholders, and other market participants, insurance enterprises are striving to incorporate various aspects of sustainability into their business. Insurance firms are embracing sustainable change in a variety of ways, including through their investments, underwriting choices, and the structure of their insurance products, as well as using their own office buildings and making the vehicle fleet available to executives and staff. By integrating ESG considerations into their risk management, product design, internal operations, long-term strategies, and workforce management, many insurance firms have already started their journey toward becoming purpose-driven organizations and have begun to integrate sustainability with their core businesses.
Exhibit 1: A look at various internal and external ways to incorporate sustainability
Incorporating sustainability in workforce management and internal processes has been the first step in creating sustainable change for most insurance enterprises. However, with the high awareness and responsibility in the play, insurers are now also increasingly moving toward adding sustainable insurance products in their catalog that address environmental and social challenges to become champions in the maturity continuum [Exhibit 2]. For instance, insurers offer green insurance policies at lower premium rates to incentivize environmentally friendly practices and offer coverage for renewable energy installations, energy-efficient buildings, and sustainable agriculture. Similarly, parametric insurance products provide rapid and efficient payouts in the event of natural disasters, helping communities recover faster and build resilience against climate change impacts. These innovative products not only protect clients against risks but also encourage sustainable change behaviors and contribute to a greener future.
Another impactful way in which insurers can increase their top line while promoting sustainability is by incorporating sustainability criteria into their investment policies, divesting from environmentally harmful industries, and investing in renewable energy projects. These actions not only align with the insurers’ values but also offer potential financial returns while mitigating climate-related risks.
Exhibit 2: Sustainability maturity continuum for insurance enterprises
Insurers need to prepare for sustainable change with the right technology and data architecture to achieve their sustainability goals, maintain transparency, and stay ahead of the regulatory disclosures requirements.
Insurers have been leveraging consulting partners to help them define their roadmap and strategies to achieve their sustainable agenda. But one of the biggest challenge insurers face in this pursuit is the lack of robust data architecture to provide an understanding of the current ESG footprint, such as carbon emissions, energy consumption, energy mix, and employee well-being. As more insurer enterprises move toward becoming sustainability champions and provide transparency and disclosures to the regulatory bodies and other stakeholders, there will be increased opportunity for data and analytics providers to partner with the insurers to help them align their insurance portfolios with sustainability goals and manage ESG-related risks.
Additionally, collaboration with technology and IT service providers can help insurers build new products and solutions by leveraging cutting-edge technologies such as data analytics, AI, cloud computing, AR/VR, and blockchain that can boost the sustainability agenda along with unlocking fresh opportunities for generating revenue. Moreover, using technologies such as green/sustainable cloud to minimize operating expenses and carbon footprint while optimizing energy demand, predictive/prescriptive maintenance of equipment using IoT to limit energy and materials waste, and processing claims efficiently and sustainably by uploading photos and videos of damage through an AR/VR interface are some of the ways insurers can leverage technology to achieving their internal sustainability initiatives as well.
Exhibit 3: Utilizing cutting-edge technology to drive sustainable change
The insurance industry has recognized the urgent need to embrace sustainability and is taking significant steps to drive positive change. By integrating sustainability into investments, leveraging technological innovation, offering sustainable products, adopting environmentally responsible business processes, and promoting transparency through disclosures, insurers are playing a crucial role in addressing global sustainability challenges. As the industry continues to evolve, the integration of sustainability practices will become even more critical, enabling insurers to manage risks effectively, foster resilience, and contribute to a more sustainable future for all.
The State of Insurance GBS: Igniting Innovation, Expanding Scope, and Driving Talent Strategy
June 15, 2023 |
8:30 AM EDT | 6 PM IST
Today’s insurance GBS organizations have become strategic partners for enterprises. Are you fully aware of the exceptional opportunity for insurance GBS organizations to deepen core capabilities, add new work to scope, and accelerate transformation initiatives, all while elevating their position as valuable solution partners?
Join this virtual roundtable discussion to participate in conversations with our expert analysts and your peers to develop a deeper understanding of insurance GBS organizations’ future priorities, opportunities, and strategies to drive more value for enterprises.
We’ll explore the insurance GBS outlook on:
Services scope expansion
Role elevation
Role in performance management
Talent and location strategy
Transformation
Who should attend?
GBS leaders
GBS strategy leaders
GBS site leaders
Virtual Roundtable Guidelines
The only price of admission is participation. Attendees should be prepared to share their experiences and be willing to engage in discourse.
Participation is limited to enterprise leaders (no service providers). Everest Group will approve each attendance request to ensure an appropriate group size and mix of participants. The sessions are 90 minutes in duration and include introductions, a short presentation, and a facilitated discussion.
Readily available capital and low-interest rates made the past few years ideal for the insurance brokerage industry to consolidate in response to increased competition, changing customer expectations, and other challenges. Merged insurance intermediaries can partner with business process service (BPS) providers to optimize processes, manage risks, enhance data analytics, and improve customer experience, among other benefits. Read on to learn more.
The insurance brokerage industry went through an inflection point last year. A confluence of factors happening simultaneously created a perfect recipe for consolidation. These included large quantities of readily available capital, low-interest rates, highly valued broker stocks, all-time high valuation multiples, and the challenging insurance market.
The deal frenzy of 2021 slowed towards the end of 2022, with less than $2 billion of deal value announced and no large transactions in the last six months of the year. Despite this, insurance brokerage transactions trumped the activity. More than 90% of the overall insurance deals were in the brokerage space. In terms of both the volume of transactions and the multiples being paid, the consolidation rate in the re/insurance broker industry has accelerated.
Let’s take a look at the following dominant broker groups influencing the insurance brokerage industry:
Global brokers – Large multinational insurance brokers who typically operate in multiple countries and offer a wide range of insurance products and services
Private Equity (PE)-backed brokers – PE firms provide the necessary capital for mergers and acquisitions
Family-owned brokers – Small to mid-sized insurance brokers that are family owned and operated
Drivers and challenges leading to consolidation
Competition
Increasing competition: The insurance intermediary industry is becoming increasingly crowded, with new players entering it all the time, further fragmenting the market. These new players often can offer better services, lower prices, and more innovative solutions than traditional insurance intermediaries
Market share growth: Insurance intermediaries can inorganically boost market share with additional capabilities and market penetration in new geographies by consolidating with another firm. They also can benefit from customer base growth
Capabilities
Technological advancements: The industry’s recent drive towards digital transformation by implementing new technology and platforms is forcing intermediaries to seek funds to invest in digitization or lose against better-capitalized intermediaries
Economies of scale: Insurance intermediary consolidation can spread fixed costs over a larger number of policies, resulting in lower average costs per policy. It also can provide intermediaries with increased bargaining power with insurers, provide cross-selling and up-selling opportunities, and help increase brand and mind share
Service offering diversification: Consolidation allows insurance intermediaries to expand and diversify their services and product lines. Intermediaries can attract new customers by acquiring another brokerage that provides different products or services. This keeps intermediaries relevant and competitive in a dynamic market
Complexity
Regulatory pressure: Consolidation can help smaller intermediaries remain up to date on increasingly complex risk management requirements that would be difficult for them to do by themselves
Inefficient processes and people: By joining forces, smaller firms can improve process efficiencies and combine their talent pools. Consolidation also can help large entities better manage operations
Customer
Changing customer expectations: Consumers increasingly demand customized and convenient services and anticipate an omnichannel experience. Insurance intermediaries that cannot meet shifting consumer expectations risk losing clients to rivals who can.
Impact of consolidation on stakeholders
Insurers
Customers
Routes to consolidation
Insurance intermediaries can take multiple paths to consolidate depending on their strategy, such as:
Mergers & Acquisitions: This is the preferred route for consolidation where two or more intermediaries enter into an M&A to achieve economies of scale, expand into new markets, and gain access to the latest tools and technologies. Different forms of M&A pursued are horizontal mergers between intermediaries from the same market, vertical mergers between intermediaries with different capabilities, and cross-border M&A
Strategic alliances and joint ventures: Insurance intermediaries can pursue strategic alliances or JVs under many forms, such as distribution agreements, co-marketing agreements, and shared service agreements to effectively share resources and expertise while reducing risks and increasing market power
PE investments: In recent years, PE firms have increased their involvement in this industry as they look to invest in dependable, cash-generating companies with room for expansion. PE companies can assist insurance intermediaries seeking strategic acquisitions and expansions while also providing access to finance and experience
Many intermediaries also take an independent route and pursue organic growth by investing in digital transformation initiatives to achieve unparalleled scale and efficiency.
Key players in the insurance intermediary consolidation space
The insurance intermediary market is highly competitive and dynamic, with many players pursuing different strategies to achieve their growth objectives. Here are some of the active players in the consolidation space:
Marsh & McLennan: In 2019, the company acquired Jardine Lloyd Thompson Group, a leading UK-based insurance intermediary, in a deal valued at $5.6 billion. The company also has announced the acquisition of Focus Insurance, offering tailored personal insurance programs.
Gallagher: Gallagher has pursued a growth strategy focused on M&A and has completed over 500 acquisitions since 1984. Gallagher started 2023 with an acquisition of Dublin-based commercial and personal lines broker First Ireland, making it one of Ireland’s largest brokers.
Hub International: The company also is focused on growth through M&As, and has made more than 600 acquisitions since its founding in 1998. In 2020, Hub acquired the assets of The Insurance Exchange, Inc., a leading insurance brokerage firm in California.
How intermediaries can leverage insurance service providers
Intermediaries face increasing pressure to reduce costs, increase efficiency, and deliver better customer experiences. By partnering with BPS providers, they can achieve these goals. BPS providers can deliver policy administration, claims processing, customer service, data analytics, and other services, as illustrated below:
In selecting a BPS provider, intermediaries need to evaluate the service provider’s capabilities by carefully considering their expertise, experience, cost arbitrage, flexibility, security, business continuity, delivery footprint, talent maturity, technology, infrastructure, governance approach, and client-centricity.
Everest Group can help evaluate these capabilities through its proprietary PEAK Matrix® assessment and impartially rank service providers as leaders, major contenders, and aspirants, as well as provide expert commentary to help enterprises make better-informed decisions.
From the many thought-provoking conversations that Everest Group analysts engaged in at Formation ’23, three main themes emerged about the future of insurance technology. These priorities are: integrating a humanized and people-centric approach, leveraging data to make intelligent decisions, and strongly emphasizing the Software-as-a-Service (SaaS) ecosystem. In this blog, we will take a closer look at these growing trends and explore their potential impact on the insurance industry.
Formation ’23 on May 8-10, hosted by Duck Creek Technologies (DCT), provided an excellent opportunity for Everest Group analysts to engage in exciting conversations with the community of insurance enterprise leaders, technology providers (from DCT and its solution partners), system integrators, consulting firms, and other analysts, about what will drive the next era in insurance.
Based on the dialogue we heard, the following three themes stood out to our team:
Building humanized and consistent experience will be the key to success
Delivering high-quality personalized customer experience is taking center stage in the insurance industry’s current transformation as carriers move from their traditional role as loss payors to becoming empathetic insurers and guardians for customers.
Digital experience platforms, distribution management systems, and smart communication platforms are becoming increasingly relevant to streamline operations, provide seamless and consistent digital experiences, and engage customers more effectively.
Data will play an important role here by equipping insurers with the right information that they can use to personalize and humanize the experience for individual customers. Interestingly, DCT also gave us a preview teaser of its new product – Elea, an AI-powered and empathy-driven chatbot slated for release later this year.
Infusing data and intelligence into insurance operations is the industry’s top priority
Data-driven intelligent decisions are a key priority for the industry. As the insurance industry moves toward AI-powered workflows, infusing data and having standard data models at a value chain and workflow level will be a major demand.
We found it interesting to see various point solutions offered by technology providers, such as CogniSure’s AI platform, which helps automate the underwriting process by converting structured and unstructured data to improve efficiency and effectiveness.
We also heard many discussions about early use cases of Generative AI (GAI) for operational tasks (emails, presentations, etc.), GAI-powered chatbots, and writing codes. But concerns remain about using this fast-growing technology in core operations.
SaaS sprawl requires attention
SaaS sprawl was another theme that dominated conversations. While the point solutions across the value chain come with the benefit of speed to market and bridge the capability gap on the top of core systems, integration across these remains a concern as these solutions often don’t talk with each other.
Enterprises leveraging a wide number of these point solutions now see the need for digital rationalization. Most of these software platforms have evolved and added new functionalities. But enterprises are not taking advantage of the latest features because they are either unaware of these benefits or because they are paying for other software with the same purpose. This leads to duplicate costs and less value.
These conversation themes and focus areas resonate well with what we expect from the industry in this environment, but we felt some upcoming trends did not get enough attention from the community – low code/no code technology being the most prominent one.
As always, Formation ’23 was a great experience for Everest Group to interact, learn and exchange thoughts and points of view with industry leaders about the future. The fun atmosphere in Orlando, Florida, complete with country music, delicious food, and drinks, added to the interesting conversations, resulting in lasting memories.
To discuss these insurance technology trends in more depth, please contact Ronak Doshi and Roma Juneja, who attended this insightful event.
