UK insurers joining outsourcing party

Outsourcing is likely to feature more prominently on the agenda for UK insurance companies in the near future, according to Pierre Audoin Consultants (PAC).

The insurance industry hasn't previously shown the same level of interest in outsourcing as some other sectors.

But now PAC says insurers are realising the benefits of handing over the running of non-core IT operations to a third party.

Drivers for this growth will include regulatory compliance which will require significant investment and management of legacy IT systems.

The growth in outsourcing is likely to be in non-core business areas such as finance, accounting and HR apps according to PAC.

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There have been a number of recent deals in which insurance firms have outsourced some of their IT infrastructure. IBM is providing Norwich Union with hardware integration and maintenance and Unisys is managing apps and infrastructure for Resolution Life.

Citing life assurance giant Pearl's £486m, 12-year deal with Tata Consultancy Services as showing the potential within the sector, PAC predicts that most deals will be smaller and over a shorter period than this.

Insurance-industry outsourcing is expected to grow by nine per cent from 2005 to 2006, and is forecast to reach a compound annual growth rate of over 10 per cent between 2006 and 2010.