Service providers help tradition-bound firms embrace AI, digital transformation to meet changing customer expectations, ISG Provider Lens report says
Insurance carriers in North America are becoming even more data-driven in response to rising costs and other market challenges, according to a new research report published by Information Services Group (ISG) a leading global technology research and advisory firm.
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“New technologies and automation are driving hyper-personalized customer experience improvements and operational efficiencies, and at the core of both of these is data.”
The 2023 ISG Provider Lens Insurance Services report for North America finds that traditional insurers are simultaneously wrestling with changing customer needs, growing cybersecurity threats, volatile economic conditions and rising risks from extreme weather and other factors. To become more customer-focused and develop successful products, they need to replace legacy technology and processes and break down silos across operations and IT, ISG says.
“Competing in insurance today requires insurers to become more agile in responding to customer needs while reducing the costs of operations,” said Dennis Winkler, Americas Insurance Industry lead at ISG. “New technologies and automation are driving hyper-personalized customer experience improvements and operational efficiencies, and at the core of both of these is data.”
Insurers are investing in digitalization projects to deliver more value to policyholders, create better policyholder experiences, and make every interaction from policy purchase through filing a claim match customers’ expectations, the report says. To do so, they must identify friction points, make business processes more responsive and utilize intelligent automation and technologies that can track changes in policyholder sentiment.
More companies are now forming holistic partnerships with service providers to make the leap into successful, ongoing innovation, ISG says. Strategic managed services offer carriers faster and more cost-effective access to the digital capabilities, process expertise and specialized talent insurers need. Companies are engaging with providers for services including business process outsourcing (BPO), IT outsourcing (ITO) and third-party administrator (TPA) services.
Life insurance companies’ use of TPA providers has grown significantly as an effective method to reduce the cost of closed books. TPA providers have evolved into strategic partners that also service open books of business, the report says. They bring new technologies and capabilities that allow insurers to offer their customers a new, digital experience.
Artificial intelligence (AI), and large language models (LLM) are already playing a pivotal role in the industry’s digital transformation, and Generative AI will further accelerate this though it may not be the magic wand some expect, ISG says. The benefits may include significant cost optimization, customized insurance products and streamlined processes and improved customer journeys.
However, insurers will need to cultivate and harvest highly granular data to achieve these breakthroughs, and this may pose the biggest challenge. Carriers will benefit from focusing their efforts first on a discipled approach to creating a unified data structure to enable the benefits of AL and LLM, rather than jumping immediately into the much more hyped Generative AI frenzy.
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“The insurers that get the most out of AI will seek input from across the organization about how it can best be used,” said Jan Erik Aase, partner and global leader, ISG Provider Lens Research. “They will need to know what AI can optimize and how this can truly benefit the company and its customers.”
The report also explores other trends affecting the North American insurance industry, including workforce changes and a move toward more cloud-agnostic TPA services.
For more insights into the challenges facing North American insurance companies, including finding new paths to profitability, see the ISG Provider Lens™ Focal Points briefing here.
The 2023 ISG Provider Lens™ Insurance Services report for North America evaluates the capabilities of 49 providers across four quadrants: Life and Retirement (L&R) Insurance BPO Services, Property and Casualty (P&C) Insurance BPO Services, Life and Retirement (L&R) Insurance TPA Services and Insurance ITO Services.
The report names Accenture and Cognizant as Leaders across all four quadrants. It names DXCTech, EXL, Genpact, Infosys, TCS and WNS as Leaders in three quadrants each. HCL is named as leader in two quadrants. Capgemini, Illumifin, LTIMindtree, NTT DATA, Sutherland and Wipro are named as Leaders in one quadrant each.
In addition, Mphasis, ReSource Pro, Sutherland and Zinnia are named as Rising Stars — companies with a “promising portfolio” and “high future potential” by ISG’s definition — in one quadrant each.
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