Outsourcing is an important part of the insurer’s CIO toolkit, and its use is widespread. Spending on external services including outsourcing continues to consume an average of 20 percent of insurers’ IT budgets, and external staff represents 20-40 percent of IT headcount on average.

Executive Summary

Midsize P/C firms are following in the footsteps of larger insurance companies toward the outsourcing market. Here, researchers from Novarica discuss the rise in blended or variable contracts and offer guidance for carriers large and small about contract provisions that need special attention.

Over the past decade, there have been several shifts in outsourcing business drivers, from pure infrastructure cost reduction and legacy application support during transition to accelerating development projects and increasing agility and scalability through blended staffing models.

Why Outsourcing?

The challenges facing IT organizations encompass meeting changing expectations for customer service; resourcing and managing core system replacement projects; improving IT processes to enhance service delivery and lower costs; and establishing support, deployment and service processes for new capabilities on new platforms. These challenges drive operational, talent and cost issues. Talent management continues to be a top issue due to low graduation rates, increased demand for specialized skills, the fast pace of technology advancement and retention challenges. Outsourcing firms that have certified, repeatable processes and access to large labor pools can address these needs.

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