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Thriving in the As-a-Service Economy

HfS Blueprint Report

Insurance As-a-Service 2015

Excerpt for TCS

August 2015

Reetika Joshi Research Director, Consumer-Centric Operations & Analytics Strategies, HfS Research

[email protected]

© 2015 HfS Research Ltd. Excerpt for TCS Proprietary │

TOPIC PAGE

Executive Summary 3

Research Methodology 10

Key Market Dynamics 17

Service Provider Grid 32

Service Provider Profile 36

Market-Wrap and Recommendations 38

About the Author 45

Table of Contents

Executive Summary


The HfS 2015 Insurance As-a-Service Blueprint is a refresh on our assessment in February 2014 with an additional focus on the role of As-a-Service platforms and commercial models as well as automation and analytics in insurance delivery. Unlike other quadrants and matrices, the HfS Blueprint identifies relevant differentials between service providers across a number of facets under two main categories: innovation and execution.

Compared to the first Blueprint on Insurance BPO, HfS has increased the focus on innovation toward As-a-Service delivery, with 50% of the Blueprint scoring being tied to proven innovation capability and performance for these engagements, beyond the standardized BPO processes in insurance.

The scope for this study includes the segments of life and annuities, property and casualty, reinsurance and brokers, and other intermediaries. Healthcare is covered separately.

HfS Blueprint Report ratings are dependent on a broad range of stakeholders with specific weightings based on 1,109 stakeholder interviews from the 2014 State of Outsourcing Survey that covered:

• Enterprise Service Buyers • Service Providers • Industry Influencers (sourcing advisors and management consultants) • HfS Sourcing Executive Council Members • HfS Research Analysts

Introduction to the HfS 2015 Blueprint Report:

Insurance As-a-Service


Insurance Operations Value Chain BPO and Platform-based Business Services for P&C and L&A carriers

Policy Serving

• Closed book policy serving [life and annuities-specific]

• Policy set-up and maintenance: Verification, set-up, change, issuance, cancellations, reinstatement, change in beneficiaries

• Premium processing and administration

• Premium audits • Billing: Payment

processing, collections, declines/ cancellations, maturities

Claims Administration

• Front end processing: Application data entry, mailroom scanning, document imaging

• Core claims Processing functions: claims notice, adjudication, pricing

• Payment analysis: Claims overpayment and recovery, fraud and abuse

• Billing: Payment processing, collections, declines/ cancellations, subrogation

• Claims analytics

New Business

• Data management

• Channel support

• Quotes

• Premium calculations

• Sales/quotes acceptance and conversion

• Customer retention/ cross and upsell

• Customer/marketing/sales analytics (hit ratio, retention)

Distribution Channel Management

• Agency administration: Provider set up, terminations, contracting, license registrations

• Agency renewal

• Commission billing

• Agency billing

• Broker collections

• Customer service

Actuarial & New Product Development

• New product development

• Underwriting support

• Risk management

• Actuarial statutory reporting

• Reinsurance

• Product development analytics

• Underwriting and pricing analytics

• Other regulatory reporting or compliance tasks

Enabling Technologies

Digitization & Robotic Automation Analytics Mobility Social Media Cognitive Computing Artificial Intelligence

Operating Models and Platforms

Outsourcing Shared Services GBS COEs BPaaS/SaaS/IaaS TPAs


A market with a selectively growing appetite for As-a-Service: We see increased investment and interest from services buyers along with service providers to modernize core processes across the outsourced/offshored/in-house/partner ecosystem. Service providers, after more than a decade of technology and business services expertise for insurance processes, are in a position to offer more consultative support to help design solutions and even operating models that are more modular, technology enabled and future-ready. Buyers are willing to act based on their internal culture, appetite for change and established relationships with service providers. Insurance As-a-Service is a reality for a growing subset of insurance BPO/BPaaS engagements today.

Winner’s Circle disrupted by the focus on innovation and As-a-Service: This refresh moved to a 50:50 split for Innovation vs. Execution in our scoring, based on our updated market insight and the feedback from buyers through our work on the Eight Ideals of the As-a-Service Economy. As a result, we saw the entry of Infosys, Cognizant and WNS into the Winner’s Circle.

Cognizant advanced due to the strong progress it has made in the last 18 months in integrating its insurance assets and partnerships, driving new business growth. Infosys has built a strong reputation based off its start with McCamish and made progress on its BPaaS strategy. WNS’ focus on outcome based models and embedded analytics coupled with its flexibility and insurance knowledge helped it advance in position.

TCS and EXL lead the market on Insurance As-a-Service, both on articulating their vision and executing at scale. They are the ones to beat in their respective client markets.

Genpact and Concentrix continue to hold onto their leadership position based on solid execution and articulation of their As-a-Service vision; they will need to make strong investments to execute in the changing competitive landscape for As-a-Service.

Key Highlights – State of the Insurance As-a-Service Market

http://www.hfsresearch.com/The Ten Key Tenets of the Emerging As-a-Service Economy
















High Performers are picking their sweet spots to invest in As-a-Service: Some service providers like Dell are focused on New Business, some like Sutherland on Distribution Channel Management, and others such as Accenture, Capita, Xchanging and CSC retain their established relationships and contracts, and are starting to embed As-a-Service components into legacy engagements.

The High Performers are at an inflection point. Since the last Blueprint, some have already pulled away in terms of differentiation to join the Winner’s Circle (WNS, Infosys and Cognizant.)

Dell and Sutherland GS are the ones to watch, as we expect traction in the next couple years as Dell modernizes its platform and tackles active blocks of business, and SGS makes in-roads with core insurance processes led by RPA.

Wipro and Accenture have not shown much growth in the last 18 months, and we do not see them as investing heavily into Insurance As-a-Service. They will need to rethink their strategies in this competitive market if they want to grow beyond their existing clientele.

Key Highlights – State of the Insurance As-a-Service

Market (contd.)


Business models are changing in insurance, and service providers are in the midst of the storm: On one hand, carriers have ageing distribution networks with traditional agents and other intermediaries, while emerging ecommerce and direct sales channels continue to proliferate. Carriers are struggling to understand how to shift the sales paradigm with sales and interactions. Some of this requires new capability development in going direct to consumers for New Business—setting up outbound and inbound sales and marketing operations, ecommerce channels, etc. Service providers are reacting accordingly to facilitate this growth, with more focus on the New Business service area than in late 2013, early 2014.

Growth and focus on TPA model: More private equity investors and reinsurance companies are taking on blocks of business, with the need for strong execution arms that are pushing more responsibility to TPAs. Similarly, ramped up new product development is driving more blocks into run-off. As a result, service providers have scrambled to acquire TPA licenses to service end-to-end insurance processes. We see far more TPA plays emerging in the last 18 months.

Service providers have progressed on integrating acquired assets: Those assets include platforms (e.g., McCamish), captive centers (e.g., Marsh, ING, Universal American) and niche capability acquisitions (e.g. Strataware, MedConnection). The integrated assets have begun to impact the vision and execution of their acquiring service providers a lot more tangibly than 18 months ago.

Changes Since The Last Insurance BPO Blueprint (Q1 2014)


Mid-market carriers not burdened by legacy are aggressively exploring new options to develop their target operating models: They are looking beyond low hanging fruit in labor arbitrage, small scale automation and consolidation to evaluate standard operating structures globally for processes and labor.

Technology is key to insurance Target Operating Model (TOM) development: Ambitious carriers seek 1-2 scalable technology platforms that can standardize workflows, data structures, interfaces, and staff and customer experiences.

One carrier described their 5 year TOM plan as, “having a single system with similar products across markets, processes defined globally operating as more of a commodity from an operations perspective.”

Changes Since The Last Insurance BPO Blueprint (Q1 2014)

(contd.)

Research Methodology


Research Methodology

Data Summary

Data was collected in Q2 2015, covering buyers, service providers, and advisors/influencers of core insurance operations.

This Report is Based On: Tales from the trenches: Interviews were

conducted with buyers who have evaluated service providers and experienced their services. Some were supplied by service providers, but many interviews were conducted by HfS Executive Council members and participants in our extensive market research.

Sell-side executive briefings: Structured discussions with service providers were intended to collect data necessary to evaluate their innovation, execution and market share, and deal counts.

HfS “State of Outsourcing” survey: The industry’s largest quantitative survey, conducted with the support of KPMG, covering the views, intentions, and dynamics of 1,300+ buyers, providers, and influencers of outsourcing.

Publicly available information: Financial data, website information, presentations given by senior executives, and other marketing collateral were evaluated.

19 Service Providers Covered:


Key Factors Driving the HfS Blueprint

Evaluation Criteria

Two major factors were evaluated:

• Execution, which represents service providers’ ability to deliver services. It includes:

– Solutions in the Real World – Quality of Customer Relationships – Flexibility

• Innovation, which represents service providers’ ability to improve services. It includes:

– Vision for End-to-End Process Lifecycle

– Investment In Future Capabilities – Leveraging External Drivers

Criteria Weighting

Criteria are weighed by crowdsourcing weightings from the four groups that matter most:

• Enterprise Buyers (revenues >$5B) (20%)

• Buyers (20%)

• Service Providers (30%)

• HfS Research Analysts Team (20%)

• Advisors, Consultants, and Industry Stakeholders (10%)

Weightings from this report come from HfS’s 2014 State of Outsourcing Study


HfS Blueprint Scoring Percentage Breakdown

EXECUTION 50.00% Quality of Customer Relationships 23.30%

Quality of Account Management Team 11.90%

How Service Providers Engage Customers and Develop Communities 4.66%

How Service Providers Incorporate Customer Feedback 6.74%

Real-World Delivery Solutions 13.16%

Actual Delivery of Services for Each Sub-Process 5.78%

New Business 1.16% 1.16%

Agency Management 1.16%

Claims Administration 1.16%

Policy Serving 1.16%

Actuarial and New Product Development 1.16%

Geographic Footprint and Scale 3.18%

Usefulness of Services to Specific Client Needs of All Sizes 4.20%

Flexibility to Deliver End-to-End Solutions and Point Solutions 4.20%

Flexible Pricing Models to Meet Customer Needs 13.54%

INNOVATION 50.00%

Vision for End-to-End Process Lifecycle 19.56%

Investment in Future Capabilities 5.06%

Vision for Insurance As-a-Service Capabilities 10.39%

Continuous Improvement Methodology and Capability 4.11%

Vision for Industry-Specific Solutions 16.86%

Ability to Leverage External Value Drivers 13.58%

Leverage New Technology, Security, Social Media, Mobility, and Cloud Capabilities 8.58%

Incorporate Regulatory Requirements Quickly & Proactively 5.00%

TOTAL 100.00%


Execution Definitions

EXECUTION How well does the provider execute on its contractual agreement and how well does the provider manage the client/provider relationship?

Quality of Customer Relationships How engaged are providers in managing the client relationship based on the following metrics: quality of account management, service provider / client engagement, and incorporation of feedback?

Quality of account management team What is the quality level of professional skills in the account management team?

How service providers engage customers and develop communities

How well does the service provider engage clients and develop client communities?

How service providers incorporate customer feedback

How have service providers taken feedback and incorporated that feedback into their product/solution?

Real-World Delivery Solutions Does the solution provided compare favorably to the service agreed upon when taking into account delivery of services for each sub-process and geographic footprint and scale?

Actual delivery of services for each sub-process

Taking into account each sub-process and the entire macro process, does each sub-process sum to successful delivery of the service being provided? For example, in the finance and accounting macro process of order-to-cash, are all sub-processes being delivered upon successfully?

Geographic footprint and scale Specific to the category, to what degree do service providers have geographic locations that offer strategic value, and do they have scale?

Usefulness of services to specific client needs of all sizes

How flexible and experienced are providers when tailoring solutions based on client size, location, and type of solution (end-to-end and single point)?

Flexibility to deliver end-to-end solutions and point solutions

How flexible are providers with delivering multi-process end-to-end solutions versus single point solutions?

Flexible Pricing Models to Meet Customer Needs How flexible are providers when determining the pricing of contracts? Are they willing to make investments into the client’s firm for long-term growth?


Innovation Definitions

INNOVATION Innovation is the combination of improving both services and business outcomes.

Vision for End-to-End Process Lifecycle The strategy for delivery of services to each part of the value chain of processes. For example, in finance and accounting, the components of the value chain may include order to cash, record to report, and procure to pay. In customer relationship management, the components may include outbound service, inbound service, quality, training, workforce management, call routing, self service, and customer insights/analytics.

Investment in future capabilities A clear understanding is present about what value levers exist and how the service provider will deliver that value by investing in future capabilities. Examples of value may include labor arbitrage, technology, analytics, quality, revenue, global scale, and flexibility.

Vision for insurance As-a-Service capabilities How does the service provider articulate its vision for future delivery and engagement models, according to HfS’ outlined Eight Ideals of the As-a-Service Economy?

Continuous improvement methodology and capability

How well does the provider execute on improving business process and capabilities of their solutions?

Vision for Industry-Specific Solutions Does the provider have a vision for services specific to certain industries?

Ability to Leverage External Value Drivers How well have providers integrated external value drivers into their services? Examples include cloud solutions, security enhancements, incorporation of regulatory changes, and use of new collaborative tools.

Leverage new technology, security, social media, mobility, and cloud capabilities

How well does the provider leverage new technologies/enhancements, mobility functionality, and cloud capabilities into their solutions?

Incorporate regulatory requirements quickly and proactively

How well does the provider incorporate the latest regulatory requirements and proactively integrate future regulatory requirements?







Definitions of Types of Innovation Used By Service Providers

Operational

New to function or division, but achieved elsewhere in client’s company

Incremental

New to client, but achieved elsewhere in client’s industry

Breakthrough

New to client’s industry and fundamentally new to any industry

Radical

New to client’s industry, but achieved in other industries

Innovation Value Chain

Key Market Dynamics


Key Industry Forces Driving Insurance Carriers To Rethink

Traditional Operating Models

Managing regulatory

pressure and risk

management Reducing expense

ratios and total cost to

serve

Improving member retention

and creating a marketing

focus Growing new

business in global

markets

Integrating disparate

operations and

technology assets from

M&A

Driving operational efficiency

and flexibility


Blurring Engagement Models For Insurance Operations

End-to-end TPA Proprietary Platform +

BPO support BPO Support With

Insurance Expertise Technology Licensing

Model Managing integrated end-to-end services on behalf of client, working on their systems or converting to proprietary platforms

Hybrid BPO support and core proprietary platform usage, primarily for policy and claims management, emerging in other areas

Managing a wide range of BPO services on clients systems

Developing/Acquiring key software assets for independent license and use

Pricing

Transaction based, SaaS Transaction based, subscription based

FTE, T&M and transaction based

License fees, Subscription based

Competitive Pressures

Legacy players, comprehensive service set, onshore delivery

Long term lock in, process efficiencies

Deep domain niches and high value service areas

Industry leading, feature-rich and market sensitive technology solutions

Major Players

Concentrix, Dell, EXL, Infosys McCamish, TCS

TCS, EXL, Dell, CSC, Infosys McCamish, Xchanging

Cognizant, EXL, WNS, Genpact, Capita, Accenture, niche domestic players

CSC, Concentrix, Infosys McCamish, CSC

HfS sees a blurring of engagement models as insurance service providers try to get closer to their clients’ businesses. Most service providers that have a strong insurance focus have acquired TPA licenses (or are progressing on acquiring them), to be able to truly offer an ‘end-to-end’ insurance operations solution. Platform BPO is now moving beyond claims and policy serving to discrete processes across L&A and P&C.


LEGACY OUTSOURCING AS-A-SERVICE ECONOMY

Insurance As-a-Service Is Based on Realizing the Eight Ideals

of the As-a-Service Economy

Resolve problems by looking first at the process

1. Design Thinking Generate creative solutions by understanding the business context

Complex, often painful technology and process transitions to reach steady state

2. Business Cloud “Plug and play” business services

Fragmented processes requiring manual interventions, multiple technologies

3. Intelligent Automation Blending of automation, analytics, and talent

Operations staff doing mostly transactional tasks

4. Proactive Intelligence Operations focused on interpreting data, seeding new ideas

Ad-hoc analysis on unstructured data with little business context

5. Intelligent Data Real-time applied analytics models, techniques, and insights from big data

Legacy technology investments drain budgets to remain functional

6. Write Off Legacy Use of platform-based services makes many tech investments redundant

Governance staff manage contracts and service levels

7. Brokers of Capability Governance staff manage towards business-driven outcomes

Pricing and relationships based on cost, effort, and labor

8. Intelligent Engagement Pricing and relationships based on expertise, outcomes, and subscriptions

Simplification


The Insurance Market is Increasingly Adopting the Ideals of

the As-a-Service Economy

IDEAL AS-A-SERVICE IDEAL

DEFINITION NON EXISTENT INITIAL EXPANSIVE EXTENSIVE ALL PERVASIVE

Design Thinking Generating creative solutions by understanding the business context

2013-2014 2015

Business Cloud “Plug and play” business services 2013-2014 2015

Intelligent Automation

Blending of automation, analytics and talent 2013-2014 2015

Proactive Intelligence

Operations focused on interpreting data, seeding new ideas

2013-2014 2015

Intelligent Data Real-time applied analytics models, techniques, and insights from big data

2013-2014 2015

Write Off Legacy Use of platform-based services makes many tech investments redundant

2013-2014 2015

Brokers of Capability

Governance staff manage towards business-driven outcomes

2013-2014 2015

Intelligent Engagement

Pricing and relationships based on expertise, outcomes and subscriptions

2013-2014 2015

How the Ideals are progressing in Insurance since the last Blueprint published in February 2014


Insurance Operations Value Chain BPO and Platform-based Business Services for P&C and L&A carriers

Policy Serving

• Closed book policy serving [life and annuities-specific]



• Premium audits • Billing: Payment

processing, collections, declines/ cancellations, maturities


• Front end processing: Application data entry, mailroom scanning, document imaging

• Core claims processing functions: Claims notice, adjudication, pricing

• Payment analysis: Claims overpayment and recovery, fraud and abuse

• Billing: Payment processing, collections, declines/ cancellations, subrogation


New Business

• Data Management

• Channel support

• Quotes


• Sales/ quotes acceptance & conversion

• Customer retention/ cross and upsell


Distribution Channel Management

• Agency Administration: Provider set up, terminations, contracting, license registrations

• Agency renewal


• Agency billing



Actuarial & New Product Development

• New product development


• Risk management


• Reinsurance




Enabling Technologies

Digitization & Robotic Automation Analytics Mobility Social Media Cognitive Computing Artificial Intelligence

Operating Models and Platforms

Outsourcing Shared Services GBS COEs BPaaS/SaaS/IaaS TPAs


State of Sourcing: Claims Administration

Trends Toward As-a-Service

State of sourcing: Claims processing and billing are heavily outsourced, typically to multiple service providers and TPAs.

Retained in-house or given to TPAs: Claims adjudication, payment analysis

Significant drive to digitize and automate claims processing through physical and electronic document intake, data entry via OCR technology and image delivery and storage.

New opportunities to improve claims data through mobility, e.g. apps to capture video and photo data at FNOL stage, track workflows

Bill reviews and subrogation are emerging areas where carriers are interested in BPaaS delivery models and analytics. There is a strong need for standardization.

Specialist partnerships for fraud detection and investigation. We see more sophisticated fraud indicators evolving with wider data availability.


• Front end processing - Application data entry, mailroom scanning, document imaging

• Core claims processing functions - Claims notice, adjudication, pricing

• Payment analysis - Claims overpayment and recovery, Fraud and Abuse

• Billing - Payment processing, collections, declines/ cancellations, subrogation, recoveries


Key carriers concerns: High loss ratios, fraud and claims leakage, waste from process inefficiencies, compliance and turnaround time


State of Sourcing: Policy Serving

Policy Serving

• Closed book policy serving [Life and Annuities-specific]



• Premium audits

• Billing: Payment processing, collections, declines/ cancellations, maturities

Trends towards As-a-Service

State of sourcing: TPAs (for L&A) and BPO service providers predominantly service policy setup and maintenance, premium processing and billing. Services buyers typically prefer onshore delivery for contact center services, where sometimes this operation is retained in-house with shared service centers. However, we increasingly see these captives being sold to service providers as buyers write off legacy.

Executed by TPAs or specialists: Premium audits.

Tremendous interest in enabling self-service, which will reduce the need for interactions with individual policyholders as well as employers. Key investments in next-generation online portals, ebilling and epolicies.

Trend towards getting 360 degree views of policyholders across lines of business to develop hybrid product and marketing strategies. This requires substantial change management to enable more data sharing and platform standardization/integration.

Key carrier concerns: Customer engagement and retention especially in P&C, reducing cost to serve especially for L&A closed block


State of Sourcing: Distribution Channel Management

Distribution Channel

Management

• Agency administration: provider set up, terminations, contracting, license registrations

• Agency renewal


• Agency billing



• Agency network management

Trends Towards As-a-Service

State of sourcing: A few BPO service providers are acquiring agent licenses to do outbound sales, and otherwise supporting backoffice services for agency management.

Where dedicated agents are not an option, many carriers consider agents and brokers as their customers; customer experience is a key focus area in this context.

Tremendous interest in enabling self-serve and facilitating web and mobile portals to improve agent experience.

Commission management is a growing concern where incorrect/excessive commissions and incentives are not monitored. This is due to unstandardized processes for payouts and network management, creating a new area for interest in technology enablement.

Key carrier concerns: Placement rate, agent satisfaction, persistency, channel optimization


State of Sourcing: Actuarial & NPD

Actuarial & New Product

Development

• New Product development


• Risk management


• Reinsurance




Trends towards As-a-Service

State of sourcing: Typically retained in-house, decentralized across lines of business. Specialist service providers do actuarial and underwriting support to the last point of decision making, or have authority on small premiums.

Seen as the core competitive advantage, where carriers that manage and write better risk are more profitable in uncertain markets.

Massive efforts by carriers to improve data and case preparation, workflows, creating a strong push on:

automation for straight through processing on low risk products with robust business rules

analytics to improve risk profiling for actuaries

platforms to support better workflows and work prioritization for expensive underwriter time

services to support case preparation and data gathering.

Key carrier concerns: Underwriting effectiveness, risk management, speed to market.


State of Sourcing: New Business

New Business

• Data management

• Channel support

• Quotes


• Sales/quotes acceptance and conversion

• Customer retention/ cross and upsell


Trends Towards As-a-Service

State of sourcing: A mix of generalist call center BPOs and insurance BPO providers handle inbound and outbound sales processes.

New opportunity for TPAs and BPO service providers to handle work in active blocks of business.

Direct distribution is markedly rising. Carriers especially in the mid-market or targeting new geographies/markets are aggressively undertaking new product development.

Carriers need flexible partners for execution on outbound marketing, multi-channel support, fulfillment on policy issuance, etc.

Many are choosing not to retain new product rollouts in-house.

Investments in e-apps, e-sig, e-policy issuance, web optimization for greater sales conversions, multi-channel customer interactions such as chat and social features.

Key carrier concerns: Intense competition, cost of issuance, cycle time to issue, speed to market.


4 out of 5 Carriers Expect More Digital Enablement in Core

Operations

Source: ‘Moving Insurance BPO Into The As-a-Service Economy’, HfS Research 2015 N= 34 Insurance BPO buyers

21%

59%

9% 12%

I expect significant digitalenablement within core

insurance operations

I expect some digitalenablement within core


I don’t expect any digital enablement within core


‘Digital’ is still a buzzword and I don’t see it as

applicable to this industry

Do you expect your insurance BPO provider to bring digital enablement into your insurance operations?

http://www.hfsresearch.com/moving-insurance-bpo-into-the-as-a-service-economy






Carriers Expect Customer Facing Functions To Be Most

Impacted By Digital

13% 13% 13% 13% 13% 17% 13% 13%

26% 26% 30% 22% 22% 17% 22% 17%

26% 30% 17% 30%

9% 22%

30% 30%

26% 13% 30% 30%

35% 22%

17% 26%

9% 17%

9% 4%

22% 22% 13% 9%

Don't know

Strong impact

Moderate impact

Minimal impact

No or insignificantimpact


To what degree will “digital” (including modern mobility, analytics, automation, cloud, and social components) change the design and execution of the following core insurance business functions?







Insurance Carriers Expect Improvements from Using

BPaaS For Major Processes

43% 39%

30% 30% 35% 35%

43%

35% 52% 57%

43% 43%

4%

4%

13% 4%

0% 4%

9%

22%

4% 4%

17% 17%

New business Agencyadministration

Claimsadministration

Policy serving Actuarial andnew productdevelopment

Regulatory andcompliance

support

Don't know

Major improvement

Some improvement

Insignificantimprovement

To what degree will the following operational areas benefit from modern business platform-based delivery?








2 out of 3 Carriers Are Ready To Outsource Complex

Processes

56%

11%

19%

14%

I am or will work with myprovider to outsourcemore complex middle

and front officeprocesses

I am inclined tooutsource complex

processes, but not withmy current provider

I will keep the scope ofmy outsourcing limited to

back-office insuranceoperations

Currently do notoutsource/plan to

outsource

Are you more inclined today to work with your service provider beyond back-office support, including more complex middle and front office processes?







Service Provider Grid


WINNER'S CIRCLE:

Organizations that demonstrate excellence in both execution and innovation.

• From an execution perspective, providers have developed strong relationships with clients, execute services beyond the scope of hitting green lights, and are highly flexible when meeting clients’ needs.

• From an innovation perspective, providers have a strong vision, invest in future capabilities, have a healthy cross-section of vertical capabilities, and have illustrated a strong ability to leverage external drivers to increase value for their clients.

HIGH PERFORMERS:

Organizations that demonstrate strong capabilities in both execution and innovation but are lacking in an innovative vision or execution against their vision.

• From an execution perspective, providers execute some of the following areas with excellence, but not all areas: high performers have developed worthwhile relationships with clients, execute their services and hit all of the green lights, and are very flexible when meeting clients’ needs.

• From an innovation perspective, providers typically execute some of the following areas with excellence, but not all areas: have a vision and demonstrated plans to invest in future capabilities, have experience delivering services over multiple vertical capabilities, and have illustrated a good ability to leverage external drivers to increase value for their clients.

To distinguish providers that have gone above and beyond within a particular line of delivery, HfS awards these providers a “Winner’s Circle” or “High Performer” designation. The below provides a brief description of the general characteristics of each designation:

Winner’s Circle and High Performers Methodology


HfS Blueprint 2015: Insurance As-a-Service IN

NO

VA

TIO

N

EXECUTION

High Performers

Winner’s Circle

Concentrix

Capita

TCS EXL

Serco

Xerox NIIT Technologies IGATE

SGS Mphasis

Source: <type source here> Note: <type note here>

CSC Xchanging

Dell Accenture

Wipro

WNS

Infosys

Genpact

Cognizant


EXECUTION

• Servicing the Entire Insurance Value Chain - With significant domain expertise and experience

working on core processes, multiple service providers took the lead on being able to support the entire insurance value chain. In particular Genpact, TCS, WNS and EXL can perform complex, high-value services.

• Offering Flexible Pricing Models - Several service providers increased effective use of

flexible pricing models. WNS Cognizant, Concentrix, EXL, IGATE, TCS and Wipro stood out for their willingness to also invest in insurance engagements over the long term.

• Fostering Customer Communities - Clients stressed the need for engaging with peers to

discuss best practices, particularly on the use and impact of automation

- Xchanging and Dell have the most satisfied clients for this category, as they have been able to best facilitate user group activities, forums, conferences and executive meetings for insurance clients.

INNOVATION

• Vision for Insurance As-a-Service Capabilities - HfS sees a broad shift among several service providers

to increased engagement with insurance clients to define solutions and create a vision that moves away from “lift and shift” transactional outsourcing to include more As-a-Service capabilities. The Winner’s Circle are leading this change, starting with Concentrix, EXL, TCS, Cognizant and Infosys.

- We also see a growing appetite and investment for change from emerging players such as Mphasis, Sutherland and IGATE that have yet to gain scale.

• Use of New Technology, Security, Social Media, Mobility, and Cloud Capabilities

- Cognizant, Sutherland, Infosys and Genpact clients are the most satisfied with the level of external value drivers that their service providers bring to the table by embedding digital components into BPO processes. RPA and analytics are the key areas where clients are seeing results today.

• Incorporation of Regulatory Requirements Quickly And Proactively

- CSC, Xchanging and WNS have strong frameworks and resources on the ground to help insurance clients grapple with the ever-changing regulatory compliance and reporting activities.

Major Service Provider Dynamics – Highlights

Service Provider Profile


TCS

Blueprint Leading Highlights

Execution • Quality of account

management • Flexible pricing models to meet

customer needs • Delivery of policy serving • Delivery of claims

administration • Geographic footprint and scale

Innovation • Investment in future

capabilities • Vision for insurance As-a-

Service capabilities • Vision for insurance-specific

solutions • Continuous improvement

methodology and capability

Relevant Acquisitions and Partnerships

Key Clients Global Operations Centers Proprietary Technologies

Partnerships with: • Cloud infrastructure provider Savvis

• Friends Life • Phoenix Group • Sunlife of Canada • NEST • Guardian Financials • FTSE 100 mutual insurance company • Fortune 100 annuity and retirals provider • Fortune 50 insurer • India operations of a U.S. top 5 life insurer • Top 5 superannuation player in Australia • U.S. division of fortune 100 multiline insurer • Fortune 500 financial services and annuity provider • Fortune 100 insurance provider • Leading provider of P&C personal lines • Leading U.S. insurance brokerage • U.S. retiral services of a global 500 insurer

• Headcount: 7,600 FTEs

• Locations: Primarily in India (Mumbai, Pune, Chennai, Nagpur, Gurgaon, Bangalore) and the UK (Peterborough, Liverpool, Bristol)

Growing presence in the U.S. (Cincinnati, OH) and Mexico (Guadalajara)

Besides UK, delivering customer interaction management in the Philippines (Manila)

• TCS BαNCS (Technology platform that services banking and insurance companies and allows delivery of services in BPaaS model)

• TCS ACE (Analytics platform) • TRAPEZE Tools (Customized E2E workflow &

Knowledge management tool, talent management, risk management and reporting, model validation tool as domain specific)

• NextGen RPA (Thinking Brain and Executing Arms) • FORE

TM (provides customers with operational

agility while ensuring regulatory compliance)

Strengths Challenges

• One of the biggest core insurance BPO practices, 7,600 FTEs in 6 locations across India, the UK and the U.S. for insurance BPO. It has significant UK delivery capabilities through subsidiary Diligenta.

• Critical business platform valued by insurance majors for managing core administration tasks as well as analytics and automation accelerators. BαNCS has particularly helped the service provider in servicing long-term platform BPO engagements such as Friends Life and Phoenix Life. Since the last Blueprint, TCS has made progress with As-a-Service where BαNCS is now running on a BPaaS delivery model for 3 clients globally.

• Patient and collaborative account management. TCS’ clients commend its account management capabilities as being very positive and forward looking, rather than short term sales-focused.

• Credibility as an insurance operations expert. Clients feel confident of TCS’ vertical knowledge and expertise because of the service provider’s BαNCS platform, as well as the quality of IT expertise. Clients also appreciate TCS’ delivery excellence with consistent performance on BPO operations.

• Strong early progress on RPA and digital since last Blueprint. TCS is piloting several RPA interventions in new business and underwriting, agency management and claims. Examples include underwriter workload and productivity management, policy admin-claims system integration to reduce cycle time, and improve recovery rates. TCS has also executed on multiple digitization and digital initiatives, particularly for front end digitization of new applications, and creating social servicing channels.

• Relative lack of flexibility in downstream configuration of BαNCS platform. Clients mention that building upgrades or making changes to their BαNCS configuration is more challenging than they anticipated from a modern, flexible platform solution. This is especially relevant given the frequency of regulatory changes in the L&A market.

• Process reengineering for BPO. Clients would like to see improvements in how TCS handles BPO processes in the front and back-office by implementing more reengineering and best practices (e.g., not just automating a sub-process but questioning the need for it). TCS has delivered the benefits of design thinking to some clients and it has the opportunity to expand this more broadly.

A market leader in the L&A segment in the UK with a strong BPaaS potential for closed books

P&C L&A

Winner’s Circle

Market-Wrap and

Recommendations


What’s Next For Insurance As-a-Service

Insurance operating models will continue to evolve to a more hybrid approach with in-house decentralized, in-house centralized, Shared Service Centers, TPAs and IT-BPO service providers as insurers gradually “let go” with:

More complex functions along the value chain (e.g., claims adjudication, actuarial and underwriting support, CAT modeling)

More integrated technology and BPO solution and delivery models that resemble Insurance As-a-Service, although in point solutions initially

More collaboration and consultative support from service providers on modernizing core insurance operations, irrespective of delivery responsibility and geographic spread

The use of robotic process automation (RPA) in core insurance processes led by early wins in underwriting and claims automation to impact other areas (e.g., policy maintenance, agent commission billing). RPA also needs to be widely adopted in FTE based commercial models as well going beyond the initial application by service providers in transactional and gain sharing based arrangements.

Service providers will continue to struggle to attract and retain experienced insurance domain experts in client-facing capacities such as presales, solution development, program leaders, especially offshore-heavy service providers.


What’s Next For Insurance As-a-Service (contd.)

Service providers will continue to make investments that will disrupt a mature market, including:

Acquisitions of captive insurance operations, particularly onshore assets.

A wider range of partnerships to facilitate BPaaS delivery models, including between the service providers evaluated in this Blueprint, apart from pure-play software vendors.

Cross-pollination of learning and experiences from different clients markets, based on core market strengths and growth aspirations beyond them (e.g., taking UK best practices and technologies to Australia).

Continued expansion of technology platforms to support more sub-processes and service areas that are not within the BPO/BPaaS purview today.

Continued evolution of embedding analytics and RPA into core insurance processes, towards becoming standardized solution components rather than add-on value drivers.


HfS Expects Greater Traction On the Adoption of Ideals of

the As-a-Service Economy By Insurance Service Providers

In 2017 IDEAL

AS-A-SERVICE IDEAL DEFINITION

NON EXISTENT INITIAL EXPANSIVE EXTENSIVE ALL PERVASIVE

Design Thinking Generating creative solutions by understanding the business context

2013-2014 2015 2017

Business Cloud “Plug and play” business services 2013-2014 2015 2017

Intelligent Automation

Blending of automation, analytics and talent 2013-2014 2015 2017

Proactive Intelligence

Operations focused on interpreting data, seeding new ideas

2013-2014 2015 2017

Intelligent Data Real-time applied analytics models, techniques, and insights from big data

2013-2014 2015

2017

Write Off Legacy Use of platform-based services makes many tech investments redundant

2013-2014 2015 2017

Brokers of Capability

Governance staff manage towards business-driven outcomes

2013-2014 2015

2017

Intelligent Engagement

Pricing and relationships based on expertise, outcomes and subscriptions

2013-2014 2015 2017


2015-16 Recommendations: Enterprise Buyers

Make concerted efforts to align stakeholders around the As-a-Service economy: From our discussions with clients, service providers and other influencers, we see a pronounced lack of synergy around core operations from insurance carriers in P&C and L&A. Lines of business mostly operate independently, even though there are similarities in processes. Relationships with service providers for IT and BPO are still isolated for a lot of buyers today, especially where they have undergone M&A and inherited contracts. Insurance carriers, particularly in L&A, have a heavy reliance on TPAs, which has created a fragmented ownership of processes where performance is not comparable or consolidated across service providers. Centralized shared services executives need a bigger voice and representation at the table today to influence enterprise-wide decision making on core processes.

Move past the notion that your operational setup is too complex and unique for a service provider to understand: Further, move beyond viewing your service provider as the “BPO,” “call center,” “backoffice” or “IT” provider—digital is blurring engagement boundaries. As enterprise services buyers, invite the service providers and TPAs that run the majority of your operations to collaborate with you on future decision making around target operating models. With this approach all the cogs in the wheel will be aligned to move forward in sync. Market leading service providers have gained experience working across different insurance environments and are in a great position to provide guidance on industry best practices and cross-vertical learning. HfS observes too many instances of buyers admitting that their service providers are capable but rationalizing by stating, “we’re not set up to work with them because of our company’s unique challenges.” We see examples of how collaboration with service providers and TPAs has helped some carriers gain more speed to market while simplifying their legacy technology and services environments.


2015-16 Recommendations: Enterprise Buyers (contd.)

Set clear expectations for areas of digital enablement from service providers – and make switches where necessary: We see an overwhelming interest in inserting digital enablement into core insurance BPO processes from buyers. However, these are largely driven by the service provider looking to bring new thinking and solutions to the table—and the capabilities vary. As enterprises operating in an increasingly digital market, there are no 12-18 month luxuries anymore for implementing new solutions. HfS recommends that you ask all your service providers and TPAs to share their vision for impacting your processes through different digital components, and offer you newer solutions throughout the lifecycle of your contract; waiting 5-7 years for a renewal and renegotiation is no longer an option for getting digitally enabled processes.

Hold both internal leaders and TPAs accountable for the next generation of delivery models in closed block processing: HfS observed a definitive lack of interest from operations leaders around innovations in closed block processing (e.g., using robotic process automation and analytics to reduce manual interventions and better anticipate exceptions in policy serving). These initiatives will result in significant cost saving and efficiency gains in the near term, and yet buyers weren’t enthused because the “nature of the processes” don’t inspire investments (i.e., dwindling volumes, no new revenues). While some responsibility does rest with service providers, we believe that buyers need to fight the status quo internally first, and inject new thinking into how to reduce total cost to serve and maintain service quality in the As-a-Service Economy.


2015-16 Recommendations: Service Providers Deliver on promises for technology platforms that are modern and flexible. We hear clients from

multiple platform BPO service providers comment on how they were sold technology platforms that are modern, agile and flexible but their experience has been lacking beyond basic benefits. This is especially relevant for insurance where legacy systems span 60 years in some cases, and regulatory requirements change frequently. Many clients feel they are not getting value for their investments to date, as they do not have access to new upgrades and features available to new platform subscribers. The insurance vertical was one of the first and most aggressive in pursuing platform based BPO opportunities, and the progress has almost come full circle now, where other functional areas such as HR have caught up and surpassed platform capabilities with examples such as Workday. Beyond enabling cloud-based delivery, services buyers are increasingly coming to expect single code bases, with seamless updates and new functionalities pushed through a multitenant deployment and available for customers to use at their discretion.

Ensure that clients realize the benefits of RPA. Some of this is a result of service providers not passing on the savings from having automated sub-processes, since they collect transaction fees in most cases. This will change in the next couple years as more contracts come up for renewal, and smart service providers adjust their operations strategies to win business leading with financial and efficiency benefits realized by RPA for major processes.

Commit to rethinking business models to support more of an As-a-Service model. HfS sees the insurance vertical as ripe for a rethink in design and execution for the As-a-Service Economy. The foundations are already present—mature processes, service providers’ domain experience, buyers’ appetites for platform-based delivery, and burning platforms for change in business models for both L&A and P&C. Winning service providers are starting to help clients navigate through disruption by offering scalable and adaptable technology-enabled solutions.

About the Author


Reetika Joshi

[email protected]

@joshireetika

Research Director, Consumer-Driven Operations & Analytics Strategies, HfS Research: Cambridge, MA

Overview

• Tracks verticalized technology-enabled BPO opportunities in insurance and retail • Tracks enterprise analytics services and marketing and digital customer experience management

services • Conducts Blueprint reports on service providers across service areas in global sourcing

Previous Experience

• Project Manager in the sourcing research wing of the business research and consulting firm ValueNotes, encompassing a range of responsibilities, including research product design and development for the outsourcing community, management of custom research engagements, and development of thought leadership through targeted content and community interaction

• Niche BPO and KPO coverage, including analytics, medical transcription, market research, and e-learning

• Bespoke engagements, including in-depth competitive intelligence studies, market and investment opportunity assessments, demand-side surveys, and marketing communication optimization for outsourcing buyers, providers, consultants, and investors

Education

• Bachelor’s in Business Administration, Symbiosis International University, India • Master’s in Marketing Management with Beta Gamma Sigma honors, Aston Business School, UK

mailto:[email protected]


About HfS Research

HfS Research is the leading analyst authority and global network for IT and business services, with a specific focus on global business services, digital transformation, and outsourcing. HfS serves the research, governance, and services strategy needs of business operations and IT leaders across finance, supply chain, human resources, marketing, and core industry functions. The firm provides insightful and meaningful analyst coverage of best business practices and innovations that impact successful business outcomes, such as the digital transformation of operations, cloud-based business platforms, services talent development strategies, process automation and outsourcing, mobility, analytics, and social collaboration. HfS applies its acclaimed Blueprint Methodology to evaluate the performance of service and technology in terms of innovating and executing against those business outcomes.

HfS educates and facilitates discussions among the world's largest knowledge community of enterprise services professionals, currently comprising 150,000 subscribers and members. HfS Research facilitates the HfS Sourcing Executive Council, the acclaimed elite group of sourcing practitioners from leading organizations that meets bi-annually to share the future direction of the global services industry and to discuss the future enterprise operations framework. HfS provides sourcing executive council members with the HfS Governance Academy and Certification Program to help its clients improve the governance of their global business services and vendor relationships.

In 2010 and 2011, HfS Research's Founder and CEO, Phil Fersht, was named “Analyst of the Year” by the International Institute of Analyst Relations (IIAR), the premier body of analyst-facing professionals, and achieved the distinctive award of being voted the research analyst industry's Most Innovative Analyst Firm in 2012.

In 2013, HfS was named first in rising influence among leading analyst firms, according to the 2013 Analyst Value Survey, and second out of the 44 leading industry analyst firms in the 2013 Analyst Value Index.

Now in its seventh year of publication, HfS Research’s acclaimed blog “Horses for Sources” is widely recognized as the most widely read and revered destination for unfettered collective insight, research, and open debate about sourcing industry issues and developments. Horses for Sources today receives over a million web visits a year.

To learn more about HfS Research, please email [email protected].

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