Learn why those who win in insurance claims and procurement can improve loss ratios by 1-3 percentage points. To read more, visit https://www.accenture.com/ca-en/insight-boosting-competitiveness-intersection-claims

1. Boosting competitiveness
at the intersection of
claims and procurement
Rob Fuhrmann, Kenneth Saldanha
and Jonathan Wicksall

2. Claims
Settlement
Lifecycle
FNOL
Investigate
& Evaluate
Closure &
Feedback
InternalProcess
InternalProcess
Payment
& Recovery
Indemnify
& Ongoing
Claim Mgmt.
Reserve
Mgmt.
Lit.
Mgmt.
Fraud
Mgmt.
Subrogation
Salvage
Attorney
Jury Consultants
Third Party Administrator
Private Investigators
Expert Services
Independent Adjuster
Accounting
Repair Shop
Medical Services
Construction Services
Rentals
Towing
Agent / Broker
Call-center
Figure 1. Products and services used across the entire claims lifecycle can have a material impact on insurer
economics and the strategic positioning of Claims.
Distribution of claims spend
on 3rd
party categories
US Commercial
Property Example
40%
25%
15%
10%
10%
Independent Adjusters
Expert Services (Engineering)
Accounting
Expert Services (Building Consultant)
Others
Source: Accenture Strategy
CLIENT EXAMPLEInsurance Claims and Procurement departments
are disjointed at best, antagonistic at worst. Claims
organizations typically underutilize Procurement
disciplines, while Procurement departments misconstrue
what matters to Claims—both of which fuel a misguided
turf war. And in the ensuing battles, everybody loses.
Accenture Strategy experience suggests that insurers that successfully
execute at the intersection of Claims and Procurement can improve
loss ratios by 1-3 percentage points, dropping millions of dollars to the
bottom line. However, rather than winning at the crossroads where the
two areas converge, insurers spend their time debating their respective
areas of responsibility.
The cost of procured products and services from third-party vendors—e.g.
auto body shops, attorneys, independent adjusters—heavily influences
the economics of Claims, and Procurement is typically an uncomfortable
partner in this process. Improving the strategic planning, sourcing and
management of billions of dollars spent on products and services can
strengthen Claims’ performance as a driver of competitive advantage for
the insurer, leading to greater efficiency, more accurate loss ratios and
enhanced customer engagement.
2 | Boosting competitiveness at the intersection of claims and procurement

3. Getting past the turf war to what
matters: increased competitiveness
Claims departments tend to view themselves as specialized, often
believing that purchasing decisions require unique expertise and
judgment (i.e. qualitative criteria). Instead of Claims sharing the reins—
and the data—with Procurement, they hold them close, thereby creating
a lack of core data. 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.
Certainly there are differences in how the two groups operate and
make decisions, but if both departments were to look beyond tactical
practices to the common goal of increased competitiveness, they could
make three critical improvements:
1. More strategic assessment of total cost
of partnership
Claims departments struggle to create objective criteria and they are
frustrated by their perception that Procurement obsesses over rate cards
and volume. Volume for rates is a small element of what is negotiated.
Claims and Procurement must collaborate to translate qualitative claims
criteria into tangible procurement measures that enable objective
selection and contractual terms.
These are some of the elements to consider for more strategic assessment:
Balanced scorecards. Organizations should pick the right vendor based
on price, location and qualitative criteria that reflect claims context. A
loss in Grand Rapids, Michigan should superficially be adjusted by an
approved vendor nearby, unless the loss requires the specialized skills
of a vendor who may be located across the country. Procurement needs
to work with Claims to strike the right balance across expertise and
location factors.
Services that create competitive advantage. Accurate and timely
services are just table stakes. Vendors also should illustrate they are
committed—and able—to create a claims experience and outcome that
are a step beyond what other carriers deliver. Does the vendor create
a differentiated level of service in exchange for favorable contractual
terms? Commercial arrangements should be aligned to the vendor’s
ability to support a claims execution that creates competitive advantage.
What’s the price
of preferred
relationships?
When one insurer
outlined its preferred
relationships with five
independent adjusters
(IAs), payment data
showed they did
business with more
than 100 different
IAs. A fragmented
supplier base within
lines of business does
not aggregate buying
power. Instead, it results
in redundant vendor
programs often with
the same vendor, and it
adds compliance risk.
3 | Boosting competitiveness at the intersection of claims and procurement

4. Figure 2. Gaps occur when claims and procurement technology are not integrated.
Vendor risk mitigation. Risk management beyond the specific scope
of services is an increasingly critical component of claims procurement.
Vendors have access to a claimant’s property and private data, and
in some cases they interact with the claimant’s family. Therefore, it
is imperative to find out if the vendor has any violations cited on its
record, and to conduct other due diligence to assess the level of risk.
2. Integrated technology
Antiquated processes and a lack of technology/automation hold
insurers back from better claims efficiency and customer service—two
areas that directly affect profitability. In current claims processes,
preferred vendors are not enabled in procurement systems, vendor
performance is not integrated and invoices are not triggered by service
completion or matched against contract terms (see Figure 2).
Many technology innovations (digital, self-service, analytics-driven
decision making, robotics, etc.) are occurring in the procurement space,
but they are yet to reach claims. 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.
Antiquated processes
and lack of technology/
automation hold
insurers back from
better claims efficiency
and customer service,
two areas that directly
affect profitability.
Source to Pay Process
Claims Process*
*Only represents salient steps,
relative to the Source to Pay
process.
Preferred vendors under contract are not enabled in the claims system. Selection is manual.
Vendor performance is not reported from claims system to be tracked/managed.
Invoices are not triggered by completion of services and matched against contract, selection
terms, performance.
HIGH LEVEL SOURCING / CLAIMS VALUE CHAIN
1
2
3
Technology Integration Gaps
FNOL
Claim
Settlement/
Indemnification
Vendor
Selection
Claim
Evaluation
Category
Planning
Invoice
Review
Sourcing
Invoice
Approval
Contracting PaymentVendor Management
1 2
3
Source: Accenture Strategy
4 | Boosting competitiveness at the intersection of claims and procurement

5. 3. Globally consistent, locally optimized practices
In most global insurers, there is an asymmetry between the level of
standardization of procurement practices (typically quite high) and the
standardization of claims practices (typically quite low). Unfortunately,
this results in procurement trying to use a one-size-fits-all model in the
face of claims resistance.
Global claims procurement programs need local optimization because
regulatory and procurement practices across countries affect strategic
priorities and economic realities. Value levers may be different according
to the geography, so claims and procurement practices must be
customized for each country to bolster competitiveness for the insurer.
Seizing the opportunities
In order to drive sustainable value and continuous improvement
over time, Claims and Procurement need to reset their mindsets and
together build a model that coordinates their operating principles
from a strategic perspective. Decision-making, governance, process
ownership and performance management—among other factors—
should all be unified.
These actions, sustained through operating model changes, will help
insurers actively move toward seizing a potential 1-3 percentage points
improved loss ratio. In the case of one carrier, such measures resulted in
over $100M reduction in loss.
Win at the intersection
There are opportunities for improvement across the end-to-end claims
procurement lifecycle. Start by looking at roles, responsibilities and
accountability. For some insurers, Procurement does it all. In other
businesses, there is overlap and duplication. 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 use that to
your advantage to boost competitiveness.
Balance the inherent biases toward contractual risk vs. relationship in
Procurement and Claims. Risk management is critical given the nature
of claims work. Claims organizations value long-term relationships and
the associated expertise and competitive pricing. Both groups are tied
to performance outcomes. Coordinating at the intersection will help
both to achieve their desired outcomes.
Procurement tries to
use a one-size-fits-all
model in the face of
Claims resistance.
5 | Boosting competitiveness at the intersection of claims and procurement

6. Key questions to ask to improve outcomes might include:
• What data do both sides care about? Procurement should partner
with Claims to agree on types of data to mine and analyze (loss,
expense, contract, compliance, performance and more).
• What is the data telling us about adherence to contracts? Is a
contract expiring? Are rates out of compliance? Is performance
good? These questions should initiate actions. Some might be
handled by Claims, some by Procurement. Collaboration is the key.
• Are the right checks and balances in place between Procurement
and Claims? Does Claims validate decisions, given it owns the
budget and the wallet?
Go digital
Claims procurement technology is in its adolescence. Insurers
should work with technology providers to design and build a digital
ecosystem that connects Claims and Procurement. It is essential that
all systems touching claims activity (e.g. Claims Management System,
Source to Invoice, Accounts Payable, Legal Exchange) are synchronized
and share data.
Digital improvements might include:
Enhancing underlying data—from intake to outcome. Enhanced
intake data can support more complex rule sets for vendor selection.
Outcome data fed back into the digital ecosystem creates a virtuous
cycle for ongoing improvement of outcomes.
Managing vendors digitally. Insurers are not using technology to
manage vendors throughout the claim. A vendor portal would enable
all communication and document upload to occur electronically,
removing the need for manual entry. This exists for indirect vendors;
why not leverage a similar principle for claims vendors?
6 | Boosting competitiveness at the intersection of claims and procurement

7. Integrating for outcomes
Winning at the intersection is possible when the right steps
are put into action to fuel competitiveness.
For example, one global multi-line insurer wanted to reduce its loss by
$100 million through claims vendor management. The business started
by capturing transactional data across more than 25 countries and
conducting global top-down spend analysis on total paid loss. Using a
“follow the spend” heat map, it identified initial areas of focus based on the
loss profiles by country, product line and third party spend. The following
sample of claims vendor management levers were then identified, validated
and applied to help the insurer realize loss improvement well above the
$100 million target:
• Implementing a vendor management program across all major third-
party spend categories to monitor performance and cost.
• Rationalizing and restructuring independent property adjuster
relationships to be focused on value.
• Insourcing of certain commercial property services (e.g. third-party
administrators, forensic accounting).
• Rationalizing auto body shops and the customer interaction process
in one Asia-Pacific country from 1,300 to 115, taking out costs and
creating stricter performance and customer service requirements for
those shops.
When Claims and Procurement work together, insurers create
competitive differentiation and drive economic value. In tandem, the
strongest vendor relationships are rewarded and strengthened, and
customers experience an improved and more engaging claims process.
With benefits such as these being there for the taking, why not start
your first steps toward change today?
7 | Boosting competitiveness at the intersection of claims and procurement

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an assertion of ownership of such trademarks by Accenture and is
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between Accenture and the lawful owners of such trademarks.
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are trademarks of Accenture.
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Contact the Authors
Rob Fuhrmann
robert.p.fuhrmann@accenture.com
Kenneth Saldanha
kenneth.i.saldanha@accenture.com
Jonathan Wicksall
jonathan.f.wicksall@accenture.com
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