Celent looks at the recent activity in business process outsourcing in the insurance sector in North America and finds that although deal activity is up, overall deal values are down.

Farming out core business processes to third parties—which was once unthinkable—is now a primary part of many insurers operational strategy to cut costs and provide alternatives to dealing with older technologies. A new report, North American Insurance BPO Market Study 2014: A Deal Analysis, provides a North American perspective on the insurance BPO sector.

Using data provided by BPO providers, Celent estimates the growth of North American core insurance BPO market through 2017. The anticipated annual growth rate for this period represents a slight decrease from the last market study. Factors driving this estimate include: a drop in the average size of the life insurance BPO contract, flat life insurance BPO deal counts, and smaller more numerous P&C deals.

Similar to the 2011 report, the deal data reflects a North American market where deal characteristics vary according to line of business. Multi-line carriers enter into BPO contracts that are fewer in number and larger in value. P&C insurers choose smaller, more focused deals. New account activity in the region has trended down in the last three years — a continuation of a trend seen in 2011.

“The North American Insurance BPO Market continues to grow at a steady, but moderate pace,” says Mike Fitzgerald, Senior Analyst with Celent’s Insurance Group and coauthor of the report.

“Life and annuity deals are predominantly platform-based solutions, driven by speed to market needs or direct channel distribution initiatives,” adds Karen Monks, Analyst with Celent’s Insurance Group and coauthor of the report. “Property & casualty deals are more tactical and driven by a need to address technology gaps or to move forward with digitization.”