One size fits none: The do's & don'ts of partner sourcing
A successful relationship between carriers and vendors must respect the needs of the businesses involved.
Partner sourcing can be a powerful tool for insurance carriers looking to drive cost and operating efficiencies. Potential benefits include reducing risk by leveraging specialist expertise as well as enhancing profitability during surge periods by adding team members where and when they are needed.
But keep in mind, no two businesses are alike, so unlocking the full value of partner sourcing calls for creating a unique relationship that respects the needs of both businesses involved. And it’s important to recognize that taking a “one-size-fits-all” approach generally leads to a “one-size-fits-none” outcome.
As a carrier, the claims experience represents the fulfillment of your promise to your policyholders. Though there are material benefits to partner sourcing claims management services, remember that your partner will ultimately have an impact on your culture and brand. So, building a partnership around your claims management function is a strategic decision with real implications for your reputation and future growth prospects.
If you are a carrier preparing to build new partnerships around or within your claims management function, the following do’s and don’ts will help guide you to more successful outcomes.
What to do
1. Do lead with strategy
Take time to understand your strategic requirements beyond the basic questions of who can do the job and at what cost. Some questions to consider:
- What attributes of your claims program are strategic to your organization/?
- Are you looking to demonstrate an innovative and premium client service, or do you compete on a no-frills, low-cost value proposition?
- Do you plan to grow in new industries or lines of coverage, or are you merely looking to maintain your current client and claims portfolio?
Understanding your competitive stance and your future objectives will help you select the right partner for the journey.
2. Do focus on the outcomes
It’s easy to fall into the trap of focusing on claims handling expense as a primary basis for evaluation. But the real impact of selecting the right claims management partner comes from their ability to drive superior outcomes on dimensions such as cost, duration, litigation rate and reserving.
Make this an explicit — and early — part of your evaluation process, providing the potential partner with data for analysis and interpretation. A potential partner’s analytic approach and ability to articulate how they can deliver better outcomes will speak volumes about their focus and capabilities.
3. Do consider your total cost
To reach an informed partner sourcing decision, you must first understand the true, internal cost of providing the service yourself. Costs relating to the continuing investments in systems and innovation, management of ancillary solution providers, compliance with regulatory requirements, and maintenance of recruiting and training resources are often overlooked when comparing “cost to own” versus “cost to partner.”
Claims management partners can often provide a higher quality, lower-cost end-to-end solution because of their ability to operate at a larger scale than many in-house claim organizations and thus focus on specialization, segmentation and innovation within the claims management space.
4. Do evaluate current and future capabilities
As stated previously, selecting the right claims management partner is a strategic decision. Your partner will become tightly integrated with your business operations and client relationships. As such, you must understand not only the prospective partner’s current capabilities but also their strategic vision, direction and future plans. Engage in strategic discussions to understand a potential partner’s road map while also looking at recent initiatives to assess their track record in executing on enhancements.
What not to do
1. Don’t base current decisions on past experiences or current capabilities
The claims management marketplace is dynamic. Some organizations are investing and innovating rapidly, while others are preserving cash flow or directing it to service areas outside the scope of your partner sourcing evaluation. Be careful not to let past perceptions of providers cloud your judgment when selecting a future strategic partner. Additionally, don’t let your current capabilities dictate the type of partner you select: You should analyze partner fit with an eye toward growth and innovation, as well.
2. Don’t confuse elegant salesmanship with exceptional execution
Businesses spend considerable time and energy honing their sales proposals and presentations. Choosing a claims management partner is often a career-defining decision that warrants looking beyond the pitch. Take time to understand your partner’s company culture; meet the team who will be serving you day-to-day. Test their understanding of your business and strategy. This will enable you to build confidence in the team you will be working with for years to come.
3. Don’t forget your role in the new program
Bringing in a partner can provide material benefits for your business. However, you remain ultimately accountable for the success of the relationship. Consider what business processes need to be integrated with your new partner, such as loss reporting and coverage verification. Determine the role you intend to play in overseeing the claims management program and on becoming involved in select claims. Be explicit on your preferred interaction model with insureds and agents. Make sure prospective partners will take the time to develop a shared vision for your future operating model.
4. Don’t treat negotiations as a zero-sum game
Once you’ve selected your desired partner, you will inevitably enter into negotiations over the economics of your relationship. Remember that this is a strategic, long-term partnership for your business. It requires a financially sound partner with the means to invest in its people, processes and technology. Once you’ve selected your partner, you and your insureds will have a vested interest in that partner’s ongoing success and future investments.
There is much to consider when preparing to partner source claims management services for your insureds. Following these do’s and don’ts instead of approaching the process from a “one-size-fits-all” perspective will better position your organization to achieve successful outcomes.
Mike Hessling is CEO, North America for Gallagher Bassett, the global provider of risk and claims management services. Contact him at michael_hessling@gbtpa.com.
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