New research reveals that Insurance companies who are using either IT or business process outsourcing (BPO) are gaining significant business benefits. However, the findings also show a surprising lack of understanding amongst those insurers with no experience of outsourcing.
The report, Issues Affecting IT Deployment in the UK Insurance Sector, was commissioned by leading IT services provider CGI Group Europe Ltd. (CGI) The research was carried out in March 2002, by independent research company Metrica, with 100 major UK-based general insurance and life & pension companies both by telephone and face-to-face interviews.
Of the 26 respondents who use IT outsourcing 105 positive remarks were made about its benefits. A similar proportion was found for BPO. This is an overwhelming endorsement for both kinds of outsourcing.
Of the advantages highlighted by insurers, flexibility is seen as a key benefit by 100% of the respondents using BPO and by 96% of those using IT outsourcing. Making the organisation more cost-effective is highlighted as a benefit by 95% of BPO users and 88% for IT outsourcing. Other benefits include making organisations more competitive, the need for less capital investment and helping organisations to cut costs.
Gavin Chapman, managing director of CGI Group Europe Ltd comments, “A significant finding for us was the low level of knowledge on outsourcing. When the whole sample was asked in which areas of the business they considered outsourcing to be most effective a surprising 50% said they did not expect BPO to be effective at all and 35% stated the same for IT outsourcing.”
“When this is compared to the actual advantages experienced from those that have used outsourcing, we can assume this finding comes from the insurers that have no experience of it themselves. In fact, quality of service was mentioned as a concern in the introduction of outsourcing, yet it is not an issue for those insurers that have experienced it. This shows a fear of the unknown. We are certain that if insurers were to look more closely at the benefits which outsourcing brings the industry, they would appreciate its role in helping them survive during these turbulent times.”
The key problem with IT outsourcing cited by respondents, and to a lesser extent BPO, is the difficulty in managing the process. This is not necessarily a barrier to outsourcing as the advantages far outweigh the negatives. However it highlights the need for more effective skills in this area. In the qualitative interviews one respondent claims, “Management of outsourcing requires that you either need to develop your internal skills or hire specialists that are familiar with managing the procurement. This is not a barrier if the economics and business case is made.”
Chapman agrees, “Insurance organisations must ensure that they dedicate ongoing resources to interface with the service provider and focus on making the partnership work for both parties. Each outsourcing contract is unique and insurers should start as they mean to go on by looking for providers that are specialists in the business, with flexible contracts that will take into account business change -- and providers that are willing to share risk and reward.”
Chapman continues, “It was interesting to see the views on BPO. There are clearly some negative feelings out there towards the take-up of BPO even though the high level of benefits experienced by users is remarkable. As a fairly new phenomenon insurers are obviously more hesitant to move forward with BPO, but this research eradicates any myths that surround it -- the report clearly shows that it brings significant advantages to organisations.”
The report also looked at off-shore outsourcing and found that 75% of all the insurers interviewed have not even considered it and only 17% currently use off-shore outsourcing. Chapman comments, “This is a surprising finding, as in our experience we have found this to be higher. However there could be some confusion over what is meant by off-shore outsourcing. The report shows that most respondents refer to India when they discuss off-shore. –Whilst India offers some excellent examples of off-shore outsourcing, it is possible that they do not realise off-shore can also refer to a whole host of other countries. Whichever way this is perceived, there is obviously a need for education in the marketplace on off-shore outsourcing.”
Copies of the research report, Issues Affecting IT Deployment in the UK Insurance Sector, can be obtained by contacting Emma Howell on 01438 317966 or emma.howell@cgi.com.
About CGI
Founded in 1976, CGI is the fourth largest independent information technology services firm in North America, based on its headcount of 13,700 professionals. CGI’s annualized revenue run-rate totals CDN$2.1 billion (US$1.3 billion). CGI’s order backlog currently totals CDN$10.7 billion (US$6.7 billion). CGI provides end-to-end IT services and business solutions to more than 3,000 clients worldwide from more than 60 offices. CGI’s shares are listed on the TSX (GIB.A) and the NYSE (GIB). They are included in the TSX 100 Composite Index as well as the S&P/TSX Canadian Information Technology and Canadian MidCap Indices. Website: www.cgi.com.
– 30 –
For more information, please contact:
UK PRESS ENQUIRIES:
Lisa Carter / Geraldine Grewal / Louisa Constable
Portfolio Communications Ltd.
Tel: 020 7240 6959
E-mail: lisa.carter@portfoliocomms.com
