Managing the Downturn and Preparing for the Rebound: Outsourcing in Insurance (Strategic Focus)

Published by: Datamonitor

Published: Jun. 24, 2009 - 41 Pages

Table of Contents

Overview

Catalyst

Summary

Key Messages

The economic downturn is driving short-term, tactical cost savings initiatives

Having coped with the downturn, insurers will prepare for the rebound

Greater use of rule-based underwriting will enable outsourcers to move up the food chain

A variable cost structure allows insurers to scale up and down in tandem with the market

Vendors should not give up on bundled service offerings, despite limited adoption to date

Table of Contents

Table of figures

Table of tables

Market Opporunity

The economic downturn is driving short-term, tactical cost savings initiatives

Mega deals have given way to functional outsourcing engagements

Asset sales are attractive to cash strapped insurers

Systems consolidation will drive application and infrastructure outsourcing

Past wave of acquisitions is driving consolidation projects

Insurers are also looking to consolidate systems across geographies

Having coped with the downturn, insurers will prepare for the rebound

After removing immediate costs, insurers will realize greater savings with BTO

Top-line growth will equal-if not surpass-cost cutting as a key strategy

Brining new products to market in a timely manner

Territorial expansion

The credit market will thaw and M&A activity will return

Closed variable annuities books will lead to big BPO deals in the future

Greater use of rule-based underwriting will enable outsourcers to move up the food chain

Captives have lost their appeal, boosting the value proposition for pure play outsourcing

Government intervention and increased regulation adds uncertainty to future growth

Impact on the Insurer

Outsourcing enables insurers to reduce costs and respond quickly to market changes

A variable cost structure can allow insurers to scale up and down with the market

Insurers that migrate to an outsourcer's policy administration platform can react to changing regulations

Outsourcing enables insurers to focus on core competencies

Outsourcing engagements need to be properly managed from scoping through termination

The first step in a successful engagement is outsourcing the proper activities

Prepare for changes and be certain to develop and adhere to a communications program

Vendor over-dependency, particularly in BPO, is a real risk that can be mitigated with an exit strategy

BPO can potentially diminish the customer and/or agent relationship

Competitive Landscape

A brief look at the balance between ITO and BPO, and how that balance is changing

Vendor profiles

Accenture

Affiliated Computer Services (ACS)

Computer Science Corporation (CSC)

IBM

Infosys Technologies

Patni Computer Systems

Perot Systems

Tata Consultancy Services (TCS)

WNS (Holdings) Limited

Go to Market

Domain expertise is essential for capturing insurance-specific BPO

Vendors should not give up on bundled service offerings, despite limited adoption to date

A diverse delivery network can be a competitive advantage

A global delivery network can help alleviate some fears among insurers

Transformative engagements require a right-shore strategy

Third party advisors are assets that should be engaged

Recommendations

Gain a balanced portfolio of open and closed books

Focus on gaining and improving platform IP

Build a diverse delivery network

APPENDIX

Methodology

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: Mega outsourcing deals in insurance, 2007-present

Table 2: Announced outsourcing deal value, insurance vertical, select vendors 2000 - Q1 2009

List of Figures

Figure 1: Cost savings trump revenue growth

Figure 2: Outsourcing adoption in the insurance industry

Figure 3: Adoption of underwriting BPO

Figure 4: A framework for choosing what to outsource and what to retain in-house

Figure 5: Benefits/risks balance for outsourcing

Figure 6: Estimated revenue split between ITO and BPO from the insurance vertical, select vendors

Figure 7: Overview of vendors profiled

Figure 8: Timeline of NaviSys and Genelco

Figure 9: Outsourcing adoption, broken down between insurance-specific and horizontal processes

Figure 10: Sourcing considerations for functional and transformative engagements

Abstract

• The report discusses the market challenges facing both life and non-life insurers.
• Application outsourcing, infrastructure outsourcing and business process outsourcing is discussed in detail.

• Gain insight into the market challenges facing insurers, and how the effective use of outsourcing is being used to mitigate these challenges.
• Learn about the market strategies of key vendors serving the insurance vertical.

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