Business process outsourcing (BPO) spending in the global insurance sector will be worth about $3.5bn in 2015, after years of double-digit expenditure increases.
The need for expertise around data analytics and digital consumers is driving the outlay.
According to research by Everest Group, the insurance sector – which spent $2bn in 2011 – will spend between $3.4bn and $3.6bn in 2015, and more than $700m worth of renewels will be available each year.
It also showed the property and casualty (P&C) insurance sector will grow at twice the rate of the more mature life and pension (L&P) segment. L&P accounts for 60% of total spending, according to Everest Group.
BPO is heavily reliant on IT and the rise of the digital consumer, as well as the need for better data analytics, are important factors behind the increase in spending.
“As the modern consumer becomes more comfortable with digital marketing channels, insurers need to up their game to meet customer expectations,” said Everest.
“Insurers need help to understand the requirements and priorities of digital consumers and are looking to BPO service providers to help them navigate through this channel,” the firm added.
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And there is the threat of new players taking a share of the business. Research by Accenture of 6,000 people in 11 countries revealed about a quarter would consider large internet companies – such as Google and Amazon – as possible insurance providers.
It showed 67% would consider buying insurance from companies other than insurers. Some 23% cited online service providers as options. A total of 43% said they would consider banks in their buying decision.
Insurance companies have to catch up quickly and outsourcing to BPO suppliers with digital and analytics expertise will help.
According to research from business consultancy BearingPoint, 90% of insurance firms are yet to implement a company-wide big data strategy and risk being bypassed by new, more agile data aggregators taking advantage of the digital era.
For example, insurance company Ecclesiastical recently embarked on its first major IT outsourcing project when it accepted it was not getting the most out of the data it holds.
The company contracted Indian IT services firm ITC Infotech to help it reduce the time and costs associated with pricing insurance products through data integration.