Life & Pensions insurers mired in legacy must leverage BPaaS—Everest Group
Although 60 percent of insurers believe improving customer experience (CX) would have the highest impact on their competitive positioning, many don’t pursue progressive CX strategies because they are shackled by legacy IT infrastructure, according to consulting and research firm Everest Group.
It said that to enable core modernisation and subsequent digital transformation, life and pensions (L&P) insurers should establish strategic business process as a service (BPaaS) partnerships with third-party IT and business process service providers.
“L&P insurers know that to remain competitive they need to evolve to customer demands, especially to the demands of the millennial segment, but they are stymied by legacy infrastructure that restricts their ability to innovate and modernise,” said Skand Bhargava, practice director, Business Process Services, at Everest Group.
“It’s no wonder insurers are slow to modernise: revamping infrastructure is expensive, time consuming for overstretched internal resources, disruptive to business continuity, and sometimes a stretch for in-house talent. An insurer’s best path forward is to partner with BPaaS providers to free themselves from the burden of legacy without capital-intensive investments. Service providers can fill the gap and help establish the business case for adopting modernisation efforts.”
Many leading insurers are beginning to see the advantages of the BPaaS approach. The L&P insurance sourcing market in 2018 reached $2.6 billion, with 44 percent represented by BPaaS engagements. The compound annual growth rate of the L&P insurance BPaaS market from 2015 to 2018 was 12-14 percent.
These findings are discussed in more detail in Everest Group’s Life and Pensions (L&P) Insurance BPO Annual Report 2020: Escape Legacy and Embrace Digital through BPaaS. This report deep dives into the looming need to modernise legacy architectures in the Life and Pensions (L&P) insurance industry and its relevance for the industry’s overall digital transformation. It also puts forward the case for BPaaS in L&P insurance and how digitalisation can make a significant impact through platform modernisation efforts.
In the report, Everest Group cites numerous examples of L&P insurers who successfully tapped third-party partners for core modernisation initiatives in the past few years.
Everest Group also stresses that BPaaS forms a foundation for future scaling of digital transformation efforts. “The ultimate goal of BPaaS investments should be to create a connected digital ecosystem on top of a modern, unified platform architecture in order to drive stakeholder experience,” said Bhargava. “By leveraging BPaaS to shift away from legacy systems and siloed units of operation, insurers can take build a platform that enables them to implement the digital technologies that are going to be critical to drive the next level of impact.”
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