InsurTech Trailblazers: Product Development
InsurTech Trailblazers: Product Development
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.
Challenging macroeconomic conditions, demanding digitally-savvy consumers, and rising fraud are pushing P&C insurance carriers to be more demanding than ever of their service providers. Carriers not only expect optimization of cost of insurance operations, but also assistance in gaining and retaining market and customer mind share. This is forcing service providers’ hand to move from an arbitrage-first to a digital-first model.
Meanwhile, insurance BPO service providers’ origins in the arbitrage-first world and their strategic choices in large P&C product categories, such as personal lines, worked well for a while. But with the U.S. and U.K. markets maturing, service providers are being forced to reconsider their strategy. They now not only need to focus on the customer experience, their digital footprint, and lowering TCO, but also on developing deeper domain expertise to drive growth and remain differentiated in the market.
As we talked about in our report, “Property and Casualty Insurance BPO – Annual Report 2016: The Dawn of Transformational Era – Adapt and Evolve to Succeed,” this leaves them with three options to avoid falling into the no-growth trap:
Genpact (a Leader on Everest Group’s P&C insurance BPO PEAK Matrix-2017) clearly decided to pull the trigger on this conundrum, announcing on 3 May that it had acquired BrightClaim. BrightClaim’s suite of services includes property claims management (including catastrophe claims), claims adjusting, TPA services, and contents pricing services.
With this acquisition, Genpact has gained deeper domain expertise in U.S. P&C insurance claims market, and has strengthened its portfolio of digital technologies and fraud detection capabilities.
The acquisition also includes National Vendor, a BrightClaim associated company, which has a nationwide network of contractors and offers carriers a direct repair program along with content fulfillment. Genpact can leverage this to provide cost-effective and faster claims settlement services, which is expected not only to reduce claims payouts for insurers, but also to improve the customer experience.
Genpact’s top competitors in the U.S. P&C market are Cognizant and EXL. With both of them continuing to augment their capabilities and developing deep domain expertise, it was imperative for Genpact to make a move. As a favorable by-product of this acquisition, Genpact has further strengthened its onshore delivery capability with centers in Atlanta, GA and Austin, TX.
Prima facie, the deal looks accretive and has the potential to enable Genpact to challenge other Leaders in P&C insurance BPO space.
How will other providers in this segment respond? Game on! We’d say….
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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: