IT Outsourcing in Insurance – Annual Report 2015: The Digital Frontier

6 Nov 2015
by Aaditya Jain, Archit Mishra, Jimit Arora, Ronak Doshi



Rising customer expectations, tight margins, pricing pressure, threat from new entrants, uncertain economy, and increasing regulatory requirements are the key challenges faced by the insurance industry. To address these challenges, insurance firms are investing in technology solutions and adopting disruptive business models looking to contain cost, improve customer experience, and profitability. The insurance firms have invested in next-generation technologies to stay ahead of competition. The rise of the sharing economy, as a result of technology advancements, poses as both an opportunity as well as a challenge for the insurance firms. The insurance companies have invested in cyber-security, risk & compliance management solutions, automation, cloud & open source technologies, mobility, big data & analytics, Internet of Things (IoT), and social media as they focused on cost reduction, product differentiation, security, and compliance.

As the insurance industry is warming up to adopt digital technology themes, such as big data analytics, mobility, IoT, cloud, AI, and social media, IT service providers are looking to leverage the opportunity by tailoring their offerings with next-generation technologies, developing in-house solution frameworks & accelerators, collaborating with the buyers to invest in innovation, setting up labs & Center of Excellences (CoEs) to demonstrate and evaluate proof-of-concepts, and forming alliances with leading platform providers.

In this research, we analyze the current trends and the future outlook for large, multi-year application outsourcing relationships for the global insurance sector. We focus on:

  • Market trends and activity for large AO relationships in insurance
  • Emerging priorities for buyers and key investment themes in insurance AO
  • Future outlook for 2015-2016

The research also captures key movements in volumes/values of insurance AO transactions, evolving trends, market dynamics, and emerging priorities of buyers in the last 12 months.

Scope of the analysis

  • Industry: Insurance (life, annuity, and pensions and property & casualty); excludes capital markets (investment banking, asset management, custody & funds administration, and brokerage services); retail & commercial banking, and healthcare payers
  • Services: Large (TCV > US$25 million), multi-year (>three years), and annuity-based application outsourcing
  • Geography: Global
  • Sourcing model: Third-party AO transactions; excludes shared services or Global In-house Centers (GICs)


This report is structured across three sections, each containing insights into application outsourcing in the insurance sector, with a specific focus on large-sized contracts:

  • Emerging priorities of buyers and key investment themes in insurance AO:
    • Market dynamics and emerging priorities across the insurance sector
    • Key investment themes
  • Insurance AO overview: Analysis specific to the insurance AO industry with a focus on large transactions:
    • BFSI ITO market overview: Overall BFSI IT Outsourcing (ITO) market size and growth
    • Insurance AO transaction activity and growth trends
    • Demand characteristics for insurance AO services by:
      • Geography
      • Line of business: Insurance (life, annuity, pensions, and P&C)
      • AO subfunctions
      • Buyer size
    • Offshore leverage
    • Global delivery locations
    • Renewal activity
  • Outlook for 2015-2016

Some of the findings in this report are:

  • The global BFSI ITO market size is estimated to have reached US$110-130 billion in 2014
  • Insurance AO overview:
    • Number of new large AO deals declined 31% over 2013, further, their TCV were the lowest in the last five years (declined 81% over 2013) as major insurers faced IT spending cuts
    • There was no major change in the share of deals with Application Development (AD) and Maintenance (AM) in scope (76% and 88% respectively). Demand for testing services grew (55% of deals in 2014 compared to 52% in 2013) as the proportion of multi-scope deals with testing scope integrated with AD and/or AM increased in 2014
    • AO activity declined for the life, annuities, and pensions subvertical due to reduced IT spending by the North American insurance firms serving this subvertical
    • Industry witnessed a stable demand from property & casualty and specialty insurance firms
    • Asia continues to be the most cost-effective option for application outsourcing services delivery
    • More than 104 large AO insurance deals with total TCV of US$8.13 billion are coming up for renewal in the next five years
  • Key technology investment themes identified in this report are in the areas of big data & analytics, connected ecosystem (IoT), cloud, social media, mobility, and AI & automation

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