DALLAS, July 14, 2020 /PRNewswire-PRWeb/ -- The COVID-19 pandemic has dealt a blow to the Property & Casualty (P&C) insurance industry, and the current recession is exacerbating the impact, according to Everest Group. Consequently, Everest Group is revising down its projected growth rates for the P&C insurance business process services (BPS) market. Everest Group estimates the P&C insurance BPS industry, currently measured at US$2.4 billion, will attain only low single digit growth rather than the double-digit growth previously expected, putting a question mark on the market's ability to cross US$3 billion by 2022.
The P&C insurance BPS growth rate in 2018-2019 (approximately 10%) was already the lowest it had been in the past four years, due to the strong linkage of the market to economic cycles and the recessionary prospects that had begun to surface. Then came the COVID-19 pandemic, which has negatively impacted both the personal and commercial lines of the P&C insurance industry, and a fully recognized recession with poor recovery prospects for the near future.
The P&C insurance BPS industry is expected to bear a four-fold impact from the pandemic:
- Operations: Business operations will be disrupted mainly due to reduced mobility and difficulties of working from remote environments. For example, IT infrastructure is strained, and physical inspection of claims is more challenging.
- Costs: Costs will depend on how reduction in claims, drastic measures of liquidity preservation, and increasing litigations against insurers play out. For example, auto claims will likely fall due to reduced driving, but lawsuits for not covering business interruption losses caused by the shutdowns will add to insurers' costs.
- Customer demand: Customer demand will vary across different product segments, ranging from high to extremely strained demands, making the demand landscape diverse in terms of the impact. Customer demands may include specific product lines such as cybersecurity and directors and officers (D&O) insurance. Customers also will likely demand more value for their money, increasing the chances of switching based only on premium prices.
- Compliance: A host of compliance and regulatory measures will have to be introduced to protect all the affected stakeholders amidst the evolutionary landscape. For instance, pressure to extend coverage for cybersecurity attacks and business interruption losses will increase.
"With the extreme shifts in business environment due to COVID-19, both for insurers as well as their service partners, many have struggled for even basic operational continuity," said Skand Bhargava, practice director at Everest Group. "While the industry has now largely adjusted to the vagaries of the changed operating environment, these changes appear to be more permanent than expected. The P&C insurance BPS market is expected to transition through significant operating model and engagement structure changes. Now, with the onset of a recession, it is even more imperative for service providers to understand the developments in insurers' sourcing strategies and the implications on future sourcing requirements."
In particular, Everest Group recommends that providers tap into these emerging trends:
- Localized delivery with greater onshore/nearshore mix
- Talent upskilling to move up the value chain
- Expanding first-time buyer engagements
- Transformation consulting to enable buyers to adapt their operation models to the new demand environment
- Adding more digital point solutions to the outsourcing levers mix.
These findings are discussed in detail in Everest Group's new report, "Property & Casualty (P&C) Insurance BPS State of the Market Report 2020: Deconstructing the Present and Expected Future of Sourcing Strategies." In this report Everest Group offers a detailed analysis of third-party outsourcing of business process services in the P&C insurance industry, including market size and growth, adoption trends, present and expected sourcing strategies, and action items for service providers.
***Download the complimentary report abstract.***
***Also, visit Everest Group's COVID-19 page for a Global Service Delivery tracker, recent reports, webinars, and more.***
About Everest Group
Everest Group is a consulting and research firm focused on strategic IT, business services, engineering services, and sourcing. Our clients include leading global enterprises, service providers, and investors. Through our research-informed insights and deep experience, we guide clients in their journeys to achieve heightened operational and financial performance, accelerated value delivery, and high-impact business outcomes. Details and in-depth content are available at http://www.everestgrp.com/.
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SOURCE Everest Group
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