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What is the market size and growth rate for insurance claims processing software?
Hello! Thanks for your inquiry on the market size and growth rate for insurance claims processing software.
The short version is that the US market for insurance claims processing software is currently estimated at $8.2 billion, and in the period 2011-2016 it grew at a CAGR of 0.4%. There are no dominant players in the claims management software industry, which has around 376 providers in the US market alone. It is estimated that the life & health segment of the claims processing software industry has a 55% share of its $8.2 billion market, equivalent to $4.5 billion, and the property & casualty segment has a 45% share, or 3.7 billion.
Below you will find a deep dive of my research / findings along with all the details of how I came to this answer.
METHODOLOGY
In order to answer your inquiry, I looked into the available excerpts of market reports on the claim management industry. I also obtained information from articles and press releases on the subject.
Market reports are usually behind paywalls, and thus we only have access to available excerpts that provide a limited amount of information. Nonetheless, some sources provided lists of providers and/or products, related to both the broad insurance software industry and the specific claims processing software segment. Based on those sources, it was possible to estimate the market size, its growth rate, and a broad list of products and players.
MARKET SIZE AND GROWTH RATE
According to the published excerpt of a market report by IbisWorld, dated November 2016, the US market for insurance claims processing software is $8 Billion. The compound annual growth rate (CAGR) of this market in the period 2011-2016 was 0.4%. A press release on the same market report is more precise, and says the revenue obtained in the US by the insurance claims processing software industry reached $8.2 billion in 2016.
Other sources provide different figures. Tower Group estimated the global market for claims management software at $7.4 billion, and thus the US market would be considerably smaller. However, IbisWorld is generally considered a reliable source, and thus let us take that estimate of the US market.
FACTORS IN MARKET GROWTH
As you mention in your inquiry, the insurance claims management software industry aims at automating the traditionally labor-intensive claim-related processes, and thus it has the potential to make operations more efficient, reducing the complexity and costs of these processes, ensuring better compliance with new regulations, and thus increasing the customer satisfaction.
Our sources underscore the potential of new developments in this industry, such as predictive analytics and cloud computing. They also mention the challenge of security. Those factors may favor the model of Software-as-a-Service (SaaS).
COST OF CLAIMS PROCESSING IN THE INSURANCE INDUSTRY
The costs of claims processing in the insurance industry vary widely depending on the company. The well-known international consulting firm McKinsey issued a report on costs of insurance companies. The average cost of operations per policy between of a bottom-quartile player can be more than double that of a top performer, both for life insurance and for property & casualty. The use of claims management software may reduce these differences in efficiency levels.
Based on the figures provided by McKinsey, we can derive that the cost of operations is about 20% of the total costs of the insurance industry. The US insurance industry is huge, about $1.2 trillion in 2015, and thus the cost of operations would be about $240 billion. Operations include several items, claims processing is only one of them, and unfortunately, no further detail is available. McKinsey does mention that by digitizing its insurance processes, an insurance company reduced its claims-related costs by 20 to 30 percent.
SEGMENTS OF THE INDUSTRY
IbisWorld says the insurance claims processing software industry depends on demand for the property, casualty and direct insurance, as well as the life insurance and annuities.
However, the available information does not allow us to provide more detailed information in relation to market size and growth rate by sub-segment. It is possible that this information be included in the full version of the cited market reports.
Nonetheless, we know that life & health insurance accounts for approximately 55% of premiums in the US, while property & casualty has the remainder 45%. We can reasonably assume that the claims processing software is distributed in similar proportions between these segments. Thus, it can be reasonably estimated that the life & health segment of the claims processing software industry has a 55% share of its $8.2 billion market, equivalent to $4.5 billion, and the property & casualty segment has a 45% share, or 3.7 billion.
TOP PLAYERS
The above-mentioned summary of the IbisWorld reports states “there are no companies with a dominant market share in this industry.” The excerpt of the report states there are 376 businesses, which provide employment to a workforce of 18,397.
Another source provides us with the market shares of the top vendors of insurance software. Claim management software is a segment of the insurance software industry. Furthermore, not all companies in the insurance software industry offer claims processing software. However, it is interesting to observe this broader industry market breakdown by company, which confirms the lack of a dominant player and many opportunities for new entrants:
Microsoft: 10%
Oracle: 6%
SAP: 4%
Vertafore: 3%
IBM: 3%
Applied Systems: 2%
Guidewire: 2%
Mitchell International: 2%
StoneRiver: 2%
Other: 55%
The same source presents a long list of vendors of insurance software with the corresponding description. Unfortunately, the list is not classified by segment, and thus we cannot filter it by claims management software providers.
The consulting firm Capterra provides us with a better segmented set of players. The Capterra´s list of top claims processing software includes 92 products, 70 of them web-based and 22 installed. The list can be filtered by several criteria: product rating, number of users, type of deployment (web based or installed), and main features of the software. However, the list does not include revenue of the software providers, and thus we cannot rank them by this aspect.
Among the best rated providers of claims processing software are following firms: DataCare, A1 Enterprise, Code Evolution, Record 360, EmergeAdapt, e-Claim, Change Healthcare, and JDi Data.
DEVELOPMENTS IN THE INDUSTRY
It is interesting to observe some developments in the claims processing software industry. It has been reported that IBM has established an alliance with the London-based software firm TIG in order to sell TIG´s claim management product, considered as innovative. This product specifically targets large insurers.
CONCLUSION
Summarizing, the US market for insurance claims processing software is currently estimated at $8.2 billion, and in the period 2011-2016 it grew at a CAGR of 0.4%. There are no dominant players in the claims management software industry, which has around 376 providers in the US market alone. It is estimated that the life & health segment of the claims processing software industry has a 55% share of its $8.2 billion market, equivalent to $4.5 billion, and the property & casualty segment has a 45% share, or 3.7 billion.
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