Procurato’s benchmarking enabled our client, a medium-sized Public Liability insurer, uncover the underlying factors that were driving the prices up. This helped them target specific building repair rates and develop a plan of how to renegotiate and reduce these rates and the associated inflation.
• Industry: Pet, Motor and Household Insurance
• Geography: United Kingdom
• Company size: GWP in excess of £500m
The challenge: Where We Started
The impact of the Pandemic, Brexit and the Ukraine War caused a scarcity in skilled labour and an increase in materials costs. Whilst all insurers were feeling this pinch, for our client it had resulted in an unacceptably high rise in costs related to household repair fulfilment.
What the insurer needed in order to pinpoint the root causes of the issue, was an end-to-end review of their household supply chain for all claims of small to medium size losses and, concurrently, procurement experts in the insurance sector, to carry out a detailed benchmarking exercise. Together these would allow evaluation of the performance and rates of market peers against the incumbent suppliers’ performance and pricing.
This is where Procurato stepped in and helped the insurer tackle the issue and turn the challenge into an opportunity, so our client could gain the insight they needed to manage the rising costs and keep the competitive advantage.
Our Approach: Our Strategic Review Step by Step
We started by matching the five different rate cards from our pool of benchmarks against the one provided by our client. Using our expert tools, systems and data, we conducted a robust review of approximately 8,000 individual rates (line items) so our team was able to understand the rates in detail and identify anomalies as well as establish potential opportunities. We then produced a detailed report that included the analytics and peer-to-peer performance within the industry.
The Results: Benchmarking Insights Leading to Deeper Understanding of the Market and Informed Decision-Making
The deep insight our benchmarking report provided enabled the insurer to focus on the issues uncovered. It became clear their rate competitiveness had drifted in certain areas from the market benchmark, meaning our client would be able to control the price increase despite the market trends at the time affecting the cost of materials and labour.
Our benchmarking helped identify the strengths and weaknesses in our client’s existing supply chain, and areas of opportunity. Procurato also provided the insurer with an overall “best in class” rate card, which helped the insurer exploit the gained insight for their benefit.
Planning for the Future:
Our client’s objective had been to understand what impact inflation had been having on their portfolio, where they benchmarked against the market and what they could do to improve or secure their position. Procurato’s final report enabled the insurer to renegotiate a large volume of rates with their new provider on a “cherry pick” basis of where there largest spend areas were, rather than spending time on low-hanging fruit. Once followed through, using the Procurato report as well as our advice/guidance on how to proceed, the anticipated savings were predicted to be ~15% across their rate card.
Additionally, whilst traditional benchmarking tends to offer a snapshot in time, it’s almost always backwards-looking and lacks predictive analytics. To improve and futureproof our work, Procurato were able to provide indicative projections by coupling our benchmarking to specific inflation analytics methodologies. This gave an indication of what-if? scenarios based upon a variety of rates of inflation. This offered some level of indicative future price inflation for key target perils.
Our approach was designed to arm the insurer with the knowledge needed to help pre-empt and address future inflation.
How benchmarking a Supply Chain helped identify areas for cost improvement