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Robert Fuhrmann Q&A: Boosting competitiveness at the intersection of claims and procurement

Insurers that end the turf war between claims and procurement departments can improve loss ratios by 1—3 percentage points.
Robert Fuhrmann
Robert Fuhrmann

MD in Accenture’s Insurance Strategy Practice

Insurance Claims and Procurement departments are disjointed at best, antagonistic at worst. Robert Fuhrmann, MD in Accenture’s Insurance Strategy Practice, believes that the business as a whole loses out as a result of the ongoing battle between the two departments. Better execution where Claims and Procurement intersect creates competitive differentiation and drives economic value for insurance carriers.

Q: The relationship between Claims and Procurement is an uncomfortable one in many insurance carriers. What are the root causes of the tension between the two departments?

Claims and Procurement have different priorities and thus do things differently. The cost of procured products and services from third-party vendors—such as auto body shops, attorneys, independent adjusters—heavily influences the economics of Claims, and Procurement is typically an uncomfortable partner in this process.

Claims organizations typically underutilize Procurement disciplines, while Procurement departments misconstrue what matters to Claims. Claims departments tend to view themselves as specialized, often believing that purchasing decisions require unique expertise and judgment—in other words, they favor qualitative criteria over the benchmarks Procurement cares about.

For example, Claims organizations value long-term relationships and the associated expertise and competitive pricing. Procurement is primarily concerned with contractual and risk matters. What’s more, Claims in multinational insurers doesn’t lend itself to the level of standardization Procurement has achieved in its practices. The result is a misguided turf war in which everyone loses.

Q: How do insurance carriers begin to change this picture?

It begins when Claims and Procurement change their mindsets with the understanding that they are better positioned to drive sustainable value and continuous improvement for the business as a whole when they work together. Ideally, they should start unifying decision-making, governance, process ownership and performance management—among other factors.

There are opportunities for improvement across the end-to-end claims procurement lifecycle, but a good place to start is by looking at roles, responsibilities and accountability. For some insurers, Procurement does it all. In other businesses, there is overlap and duplication.

Insurers should design a future state where Claims and Procurement work together to select, manage and pay vendors. Each side brings its own biases and experiences, so it’s important to balance the inherent biases toward contractual risk versus relationship in Procurement and Claims.

These actions, sustained through operating model changes, will help insurers actively move toward improving the loss ratio by a potential 1—3 percentage points.

Q: How will a closer relationship between Claims and Procurement benefit the wider organization?

When the two groups look beyond the differences in how they operate and make decisions, they can work together to drive innovation and increase competitiveness.

For example, Claims sometimes holds its data close rather than sharing it with Procurement. If this dynamic were to change and data could be augmented with the necessary claims context, and analyzed, it would allow better visibility into categories, vendors and performance.

When Claims and Procurement collaborate, they can also translate qualitative claims criteria into tangible procurement measures that enable objective selection and contractual terms. This, in turn, can help deliver a great claims experience for the customer while keeping costs in check and mitigating vendor risk.

Finally, antiquated processes and a lack of technology and automation hold many insurers back from better claims efficiency and customer service. By coming together on the strategic use of technology across claims and procurement value chains, insurers can achieve innovation and unlock the value currently lost due to conflicting tactical approaches.

Q: Are there any examples of insurers who have tried to take such steps? What sort of results have they achieved?

One particular global multi-line insurer wanted to reduce its loss costs by $100 million through claims vendor management. It has exceeded its target. It took a number of steps to do so—for example, it implemented a vendor management program across all major third-party spend categories to monitor performance and cost.

It also rationalized and restructured independent property adjuster relationships to be focused on value, and insourced certain commercial property services. Finally, it rationalized auto body shops in one Asia-Pacific country from 1,300 to 115, taking out costs and creating stricter performance and customer service requirements for those shops.

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