Moumita Bakshi Chatterjee, New Delhi, Dec. 13
THE slow off-take of outsourcing in the insurance domain notwithstanding, the competitive pressure is driving the sector towards higher level of outsourcing adoption now. This has opened up for the BPO service providers an opportunity to capture about $11 billion of insurance revenues by 2008, according to the National Association of Software and Services Companies (Nasscom).
"As observed in other segments of the outsourcing space, once past proof-of-concept, early movers in the industry are beginning to push-the-envelope to expand the scope of activities included in insurance BPO. The rapidly increasing maturity of customers as well as service providers is now enabling them to add more higher-value-adding elements across the insurance value chain to the existing engagements," the latest Nasscom report on `Trends and Opportunities in Insurance BPO' has said.
The report said although outsourcing was primarily viewed as a cost-saving tactic, a few players were beginning to realise the game changing potential it held for the sector. "The ability to offer existing services at a fraction of the costs enables companies to enhance their service offerings as well as tap other segments of the market that were previously `uneconomical' to target — leading to improved cost-margin ratios," the Nasscom report added.
It said that insurance BPO market size for India, which was pegged at $425 million in 2004, is estimated to touch $790 million by 2007.
"Though the insurance segment of the BFSI vertical has had a relatively slower start, compared to other segments such as payment services (credit cards), traditional banking etc., competitive pressure is driving this sector towards higher levels of outsourcing adoption," it said.
Citing projection by Gartner that BPO service providers would capture $11 billion of insurance revenue by 2008, the Nasscom report said that insurers are turning to external BPO providers to expedite their legacy transformation process.
"By 2008, BPO providers are likely to develop the intellectual property and technology platforms to align with various distribution channels (for example, bank and investment houses) and launch insurance ventures.
These measures are likely to capture about one per cent of the global annual premium total of life, annuity, and property and casualty products," Nasscom said.
The report noted that the global insurance industry was witnessing trying times, and said that in the past few years, players had incurred rising claims and serious underwriting losses coupled with poor investment returns and difficult capital market conditions.
"The resultant decline in corporate profitability has led to increased pressures to achieve greater cost efficiencies," it pointed out.
In addition to the pressures, the increasing product and channel complexity and proliferation were driving players in the insurance industry to tap new markets such as banking and brokerage in order to maintain revenue growth and leverage operational infrastructure.
As a result, multiple product and channel customer service initiatives are becoming the norm, with the focus shifting towards integrating or consolidating customer servicing systems, improving the servicing process itself to avoid revisit and duplication, and accelerating new product introduction.
Nasscom said that a study by NeoIT had revealed that cost savings for offshore insurance processes undertaken in India (as compared to those done out of the US) stood at 35 per cent for claims adjusters and examiners, 45 per cent for insurance underwriters, 35 per cent for computer programmers, 15 per cent for insurance sales agents and 15 per cent in case of telemarketers.
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