Outsourcing Observations on Insurance


Having just completed a detailed review of outsourcing activity in 26 different vertical industry groups, I want to share some interesting findings from my research. The Insurance vertical sector has been hard hit by the economic issues of the last year, so I will share my observations on this industry segment first.

A quick look at the companies in the Forbes® Global 2000 reveals that there are more than 100 companies in the Insurance vertical sector, of which just less than half have an active outsourcing contract with a total contract value (TCV) of $25 million or more, according to TPI Research. As a group, these companies have increased their spending on outsourcing in each of the last 13 years, reaching an all time high of nearly $5 billion in annualized contract value in 2008. Compared to other industry groups, however, the typical insurance company spends about $10 million less per year than the overall market average, indicating that this vertical may be well-positioned for increased spending in the future.

Companies in this vertical sector have been somewhat slow to the BPO party, though TPI has recently observed increased attention being given to processes that can be offshored due to board pressure to reduce costs. Companies are also considering onshore options; especially those have taken TARP funding. This shift may benefit the US-based multinational service providers, who can market their US-based delivery centers.

To sum up, the Insurance vertical sector is a large market that already spends significant dollars on outsourcing. TPI sees opportunities for increased spending among companies that already source and expects more Insurance companies to adopt outsourcing during 2009, especially those positioned in the mid-market.

I’d be very interested to hear your thoughts on outsourcing in the Insurance vertical sector.

Source: TPI Momentum Q109 Vertical Industries Report
About the author

Paul Reynolds leads Momentum, a division of ISG that provides research services to help service providers better target, win and retain business. Paul has 25 years of market research experience with specific expertise in methodology development, data analytics and research process design. Having found many service providers’ Advisor Relations functions to lack appropriate analytics, Paul is working to develop innovative new approaches that allow for data-driven programs based on the unique needs of each client. His approach benefits Advisor Relations, go-to-market functions, sales, strategy, marketing, and market/competitive intelligence teams.