Moving Insurance Operations Into the As-A-Service Economy

Researching the As-A-Service Economy

Moving Insurance Operations Into The As-A-Service Economy

December 11, 2014

Charles Sutherland Brad Burdick Shaun Kelly Executive Vice President, Research SVP, Insurance and Healthcare Senior Vice President HfS Research EXL Assurant Specialty Property [email protected] [email protected] [email protected]

Reetika Joshi John Barr Ian Maher Research Director, Consumer-Driven Operations & VP of Insurance Product Management VP, Head of Sourcing Analytics Strategies and Operations Consulting Hanover Insurance HfS Research EXL [email protected] [email protected] [email protected] Charles Sutherland, EVP Research – HfS Research

Overview: • Over 19 years’ business experience in strategy development and delivery in the global outsourcing industry across US, Europe and Asia

• An industry advisor, strategist, author, speaker, practitioner and blogger

Previous Experience: • Managing Director, Growth & Strategy, Accenture BPO

• Managing Director, Strategy, Accenture Infrastructure Outsourcing

• Strategy Partner, Accenture Media & Entertainment Practice

• Chief Strategy Officer, SourceHOV

[email protected] • Marketing Director, Olivetti

Education: • MBA, INSEAD, Fontainebleau France

• Honors BA, Political Science and Economics, University of Toronto

Driving Real Blueprint Market Unvarnished Analyses and Best Community Practices Dialog

Real-time data Industry-Leading from 1000’s of Buyer-led industry Summits stakeholders

Major Media Strategy, Platform and Blog Advisory, Training

© 2014 HfS Research Ltd. Proprietary │Page 5 Reetika Joshi, Research Director, Consumer-Driven Operations & Analytics Strategies – HfS Research Overview: • Tracks verticalized technology-enabled BPO opportunities in insurance and retail • Tracks enterprise analytics services and marketing and digital customer experience management services • Conducts Blueprint reports on service providers across service areas in global sourcing.

Previous Experience: • Project Manager in the sourcing research wing of the business research and consulting firm ValueNotes, encompassing a range of responsibilities, including research product design and development for the outsourcing community, management of custom research engagements, and development of thought leadership through targeted content and community interaction. • [email protected] Niche BPO and KPO coverage, including analytics, medical transcription, market research, and e-learning. • Bespoke engagements, including in-depth competitive intelligence studies, market and investment opportunity assessments, demand-side surveys, and marketing communication optimization for outsourcing buyers, providers, consultants, and investors.

Education: • Bachelor’s in Business Administration, Symbiosis International University, India • Master’s in Marketing Management with Beta Gamma Sigma honors, Aston Business School, UK

Overview: • Leads The Hanover’s sourcing group in support of all North American business lines and Chaucer, Hanover’s Lloyd’s of London syndicate.

• 20 years of sales, research and operations management in ITO and BPO

• Regularly presents to “C” level executives on how to realize the benefits of ITO and BPO.

Previous Experience: • Global Account Manager at Gartner

• Support to Sourcing research agenda and CXO roundtables

• Sales and operations roles at Fujitsu [email protected]

Education: • B.A. in Business Studies with Honors, Kingston University, London

• Evertonian

Overview: • 25 years of Financial Service experience with 17 of that being focused in Insurance

• Primary areas of expertise include Operations Management, Strategy & Service Delivery Model Transformation

• Currently chair of two Assurant enterprise executive committees - The Customer Operations Board and Assurant Sourcing Practices Group

Previous Experience: • Managed 500+ person servicing operations, led integration efforts for all functions post acquisition of large insurance provider, currently partners with C-suite leaders to look for opportunities to leverage the value of the Assurant enterprise through a variety of means including creation of shared services, exploration of [email protected] outsourcing opportunities, strengthening organization governance models and leader large scale enterprise transformation initiatives.

• Previously served on the Board of Directors for the National Lenders Insurance Council

Education: • Master's in Business Administration (MBA) - Drexel University

Overview: • Brad Burdick co-leads EXL’s P&C business.

• With over 30 years’ experience in the management of technology and strategy, he has responsibility for building BPaaS capability for the business.

• He also has management responsibility for Trumbull Services – an acquisition EXL made 3 years ago.

Previous Experience:

• Prior to joining EXL, Brad worked for The Hartford Insurance Group where he held various positions in Service Operations Strategy, Six Sigma and Sales and Distribution.

[email protected] • PA Consulting Group, a London-based global consultancy; and Channelpoint,formerly a dotcom start up focused on insurance transactions.

Education:

• Brad has degrees in engineering from the University of California and an MBA from MIT’s Sloan School.

Overview: • John has 25+ years of experience in management and executive roles with Information Technology, consulting services and insurance companies.

• He has lead the development of insurance business advisory and professional services organizations, and directed global insurance vertical product and services organizations

• John brings deep domain expertise across the life, annuity, pensions, and P&C insurance spectrum, and has held leadership positions with Wipro, Capgemini, and CSC/Continuum, and served as CIO of Texas Workers Compensation Insurance (now Texas Mutual), a $600M WC carrier.

[email protected] • John resides in Austin, Texas with his wife Linda and daughter Meagan.

© 2014 HfS Research Ltd. Proprietary │Page 10 Insurance Companies Contend With Several Industry Challenges today… Managing regulatory pressure and risk Driving management operational Reducing efficiency expense and ratios and flexibility total cost to serve

Improving Dealing with member the aftermath retention and of creating a consolidation marketing Growing focus new business in global markets

Enabling Technologies Operating Models and Digitization  Automation  Analytics Platforms Mobility  Social Media  Cognitive Outsourcing  Shared Services Computing  Artificial Intelligence GBS  BPaaS/SaaS/IaaS  Crowdsourcing

Tools/Infrastructure Governance

Agility  Collaboration One-to-Many  Outcome Focus Plug-and-Play Services The World We Live In Enabling Talent Globalization of Labor  High-growth Service Governance  Defining Emerging Markets  Disruptive Outcomes  Creativity  Data Science Business Models  Consumerization

Insurance BPO contract analysis shows that buyers are expanding the scope of their outsourcing to include more high-value, complex and core functions

2014 2012

Policy Serving Claims Administration New Business Application Development and Maintenance Actuarial and NPD Regulatory & Compliance Support Agency Administration Finance & Accounting Infrastructure Service Management Marketing & Sales Human Resources Procurement

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% Percentage of insurance BPO contracts

Are you more inclined today to work with your service provider beyond back-office support, including more complex middle and front office processes?

A. I am or will work with my provider to outsource more complex middle and front office processes

B. I am inclined to outsource complex processes, but not with my current provider

C. I will keep the scope of my outsourcing limited to back-office insurance operations

D. Currently do not outsource/plan to outsource

© 2014 HfS Research Ltd. Proprietary │Page 14 Key Theme 2: Digital Proliferation and Technology Platform Evolution In Insurance Our latest SOO study shows the growing adoption of platform BPO, particularly industry-specific solutions In what areas are you considering cloud / as-a-service options to augment / replace traditional outsourcing? We have at least one cloud-based service for this function Starting to evaluate / test solutions We are interested but yet to find anything suitable Nothing in place & see no value

Human Resources 22% 8% 39% 31%

Industry-specific Operations 20% 8% 35% 37%

Finance and Accounting 15% 17% 37% 31%

Customer Service/Support 14% 12% 37% 37%

Procurement 11% 19% 28% 42%

Sales 9% 9% 24% 59%

Supply Chain and Logistics 6% 6% 29% 58%

Legal 4% 13% 23% 60%

Marketing 2% 16% 37% 45%

Over the next two years, to what degree do you expect your core insurance BPO processes to be run in a BPaaS model?

A. I expect platform-based BPO delivery for multiple service areas beyond closed block processing

B. I expect greater transition of closed blocks of business to platform BPO

C. I expect traditional BPO delivery model to continue

© 2014 HfS Research Ltd. Proprietary │Page 16 Key Theme 2: Digital Proliferation and Technology Platform Evolution In Insurance (contd.) Our Digital Transformation study shows strong linkages in buyer perception of digital to future operating models Agree Agree Disagree Disagree Strongly Somewhat Somewhat Strongly

The new wave of Digital Technologies is fundamentally 61% 39% changing the way entire industries will operate

Enterprises which fail to embrace Digital Transformation will lose ground to their competitors very quickly in the 52% 43% 5% next couple of years Service providers which fail to base their outsourcing delivery models on Digital Technologies will quickly 38% 54% 7% become legacy providers Consulting firms which do not invest in Digital capabilities to support their clients will get cast aside 43% 46% 8% very quickly Operations talent which fails to re-orient itself to embrace Digital Technologies could get cast aside in 2-3 26% 59% 15% years' time

Digital Transformation is a fad that is merely marketing 6% 15% 36% 44% hype and will soon be replaced by another buzzword

Do you expect your insurance BPO provider to bring digital enablement into your insurance operations?

A. I expect significant digital enablement within core insurance operations

B. I expect some digital enablement within core insurance operations

C. I don’t expect any digital enablement within core insurance operations

D. ‘Digital’ is still a buzzword and I don’t see it as applicable to this industry

© 2014 HfS Research Ltd. Proprietary │Page 18 Key Theme 3: The Rise of Analytics-Driven Decision Making in Insurance Operations Analytics has the potential to significantly improve outsourcing outcomes in insurance

What role can each of the following emerging technologies play in improving the outcomes of your current and future outsourcing engagement(s)?

5. It is a critical component 4 3 2 1. None - no value in it for BPO

Analytics 49% 33% 13% 3% 2%

Automation 47% 29% 17% 4% 3%

Cloud 30% 31% 28% 7% 4%

Mobile 25% 29% 31% 9% 6%

Social 12% 24% 24% 24% 16%

Over the next two years, do you expect your BPO service provider to bring you greater access to advanced analytics capabilities and improve their embedded reporting?

A. I expect significant advanced analytics and more sophisticated embedded reporting

B. I expect some advanced analytics but stronger sophistication of embedded reporting

C. I primarily expect more sophisticated embedded reporting

D. I expect no improvement in embedded reporting or advanced analytics

© 2014 HfS Research Ltd. Proprietary │Page 20 Takeaway Theme: The Move To Progressive Insurance Operations Buyers and service providers have not yet tapped collaboration opportunities for disruptive innovation due to broken governance frameworks Would you say that your service provider brings you innovation?

45%

20% 20%

15%

Frequently Sometimes Only when I ask for it Nope

As a buyer or service provider, what do you expect from your insurance outsourcing engagements over the next two years?

A. I expect a "lift and shift" of people and existing processes, with limited transformation of processes or their enabling technologies

B. I expect a genuine transformation of business processes, but limited use of technology

C. I expect a wide-scale transformation of business processes enabled by new technology tools / platforms

State of Sourcing Engagements today and expectations for 2 years time

Today 2 Years' time

Progressive Shift in How Services are Delivered 49% 49%

28% 26% 26% 23%

A "lift and shift" of people and existing A genuine transformation of business A wide-scale transformation of business processes, with limited transformation of processes, but limited use of technology processes enabled by new technology tools / processes or their enabling technologies platforms

If you are an insurance BPO buyer, please take a few minutes to fill out our

survey to share your thoughts on insurance outsourcing trends: www.surveymonkey.com/s/InsuranceaaS

(You’ll receive a free copy of the findings) About HfS Research

HfS Research is the leading analyst authority and global network for IT and business services, with specific focus on global business services, digital transformation and outsourcing. HfS serves the research, governance and services strategy needs of business operations and IT leaders across finance, supply chain, human resources, marketing, and core industry functions. The firm provides insightful and meaningful analyst coverage of best business practices and innovations that impact successful business outcomes, such as the digital transformation of operations, cloud-based business platforms, services talent development strategies, process automation and outsourcing, mobility, analytics and social collaboration. HfS applies its acclaimed Blueprint Methodology to evaluate the performance of service and technology in terms of innovating and executing against those business outcomes.

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