Approaching the Boiling Point: BPO, SaaS in Insurance

by Benjamin Moreland,  Craig Weber, November 24, 2010
Industry Trends
North America

Abstract

BPO has been used extensively, for more than a decade, throughout the financial services industry. The one exception is insurance, but we are beginning to see signs that core systems BPO is heating up.

Insurers that are rethinking their core systems have questions about alternatives such as outsourcing some or all back office functions to avoid building another generation of legacy systems, according to a new report, Approaching the Boiling Point: BPO, SaaS in Insurance. Celent conducted a survey of insurers to gain their perspectives on business process outsourcing. According to the survey, a clear majority of insurers will either continue their present levels of BPO (50%) or increase them (36%).

The key hurdles that vendors must overcome, even if they are more perception than reality, are shown in the figure. Software as a service is lagging a little behind BPO in most insurers’ minds, but they are cautiously anticipating that SaaS will gain strength.

“Celent expects that the first wave of strong movers into core systems BPO and/or a SaaS model for core systems will gain competitive momentum that will be difficult to match,” says Craig Weber, Senior Vice President of Celent’s Insurance Group and coauthor of the report.

“Insurers and SaaS vendors will need to build strong relationships through successful implementations with well-defined SLAs to overcome the SaaS and BPO hurdles,” says Benjamin Moreland, Senior Analyst with Celent’s Insurance Group and coauthor of the report. “However, those that do will address the biggest IT challenges today with respect to flexibility, agility, and lower TCO.”

This report aims to provide a current state of the market with respect to BPO and SaaS. It offers insights into the primary issues insurers must address.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

3

Introduction

4

 

Survey Methodology

4

Views on BPO

8

BPO Views by Life/Annuity and P&C Insurers

8

 

BPO Experience

9

 

Largest Impediments to BPO Adoption

10

 

Concerns with Core BPO

11

 

Business Case for BPO

12

 

Willingness Vs. Differentiation

14

 

Vendor Capabilities

16

Views on SaaS

17

 

Impediments to SaaS

18

Conclusions

19

 

Advice to Insurers

19

 

Advice to Vendors

19

Leveraging Celent’s Expertise

21

 

Support for Financial Institutions

21

 

Support for Vendors

21

Related Celent Research

22

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