October 2006: A report, by Pune-based ValueNotes, anticipates that offshoring of insurance services to India will be propelled into a higher growth phase with more than 30 percent annual growth every year for the next three years. This report is an update to an earlier study on insurance outsourcing, where ValueNotes had estimated a growth rate of 21 percent per annum. In reality, the industry has grown at an estimated 23 percent CAGR in the last three years. This is very different from other estimates at that time, which ranged from 30 to 40 percent.
The global insurance industry still lags industries such as banking, financial services and telecom in terms of offshoring maturity. However, insurance industry dynamics have changed rapidly in the last two to three years owing to rising natural calamities, fraud and changing consumer demographics. Mounting cost pressures, increasingly stringent regulatory compliance and the need to differentiate product offerings will make offshoring a growing imperative for the global insurance industry. Revenues from insurance (BPO) offshoring to India currently stand at $690 million, and are expected to grow to around $2 billion by 2010. Further, the industry is expected to employ close to 100,500 persons by 2010.
The Indian offshore services provider landscape consists of captives of large insurance companies, third party vendors and joint ventures. “While traditional captive and third party contracts will continue to be signed, an increasing proportion of offshore contracts will move towards ‘hybrid’ operating arrangements,” believes Arun Jethmalani, CEO of ValueNotes.
Driving the growth in third party as well as hybrid arrangements will be the large third party vendors such as Genpact, EXL Service and WNS, all of whom have significant domain expertise owing to recent acquisitions or a legacy of providing captive insurance services. The other success story is that of the BPO offshoots of IT companies, which have been leveraging their offshoring knowledge, client base and financial backing from their IT parents. In this group, BPO units of companies such as IBM, TCS, Wipro and Infosys (Progeon) have been building insurance capabilities rapidly, and are strongly positioned for the future.
Insurance Practice Head at Genpact, Mr. Mohit Thukral re-iterates, “Product development will be a huge trend in the next two-three years in terms of work related to analytics and product pricing being offshored from India.”
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The ValueNotes Sourcing Practice is one of the largest information providers on the outsourcing industry. The Practice uses a comprehensive, analytical framework providing fresh insights into the fast emerging and yet, complex outsourcing space. We extensively track the space through regular analysis of news and events, continuous primary research and contact with the industry.