Emerging Markets Will be Main Focus of Life BPO Activity in 2008
by Charles Juniper
While life and annuities BPO activity will grow steadily in the U.S. during 2008, the focus of growth within the life BPO market will switch from Europe to emerging markets in Asia......
Prediction 1 - Steady Growth in the U.S.
The life and annuities BPO market in the U.S. will grow at a steady 10% in 2008 and beyond as U.S. insurers continue to outsource policy processing. This is considerably less than the 20-30% anticipated three years ago although some sub-segments, such as that focused on the high-net worth individuals are seeing substantially higher growth rates as affluent Baby Boomers plan for retirement.
Prediction 2 - Tier 1 Service Providers Re-trench From Europe
The tier 1 U.S. IT service providers such as EDS, IBM and CSC, are quietly revising their L&P BPO strategies for Europe and the U.K. With many of the largest closed books already outsourced, the U.K. market is looking a less attractive market. L&P BPO has failed to gain significant traction in continental Europe with labour legislation seen as severely restricting the flexibility available to any prospective outsourcer.
The U.S. players are unlikely to actively pursue any European L&P BPO bids that may come to market, particularly following the significant effort and investment over the last 2 years in bidding for deals like Zurich and Resolution and with nothing to show for it. Instead, they are looking to exploit adjacent opportunities with operational similarities to L&P such as mortgage processing. They are also attempting to re-emphasise their process knowledge and IP gained from development of core application platforms and migration and integration skills to affect technology-led operational improvement.
Prediction 3 - A Quiet Year For the U.K. L&P BPO Market
Growth in the U.K. L&P BPO market will be muted following the major deals of 2007. Potential insurance clients are watching Capita to see how effectively they integrate the recent Resolution and Prudential contracts. It will be a challenging year for the smaller players such as Vertex and Liberata, with Vertex increasingly promoting its processing platform rather than its operational capabilities.
Prediction 4 - Emerging Markets Are The Main Focus in 2008
The key L&P BPO battle ground for the U.S. and Indian IT service providers in 2008 will be the emerging Chinese and Indian markets. Most of these players are offering a complete package of managed IT infrastructure, core applications platforms and off shore service delivery centers to U.S. and European insurers looking to establish a foothold in these markets. Some of the U.S. providers have the advantage of long established working relationships with key insurers whilst the Indian providers have local presence. The key differentiators will be how rapidly a service provider can implement an entire operation, with 4 to 6 months being the typical requirement and how much they can assist a client with the cultural and legal complexity of establishing a business in China.