Revenues from insurance offshoring to India are expected to grow to around $2 billion by 2010 from the present $690 million, according to a report by research company ValueNotes. The report also estimates that the industry is expected to see close to 100,500 employees by 2010.
According to the report, "Insurance Outsourcing: India Gains Momentum As Offshoring Intensifies - Trends, Insights and Key Vendor Profiles," mounting cost pressures, increasingly stringent regulatory compliance and the need to differentiate product offerings will make offshoring a growing imperative for the global insurance industry.
The report says offshoring of insurance services to India will be propelled into a higher growth phase with more than 30 per cent annual growth every year for the next three years.
This report is an update to an earlier study on insurance outsourcing, where ValueNotes had estimated a growth rate of 21 percent per annum.
In reality, the industry has grown at an estimated 23 per cent CAGR in the last three years. This is very different from other estimates at that time, which ranged from 30 to 40 per cent.
According to Arun Jethmalani, CEO of ValueNotes, the global insurance industry still lags industries such as banking, financial services and telecom in terms of offshoring maturity.
However, insurance industry dynamics have changed rapidly in the last two to three years owing to rising natural calamities, fraud and changing consumer demographics.
The Indian offshore services provider landscape consists of captives of large insurance companies, third party vendors and joint ventures.
"While traditional captive and third party contracts will continue to be signed, an increasing proportion of offshore contracts will move towards 'hybrid' operating arrangements," Jethmalani said.
The report suggests that while, traditional services such as claims processing, policy management will continue to provide volume growth to offshore BPO providers, new services such as analytics and decision support will drive value growth.
Driving the growth in third party as well as hybrid arrangements will be the large third party vendors such as Genpact, EXL Service and WNS, all of whom have significant domain expertise owing to recent acquisitions or a legacy of providing captive insurance services, says the report.
The other success story is that of the BPO offshoots of IT companies, which have been leveraging their offshoring knowledge, client base and financial backing from their IT parents.
In this group, BPO units of companies such as IBM, TCS, Wipro and Infosys BPO have been building insurance capabilities rapidly, and are strongly positioned for the future.
According to Mohit Thukral, insurance practice head at Genpact, "product development will be a huge trend in the next two-three years in terms of work related to analytics and product pricing being offshored from India".
