Financial Daily from THE HINDU group of publications
Tuesday, Sep 21, 2004
Financial Daily from THE HINDU group of publications Tuesday, Sep 21, 2004 |
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Money & Banking
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Outsourcing Insurance outsourcing revenues to touch $790 m by 2007 Pratap Ravindran
Pune , Sept. 20 INDIAN insurance outsourcing revenues are likely to grow from an estimated $367 million (around Rs 1,682 crore) in 2003 to $790 million (around Rs 3,621 crore) by 2007, represented a compounded annual growth rate of 21 per cent, according to report titled `Global Insurance Outsourcing - The India Perspective: Overview, Trends, Insights and key Vendor Profiles' published by ValueNotes Database. According to the Pune-based ValueNotes Database, a leading provider of business intelligence and research, the potential for insurance outsourcing market is enormous, with over 1,500 Property & Casualty (P&C) insurance companies and 1,300 health insurance companies in the US alone. Globally, the banking, financial services and insurance (BFSI) vertical is the fastest growing segment in outsourcing. India's BFSI outsourcing revenues in 2003 stood at $1.1 billion (around Rs 5,042 crore), which constituted 2.5 per cent of global BFSI outsourcing. The top five Indian vendors in BFSI get 49 per cent of their revenues from BFSI. Insurance companies, the report says, have traditionally been among the slowest adopters of outsourcing/offshoring. "However shrinking margins, higher claims disbursement and increasing competition in recent years, especially post 9/11, have forced insurance companies to look at outsourcing/offshoring to improve efficiencies and channelise resources towards the core functions of product development and innovation." India has several advantages as a leading insurance outsourcing destination. It offers low costs and is an established destination for outsourcing. Indian companies offer near-shore services and IT outsourcers can leverage existing relationships with large insurers. Further, Indian vendors are expanding organically as well as inorganically to establish a multi-location presence, to de-risk their business. Large Indian service providers have, through organic growth or acquisitions, set up centres in US, Canada and other places that qualify as "near-shore" outsourcing destinations and are therefore more acceptable to first time outsourcers. The factors that inhibit insurance companies from offshoring to India include cultural differences and the perception of loss of control. According to the report, several niche providers with relevant domain expertise are emerging, encouraging insurance companies to outsource more value-added services. The growth drivers are common to all verticals - cost saving, ability to focus on core processes of product development, innovation and marketing strategy and minimising risk through multiple delivery centres. For the insurance outsourcing vertical, the critical drivers are:
Fuelled by the success of Aetna in moving their claims adjudication process to India, many other organisations want to tread the same path, the report adds. The report notes that India, in fact, has already become one of the most popular destinations for off-shoring insurance processes. Some of the top insurance companies in the US and Europe such as Cox Insurance Holdings, Aviva Life Insurance, AXA Sun Life have moved one or more processes to India-based captive or third party outsourcing firms. Some of the top players in the insurance vertical include WNS, HTMT, EXL, ICICI OneSource and GTL. Currently around 63 per cent of India's insurance outsourcing revenue comes from the US and around 22 per cent from Europe, West Asia and Asia.
More Stories on : Outsourcing | Insurance
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