HOW PROCUREMENT CAN HELP INSURANCE CARRIERS IMPROVE THEIR EXPENSE RATIO AND REDUCE RISK

White Paper

PROCUREMENT’S POTENTIAL TO DRIVE STRATEGIC VALUE FOR INSURANCE COMPANIES

  • Insurance carriers are missing out on multi-million dollar savings due to having sub-optimal Procurement processes in place. Some of the key challenges faced by Insurance carriers include:

Lack of visibility into enterprise-wide spend with suppliers

Inability to leverage aggregate purchasing power due to multiple contracts with the same vendor

No processes to manage third party risk after the vendors have been onboarded

Lack of market intelligence on suppliers and price benchmarking information

Contract terms more heavily weighted in the supplier’s favor (e.g. no termination for convenience, price increases, data ownership)

No standard process for measuring supplier’s performance through specific SLAs and KPIs

No centralized repository for storing and accessing contracts

Lack of standard RFP templates and negotiation toolkits

Insufficient notice when contracts are about to expire resulting in sub-optimal negotiations

Third-party vendors tightly integrated into core business processes, which increases complexity around changing suppliers

PROCUREMENT IN INSURANCE INDUSTRY: JOURNEY FROM TRANSACTIONAL TO TRANSFORMATIONAL

  • Valorant has extensive experience of working with insurance carriers to drive savings of 10% to 15% on their third-party vendor spend. Typically, the role of the Procurement organization, if one exists, in most insurance carriers is transactional and limited to rubber stamping contracts and sending PO’s to the suppliers. Our comprehensive range of procurement solutions for insurance industry is focused on building the Procurement capability of our clients to maximize value, fuel innovation and reduce risk. By aligning our solutions with their corporate strategy, we help insurance carriers in achieving strategic organizational goals.

Valorant Driven Results

10-15%

Realized cost savings on thrid party suppliers spend

95% +

Adherence to contract KPIs and SLAs

1-2%

Sunstained improvement in Expense Ratio

Valorant helps Insurance carriers transform their Procurement capabilities through the following services:

1. SPEND ANALYSIS

  • Most insurance carriers do not have complete visibility into how much their company is spending with all of their third-party suppliers. Gaining comprehensive visibility into costs with third party suppliers, through a spend analysis exercise is a critical first step in enabling Procurement benefits. Spend analysis enables getting a holistic view of the spend across business channels which helps us to negotiate better with vendors, reducing the siloed philosophy which exists at a lot of Insurance carriers.
  • A successful spend analysis project acts as a foundation through which companies can identify and drive cost-reduction opportunities. Valorant empowers its clients to quickly identify and realize value creation initiatives by consolidating data across multiple sources, leveraging cutting-edge analytics and classifying spend according to an industry-leading taxonomy.

2. SUPPLIER COST REDUCTION THROUGH STRATEGIC SOURCING

  • Insurance carriers that do not have a structured Procurement process in place are potentially losing out on 10 to 15 percent savings on their third party spend. They should adopt a comprehensive, structured and collaborative strategic sourcing process when addressing their third party spend. The process should include detailed data collection, benchmarking & supply market analysis, RFP and strategy development, vendor screening and evaluation, online and offline negotiations, operational support, and total cost analysis for supplier selection and contracting.
  • Valorant can help insurance carriers achieve significant savings by analyzing spend data, conducting benchmarking exercises by leveraging extensive market intelligence and proposing cost reduction projects. We then work with our clients to design & publish RFP’s, conduct vendor negotiations, support contracting & vendor onboarding processes to deliver savings to the bottom line

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