Future of Sourcing - claims https://futureofsourcing.com/tags/claims en How Procurement Can Enable Insurance Companies to Deliver Value to Claims Management https://futureofsourcing.com/how-procurement-can-enable-insurance-companies-to-deliver-value-to-claims-management-0 <div class="field field-name-field-image field-type-image field-label-hidden"><div class="field-items"><div class="field-item even" rel="og:image rdfs:seeAlso" resource="https://futureofsourcing.com/sites/default/files/articles/Procurement%20insurance.png"><a href="https://futureofsourcing.com/sites/default/files/articles/Procurement%20insurance.png" title="Procurement’s key metric is vendors’ value contribution, not cost. " class="colorbox" rel="gallery-node-1834-WrWzbJGTqQE"><img typeof="foaf:Image" src="https://futureofsourcing.com/sites/default/files/styles/juicebox_medium/public/articles/Procurement%20insurance.png?itok=EyiW7GQj" width="624" height="325" alt="Procurement’s key metric is vendors’ value contribution, not cost. " title="" /></a></div></div></div><div class="field field-name-field-related-news field-type-entityreference field-label-above"><div class="field-label">Related news:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/3-things-small-businesses-can-do-to-lower-insurance-costs">3 Things Small Businesses Can Do to Lower Insurance Costs</a></div></div></div><div class="field field-name-body field-type-text-with-summary field-label-hidden"><div class="field-items"><div class="field-item even" property="content:encoded"> <p>At U.S. insurance companies, policyholders&rsquo; claims represent 70% to 75% of the total cost. This makes complete sense, of course, since policyholder benefits are the sole reason why anyone buys insurance products and services.</p> <p>The problem is, at insurance companies, procurement is limited to supporting indirect spend &mdash; real estate, marketing, finance, etc. &mdash; which accounts for less than 10% of the organization&rsquo;s total costs and severely limits our ability to provide substantive value.</p> <h1>So, why doesn&rsquo;t procurement play a bigger role inside insurance organizations?</h1> <p>First, the independent assessors and the adjustors who handle policyholders&rsquo; claims are not in the procurement system. As a result, procurement has no visibility into organizations&rsquo; key vendors. We&rsquo;re unable to select or evaluate vendor performance, manage the spend, or even influence the administrative expenses incurred in supporting and negotiating appraisers and adjustors.</p> <p>But the truth is, discrete systems are just a symptom of a deeper issue. The relationship between the chief procurement officer and chief claims officer is often strained. Claim leaders are inherently guarded since they assume procurement is only focused on cutting costs. And cutting costs from claims is a sacred cow since it undermines policyholders&rsquo; indemnities and benefits, and flies in the face of the organization&rsquo;s core mission, namely driving customer satisfaction.</p> <p>The net result is that inside insurance companies &mdash; a $1.75 trillion U.S. industry &mdash; procurement is a relatively marginal player. And chief procurement officers rarely have a seat at the leadership table.</p> <p>The extraordinary thing is, there is no more knowledgeable partner for claims than procurement when it comes to driving value. The gulf between the two groups is an opportunity lost.</p> <p><strong><em>For procurement leaders to turn it around, and build a strategic, collaborative and powerful partnership with claims, we must do four things:</em></strong></p> <h1>Use a Balanced Scorecard to Select and Evaluate Vendors&rsquo; Contribution</h1> <p>Procurement&rsquo;s key metric is vendors&rsquo; value contribution, not cost. Use qualification, location, risk and customer satisfaction scores, as well as price, to identify service providers who provide a competitive advantage. In the case of a car accident, third-party administrators (TPAs) are the main contact for policyholders because they handle the entire claims process. By tracking and improving TPAs, auto claims management can yield up to 20% cost reduction <em>and </em>improve customer satisfaction.</p> <h1>Provide Actionable Intelligence About Vendors</h1> <p>Even when claims data &mdash; preferred vendor panels, terms, volumes and performance &mdash; reside on a separate platform. The data can easily be extracted and imported over to track and identify assessors and adjustors who deliver value over time. For instance, most insurance companies will find that local assessors and adjustors, rather than national providers, are rated higher by the policyholders.</p> <h1>Use Integrated Technology and Go Digital</h1> <p>In the short term, integrate procurement&rsquo;s source-to-pay system with the claims systems. Namely, vendor selection, claims evaluation and claims settlement. Longer-term, establish a digital portal where claims vendors register themselves, and the data is exported to both procurement and claims systems.</p> <h1>Implement Consistent but Locally Optimized Processes</h1> <p>It is imperative for procurement and business teams to get to know other&rsquo;s priorities before creating value creation programs. Then to implement effectively, procurement should be organized by regions with claims category management taking place at a local level but overseen by a global category manager in partnership with the business.</p> <p>Today, procurement in most insurance companies are overlooking its potential to unlock huge value. When procurement is a strategic partner with claims, insurance companies improve customer satisfaction, reputation, renewals and revenue, <em>and </em>reduce claims payout between 1% to 3%, which drops right to the bottom line. This is a massive contribution to the organization and elevates the chief procurement officer to a strategic role.</p> </div></div></div><div class="field field-name-field-tags field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Tags:&nbsp;</div><div class="field-items"><div class="field-item even" rel="dc:subject"><a href="/tags/procurement" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Procurement</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/insurance" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Insurance</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/claims" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">claims</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/category-manager" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Category Manager</a></div><div class="field-item even" rel="dc:subject"><a href="/tags/category-management" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Category Management</a></div><div class="field-item odd" rel="dc:subject"><a href="/tags/vendor-management" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Vendor Management</a></div></div></div><div class="field field-name-field-addthis field-type-addthis field-label-hidden"><div class="field-items"><div class="field-item even"><div class="addthis_toolbox addthis_default_style " addthis:title="How Procurement Can Enable Insurance Companies to Deliver Value to Claims Management - Future of Sourcing" addthis:url="https://futureofsourcing.com/how-procurement-can-enable-insurance-companies-to-deliver-value-to-claims-management-0"><a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_linkedin"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_facebook"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_twitter"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_googleplus"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_pinterest_share"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_reddit"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_email"></a> <a href="https://www.addthis.com/bookmark.php?v=300" class="addthis_button_print"></a> </div> </div></div></div><div class="field field-name-field-region field-type-taxonomy-term-reference field-label-inline clearfix"><div class="field-label">Region:&nbsp;</div><div class="field-items"><div class="field-item even"><a href="/regions/global" typeof="skos:Concept" property="rdfs:label skos:prefLabel" datatype="">Global</a></div></div></div> Fri, 21 Aug 2020 19:36:13 +0000 Tunir Chatterjee 1834 at https://futureofsourcing.com https://futureofsourcing.com/how-procurement-can-enable-insurance-companies-to-deliver-value-to-claims-management-0#comments