In recognition of the scarcity of skills in many insurance companies, the difficulty of transforming to enable next-generation business models and the goal of improving the customer experience, most insurers (88 percent) leverage the resources and expertise of third-party solution providers for at least some components of their digital strategy. As digital transformation pervades all areas of the business, however, decision-makers are increasingly looking for their vendors to serve as ongoing strategic partners rather than simply implementers of point solutions.
The processes most frequently outsourced to vendors include:
- Web/user experience design.
- Front-end and back-end applications implementation.
- Digital strategy.
- Managed services.
- Performance analytics and reporting.
- Digital marketing support.
The mix of outsourced services varies by company type as well. Commercial-line carriers are more likely to use partners for analytics and measurement, whereas those focusing on personal lines rely on partners more for strategy, requirements definition and project management.
Our research showed that as well as leveraging partners for their expertise and resources, firms use third-party vendors to help them reduce the burden on the insurer’s internal resources, reduce costs and reduce risk. But the top driver of organizations engaging digital vendors is the same as for digital transformation overall, which is to provide a better customer experience (44%).
However, we also found that existing vendor relationships are not all structured optimally. Although very few insurers were “dissatisfied” outright with their third-party digital vendors, only 28 percent reported being “very satisfied,” which indicates there is some room for improvement. Interviewees commonly cited communication and post-project support as areas where vendors were lacking, though their experiences varied across vendors.
These types of issues may be symptomatic of the fixed-contract structure of many vendor relationships. Our study found that half of companies have vendors as full-service partners, whereas the rest outsource work in a lesser capacity, as strategic advisors or contractors responsible for point implementations. For something as strategic and iterative as digital transformation, insurers should consider challenging their partners to engage in an end-to-end partnership in which the vendor assumes some responsibility for the success of the initiatives.
By creating or joining ecosystems with partners whose capabilities complement their own, insurers can increase their agility as technology continues to evolve, enjoy greater credibility among their customers and benefit from less transformational pain and risk.
To learn more, register to download the Digital Transformation in the Age of the Customer: A Spotlight on Insurance report.