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Accenture Selected by HDFC ERGO

Zacks Equity Research

Accenture (ACN) has been selected by India’s HDFC ERGO General Insurance Company Limited to manage its digital applications. Per the multi-year outsourcing contract, Accenture will enhance and develop HDFC ERGO’s digital channels such as web portals and mobile applications. Moreover, Accenture will customize the insurance company’s sales techniques through strategic planning to suit customers’ needs.

According to a report from Indian Brand Equity Foundation, the life insurance industry in India is projected to increase at a CAGR of 12–15% for the next five years and is expected to touch $1 trillion in the next seven years.

According to Gartner, in 2014, spending on IT products and services by Indian insurance companies will reach approximately $2.01 billion, up 12% from 2013. These projections bode well for Accenture as it has a strong presence in the country.   

Moreover, Accenture has been serving the insurance vertical for years. Continuous insurance deal wins underscore the efficacy and popularity of its services. This has also aided its revenues.

In the last-reported quarter, Financial Services revenues, which combine banking, capital markets and insurance, increased 4% year over year and helped Accenture register 1% increase in revenues. Other operating segments either declined or remained flat on a year-over-year basis.

It is worth mentioning that Accenture’s foothold in the insurance solutions market was further strengthened by the acquisitions of Duck Creek (Jul 2011) and avVenta (Oct 2012). Synergizing these acquisitions enhanced Accenture’s insurance platform, which, in turn, is helping insurance providers adapt to the changing market conditions, gauge future requirements and run high-performance businesses.

Nonetheless, the competition in the insurance sector is also increasing with players like International Business Machines (IBM), Computer Sciences Corp. (CSC) and Hewlett-Packard Co. (HPQ) coming up with cost-effective solutions.

These companies have also started aggressive marketing to take a bite out of the insurance market, especially in emerging countries. Thus, we believe that Accenture has to come up with innovative and customized insurance solutions to maintain its current position in the market.

Currently, Accenture has a Zacks Rank #4 (Sell).

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