Only 8% of insurance BPO buyers would renew contracts as is: ISG
- Only 8% of insurance outsourcing buyers would renew their contracts as they stand.
- 64% would renegotiate for AI-driven efficiency; 23% would rework terms entirely.
- ISG surveyed 150 insurance decision-makers in August 2026.
- 49% of BPO users rated AI-led innovation below expectations.
CONNECTICUT, UNITED STATES — Most insurance companies that outsource operations would not renew those contracts on current terms, and the gap they name most often is artificial intelligence (AI). Only 8% of buyers of outsourced insurance operations would renew their contracts as they stand.
Renegotiation over renewal
Some 64% said they would renegotiate for AI-driven efficiency, and 23% would rework terms and service levels entirely, according to Insurance Business, citing The State of Insurance Operations by technology research and advisory firm ISG. The study surveyed 150 insurance decision-makers in August 2026 across carriers, brokers, managing general agents (MGAs) and reinsurers in North America, Europe and Asia.
It covered 20 operational activities. The research was commissioned by mea Platform, which sells AI software for insurance operations.
AI is the biggest shortfall
AI-led innovation was where outsourcing providers most often fell short, with 49% of users rating it below expectations, the largest shortfall among the nine areas assessed. Strategic value came next, at 39%.
“The shortfall buyers name most often is AI-led innovation, and that is a hard thing to answer at a renewal, because it cannot be settled with a price concession,” said Ashish Jhajharia, insurance principal analyst at ISG.
Most insurance outsourcing is priced per transaction or per full-time employee, so costs rise in line with volume. That is the model AI vendors argue they can break.
Limits on trust
Buyers remain cautious about how much they hand over to AI. Asked what they would trust for high-stakes underwriting and claims decisions, 75% chose an insurance-specific AI model or a governed hybrid of AI and human oversight, while only 6% would accept a general-purpose model on its own.
“Outsourcing to cheaper labor buys a few points of unit cost, and it takes years of transition and governance to collect them,” said Martin Henley, CEO of mea Platform.
Because mea Platform sells the alternative the research points toward, buyers should test vendor claims against their own workflows. ISG itself recommended that insurers compare outsourcing providers, technology platforms and in-house builds on equivalent evidence of how each performs on real workflows.
Leverage at renewal
Market research firms cited in the release put core insurance outsourcing at between $7.5 billion and $8.4 billion in 2025. With few buyers willing to renew on existing terms, renewals give carriers, brokers and MGAs a chance to push for AI-driven efficiency, clearer service levels and pricing that does not simply scale with volume.
Insurers reviewing business process outsourcing (BPO) contracts for claims and policy administration can ask providers to show results on their own back office workflows, and compare options on the top BPO companies worldwide list.
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- European insurers rethink BPO for the AI era: ISG · 1 Jul 2026
Disclosure: Outsource Accelerator uses AI tools in the backend of its editorial workflow. Every article is reviewed and verified by a human editor before publication.
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