U.S. Insurers Seek Partners for Digital Transformation as Pandemic, Regulations, Market Trends Shake Up Industry

U.S. insurance companies are accelerating their adoption of digital technologies as the COVID-19 pandemic disrupts their operations, in many cases turning to business process outsourcing for efficiency, agility and new capabilities, according to a new report published today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

The 2020 ISG Provider Lens Insurance BPO Services report for the U.S. finds most of the country’s life and retirement (L&R) and property and casualty (P&C) insurance companies have begun digital transformations, though they are at varying stages of the process. When COVID-19 sparked changes, such as employees being forced to work remotely and potential policyholders applying for coverage without meeting an agent in person, companies that had been slowly changing had to speed up just to survive.

Business process outsourcing (BPO) providers are helping insurers achieve more growth and efficiency in response to changing market dynamics, including increasing regulation and customer demand for modern digital experiences, the report says. Companies are outsourcing business processes instead of continuing to operate inflexible legacy systems where data is locked up in silos.

“The pandemic showed how much insurance companies need agility and modern technology,” said insurance specialist Dennis Winkler, senior director, business services, for ISG Americas and a co-author of the report. “Rather than make big investments in new systems, many are turning to experienced outside providers.”

Insurers that outsource business processes can focus on more strategic activities instead of on squeezing new capabilities out of old platforms, ISG says. BPO providers are bringing robotic process automation (RPA), artificial intelligence (AI), chatbots and other technologies to the table, while providers of third-party administrator (TPA) services are carrying out essential tasks through modern digital ecosystems. Some insurance companies are leveraging these technologies to quickly launch new businesses, while others are replacing their older systems wholesale.

Business process outsourcing can help insurers analyze the growing amount of available data to build a unified, 360-degree view of customers, according to the report. Analytics also can help companies improve risk management, more accurately price policies and better detect fraud. In addition, BPO and TPA providers offer technologies that can help insurers create user experiences similar to what consumers have come to expect from online retail, such as a fast and simple policy application with an immediate response.