Data Taking Center Stage in North American Insurance Industry

Rhea-AI Summary

The Information Services Group (ISG) released a report on the state of insurance carriers in North America, revealing that traditional insurers are becoming more data-driven in response to rising costs and market challenges. The report highlights the need for insurers to embrace digital transformation and AI to meet changing customer expectations. It emphasizes the importance of reducing operational costs while becoming more agile in responding to customer needs. The report also discusses the role of service providers in helping insurers achieve successful digitalization projects and improve customer experiences.

Service providers help tradition-bound firms embrace AI, digital transformation to meet changing customer expectations, ISG Provider Lens™ report says

STAMFORD, Conn.--(BUSINESS WIRE)-- 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 today by Information Services Group (ISG) (Nasdaq: III), a leading global technology research and advisory firm.

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.

“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.

A customized version of the report is available from WNS.

The 2023 ISG Provider Lens™ Insurance Services report for North America is available to subscribers or for one-time purchase on this webpage.

About ISG Provider Lens™ Research

The ISG Provider Lens™ Quadrant research series is the only service provider evaluation of its kind to combine empirical, data-driven research and market analysis with the real-world experience and observations of ISG's global advisory team. Enterprises will find a wealth of detailed data and market analysis to help guide their selection of appropriate sourcing partners, while ISG advisors use the reports to validate their own market knowledge and make recommendations to ISG's enterprise clients. The research currently covers providers offering their services globally, across Europe, as well as in the U.S., Canada, Brazil, the U.K., France, Benelux, Germany, Switzerland, the Nordics, Australia and Singapore/Malaysia, with additional markets to be added in the future. For more information about ISG Provider Lens research, please visit this webpage.

A companion research series, the ISG Provider Lens Archetype reports, offer a first-of-its-kind evaluation of providers from the perspective of specific buyer types.

About ISG

ISG (Information Services Group) (Nasdaq: III) is a leading global technology research and advisory firm. A trusted business partner to more than 900 clients, including more than 75 of the world’s top 100 enterprises, ISG is committed to helping corporations, public sector organizations, and service and technology providers achieve operational excellence and faster growth. The firm specializes in digital transformation services, including automation, cloud and data analytics; sourcing advisory; managed governance and risk services; network carrier services; strategy and operations design; change management; market intelligence and technology research and analysis. Founded in 2006, and based in Stamford, Conn., ISG employs more than 1,600 digital-ready professionals operating in more than 20 countries—a global team known for its innovative thinking, market influence, deep industry and technology expertise, and world-class research and analytical capabilities based on the industry’s most comprehensive marketplace data. For more information, visit www.isg-one.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20231207015905/en/

Will Thoretz, ISG

+1 203 517 3119

will.thoretz@isg-one.com

Julianna Sheridan, Matter Communications for ISG

+1 978-518-4520

isg@matternow.com

Source: Information Services Group, Inc.

FAQ

What is the focus of the ISG Provider Lens™ report for North America?

The report focuses on the state of insurance carriers in North America, highlighting the need for digital transformation and AI to meet changing customer expectations.

What are the challenges traditional insurers are facing in North America?

Traditional insurers in North America are facing challenges such as changing customer needs, growing cybersecurity threats, volatile economic conditions, and rising risks from extreme weather and other factors.

How can insurers become more customer-focused and develop successful products?

Insurers need to replace legacy technology and processes, break down silos across operations and IT, and invest in digitalization projects to deliver more value to policyholders and create better policyholder experiences.

What role do service providers play in the digital transformation of insurance companies?

Service providers help insurance companies by offering strategic managed services, including business process outsourcing (BPO), IT outsourcing (ITO), and third-party administrator (TPA) services, to provide faster and more cost-effective access to digital capabilities and specialized talent.

What technologies are driving improvements in customer experience and operational efficiencies for insurers?

New technologies and automation, including artificial intelligence (AI), large language models (LLM), and Generative AI, are driving hyper-personalized customer experience improvements and operational efficiencies for insurers.

What challenges do insurers face in implementing AI and Generative AI?

Insurers will need to cultivate and harvest highly granular data to achieve the benefits of AI and Generative AI, which may pose the biggest challenge. The report suggests focusing efforts on creating a unified data structure to enable the benefits of AI and LLM before delving into Generative AI.