Insurance companies face a constantly evolving environment. Uncertain economic conditions, new and heightened risks and increasingly strict regulations can make for choppy seas. Today, many are searching for ways to win loyalty of fickle consumers, overcome tight profit margins and comply with regulatory requirements around security, privacy, third-party and operating risk. It’s a tall order.
On top of it, many insurance companies are stuck with aging IT systems that depend on paper-intensive processes and disparate software solutions requiring a tangle of manual work-arounds. In the face of these challenges, insurers are trending toward three solutions:
2. Strategic sourcing
3. Cloud services
Automation is taking hold particularly as outsourcing service providers tool up to improve efficiency and reduce costs. Many providers are piloting or are already using technologies such as IPsoft’s IPcenter platform to deliver autonomous infrastructure services in network, storage, service desk and server towers. Clients are starting to pilot the technology as well, either directly with the software providers or through the outsourcing community. Entire functional areas, like end-to-end incident remediation, are being automated with significant benefits. In addition to reducing labor costs, automation can significantly cut mean time to resolution, in many cases from hours to minutes and minutes to seconds.
In the midst of all of this change, many insurance companies continue to look to sourcing as a go-to-strategy. Though outsourcing buyers are pursuing shorter contracts to take advantage of rapid-fire advances in technology, the number of contracts awarded has increased as clients engage strategic and niche providers for everything from traditional outsourcing to X-as-a-Service to address specific business objectives. Many are casting the net farther, narrowing what they define as core to the business and looking for service providers that can offer industry-specific solutions across the entire insurance value chain. With big data accumulating on customer lifestyle and behavior, for example, a growing number of insurers are engaging niche service providers for analytics solutions to sharpen their market-segmentation strategies and help reduce fraudulent claims.
Meanwhile, the explosion of consumption-based cloud services is fundamentally changing the equation, with cloud providers encroaching on traditional outsourcing providers’ market share. Even when it comes to core systems, such as policy administration and claims handling, companies are inclined to buy versus build, and are willing to entertain implementing in the cloud if it meets certain security and data privacy requirements. Software providers like Guidewire and Accenture Duck Creek have benefited from such trends.
The focus of IT is shifting dramatically, requiring today’s CIO to think like an entrepreneur, reduce and flex costs, and invest in technologies that increase business revenue. To do this, they must build a sound business case that compares current costs to a realistic future-state deployment model, which can be a tricky exercise as technology, operations and contractual specifics vary greatly across cloud service and deployment models.
ISG helps insurance companies survive service delivery transformation and come out ahead. Contact us to find out more.About the author
Ray helps Financial Services organizations with all aspects of their IT, back-office, middle-office and customer-facing service alternatives. He is an accomplished professional with more than 14 years of Financial Services experience and is skilled in developing and leading offshore and outsource strategy and assessments, and implementing IT and BPO service agreements for large, multi-national corporations. Ray has expertise in assessing which functions are optimal to outsource, offshore or re-engineer through shared services and determining the associated savings opportunity. In addition, he assists companies in evaluating, negotiating and implementing ITO and BPO transactions and designing appropriate governance organizations to manage the ongoing operations. Most recently, Ray assisted a Financial Services firm restructuring its infrastructure managed service contract, which resulted in more than 10 percent cost savings. In addition, the company significantly enhanced its contract terms and created a pricing structure that allows for cost transparency and variability as its business changes.