Executive Summary: ISG Provider Lens™ Insurance Services - Europe 2022
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ISG Provider Lens™ Insurance Services - Property & Casualty Insurance BPO Services - Europe 2022
ISG Provider Lens™ Insurance Services - Life & Retirement Insurance BPO Services - Europe 2022
ISG Provider Lens™ Insurance Services - Insurance ITO Services - Europe 2022
BPO and ITO providers are supporting European insurers
Insurers in Europe are increasingly relying on service providers to consistently deliver on their promises of protection and indemnity to policyholders. Insurers require deeply collaborated partnerships to seamlessly address headwinds and maintain profitable growth. Like their peers across the globe, these insurance enterprises have been facing challenges due to permacrisis since 2020.
Losses incurred from pandemic-related claims, increases in operational costs, property damage and disrupted supply chains from climate-related risks will continue to impact businesses and economies. Other factors include geopolitical uncertainties, more sophisticated cyberattacks, inflation and rising costs as a result of the energy crisis. The previously low interest rates during the last couple of years and the increased actuarial provision under IFRS- 17 requirements are also expected to have negative impact on their profitability.
Insurers must focus on delivering customer value while building macro resiliency and changing regulatory landscape
The increase in claims pay-outs amid the inflationary trends and declining profitability has created a dire situation for insurers. This and changes in working behavior across regions are pushing insurers further beyond their existing technological capabilities, subsequently posing challenges in delivering the expected customer value in the present operating model.
To address these issues successfully, insurers are seeking a strategic approach in partnering with BPO and ITO providers to restructure their existing workforces across the insurance value chain, allowing them to focus more on critical business operations and decision making. BPO and ITO providers can support and improve the business as usual and modernize existing technology stack much faster and rapidly align these newer delivery models to insurers’ changing operating models and impacts of regulatory changes (for example IFRS-17). A renewed partner ecosystem will also enable insurers to deliver the expected value and acquire and retain customers in a profitable manner.
These providers enable rapid scalability, responsive design and swift deployment of new models for insurers. They also offer the ability to operate in hybrid delivery models (onshore, nearshore and offshore) even in adverse situations and with greater cost efficiencies.
Furthermore, modernization of existing technology stacks by using new technologies such as AI, machine learning, intelligent automation, low-code/ no-code development and advanced analytics can be pivotal for carriers to stay ahead of the competition.
As per ISG advisors, the demand for ITO and BPO services in the insurance market has increased over the past couple of years. During the pandemic, these providers were focused on responding to the urgent needs of the market and providing continuous delivery support while enabling insurers to speed up their digital agenda.
The providers’ proven ability to deliver basic operations with higher standards, prior to addressing complex requirements such as digital transformation, has given them a better outlook in Europe. Providers with capabilities around strategy, consulting, digital transformation of services and processes along with traditional ITO and BPO are especially gaining traction to drive business innovation.
Key themes of this research report are as follows:
Managing multiple stakeholders
Digital transformation is both an opportunity and a challenge for carriers and their ITO and BPO partners to revaluate the customer journey. It is pushing them to reimagine newer approaches to design and deliver more relevant products based on better research backed by deep insights and detailed analytical thinking.
Insurance will remain a distribution-led business comprising multiple delivery channels such as agents, brokers, bancassurance, aggregators and InsurTech platforms. Their ability to drive business will be a key growth parameter for insurers in offering an authentic omnichannel experience.
Increased engagements (with customers, intermediaries and employees) for higher value creation
Because insurance is a highly peopledriven business, insurance companies rely on relationships, knowledge and experience; hence, human capital is a critical aspect in the entire process. Misaligned skills, poor incentives and ambiguous career paths are among the factors that impact employee morale and lead to higher attrition. This, in turn, results in increased costs and efforts in new talent acquisitions.
Digitalize for “customer first“ and personalization
The demand for heavily commoditized and off-the-shelf insurance products is declining, as customers are seeking more tailored and responsive solutions to their changing needs amid growing uncertainty (individual and global).
Most customer segments are seeking solutions that provide coverage from both traditional and newer threats such as cyberattacks and climate change, global crises or business uncertaintyspecific threats with features of highly responsive customer services and faster claims settlements.
Insurers with archaic processes, an unchanged organizational culture and antiquated technology infrastructure will not be able to scale up faster or adapt to these changing market demands.
It requires innovative approaches, involving reinventing business models or reimagining insurance products, to cater to these changing needs. Insurers with access to skilled talent capabilities in business processes and IT across the value chain will find themselves in a better position to respond to it more effectively.
Bringing InsurTechs into the existing mix
These technology-based startups are reimagining the insurance industry by enabling innovation. Their highly agile and adaptive approaches toward new technologies help bring in more relatable insurance solutions and services in the market. They empower insurers by transforming long and cumbersome processes into leaner and scalable ones through plug-and-play capabilities.
Low-code/no-code based journey building solutions, AI-based SaaS solutions for claims, underwriting and fraud, waste and abuse (FWA) are some of the emerging solutions.
Adopt, adapt and improve with intelligent technology
Digital technologies are used to acquire and retain customers, and their intelligent usage can be a differentiating factor for an insurer’s operating model and profitability.
The implementation of new-age technologies may also lead to a significant decline in customer acquisition costs. Providers' knowledge in customer pain points and expertise in handling IT and operational challenges play a decisive role in their selection by carriers.
Thoughtfully designed products based on intelligent modern technologies also bring in several benefits such as speedier time to market, process simplification, faster straight-through processes (STP), decline in FWA and higher indemnity savings.
For efficient and profitable underwriting, pricing optimization and risk selection, providers are upskilling their resource pool in new digital technologies to enable successful AI deployments.
Shifting focus toward outsourcing complex processes
Insurers are looking for providers beyond transactional processes. They have a keen interest in outsourcing business-critical processes such as product innovation, actuarial model design and subrogation assessment. This indicates their mental readiness and confidence in providers with new technology capabilities and dedicated centers of excellence.
Outcome and value-based delivery models
Contracts based on employee counts and transaction volumes among other aspects are losing traction among insurers. On the other hand, value and outcome-based contracts tailored for specific customer requirements with assured tangible benefits are becoming popular among insurers that are looking for cost-effective and valuedriven services.
Although value-based contracts are gaining traction globally, ISG advisors observe a low pace of adoption. The key challenge in implementing such contracts is the involvement of multiple BPO and ITO partners, which makes it difficult to quantify the outcomes and increase the efforts to drive such engagements and manage the overall performance.
This report talks about how service providers are addressing these challenges by deploying new services, products and partnerships.
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