With CXOs acknowledging the need to move away from traditionally siloed, inefficient, complex, and non-customer-centric business models, the Life and Pensions (L&P) insurance industry is undoubtedly on a progressive journey. L&P insurers are increasing their budgets toward projects that deliver digital-led transformation in pursuit of superior experience for the end customer.
While their priorities are in the right direction, most L&P insurers find that their ability to modernize their businesses or operations is fairly limited, primarily due to two reasons:
Existing legacy systems or traditional technologies require complex projects for integration with modern architectures/databases/technologies, and, at times, the integration is not even feasible. Additionally, moving away from such systems is usually not practical, given the high sunk costs and potential disruption to business continuity
Insurers’ continued operations on legacy systems drive high maintenance costs, in turn constraining them from allocating requisite resources toward digital transformation
To address such restrictions and accelerate their digital transformation agendas, L&P insurers are now partnering with IT/BPO service providers in a BPaaS model to reduce the risk they undertake for core modernization and convert their capital expenditures into operating expenses. However, such large-scale investments need to be sufficiently customized to insurers’ product portfolios, with not all books of businesses requiring extensive modernization. This report explores the state of BPaaS adoption in L&P insurance, recommends legacy architecture modernization, and discusses the business factors that impact the extent of modernization required.
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