Insurance Procurement - Changing The Game Plan

    MELBOURNE, AUSTRALIA, March 09, 2011 /24-7PressRelease/ -- Epago Group announces alliance with Boutique Risk offering an unique Insurance Procurement Solutions.

Epago Group, with our extensive procurement experience, has partnered with Boutique Risk to provide clients with a leading independent insurance procurement consultancy that understands the importance of nurturing an effective insurance procurement process.

The Insurance procurement NEED:

In July 2010, the Economist Intelligence Unit (EIU) released survey results on the changing role and responsibilities of corporate risk management. The survey, which included almost 500 executives from around the world, found that while there is wide-spread acknowledgment of the importance of strategic risk management, only:

* 35% of senior executives believe their company is effective at anticipating emerging risks; and
* 50% of companies involve their risk function formally in any major strategic decision

While many organisations are expert in identifying and solving operational problems through tacit knowledge built over many years, the EIU results indicate that companies remain extremely vulnerable to severe external events that threaten a company's ability to execute its overall strategy. Instead of trying to anticipate severe events, organisations need to focus energies on trying to instil the best possible process to reduce organisational vulnerability to external events. Often these events can be catastrophic to a business; therefore a crucial area in managing external risks is the insurance / risk transfer process.

While some companies employ a full-time risk manager with a solid understanding of insurable risks, the truth is that the responsibility often tends to fall in to financial controller's or accountant's portfolio of duties. The company personnel managing the insurance procurement process are often time poor, and not always ideally suited to perform the various due diligence required through the insurance procurement process.

The result of this is that the insurance procurement process is often outsourced to an insurance company or broker, who in turn is relied upon to suggest a course of action. While this can sometimes yield the required result, many variables are left to chance including:

1. Performing cost analysis and assessing buyer side risk;
2. Analysing differences in policy wordings and endorsements;
3. Checking adequacy of limits of liability and declared values;
4. Monitoring major dependencies with customers and suppliers;
5. Reviewing contractual liabilities and their effect on insurance policy coverage;
6. Analysing uninsured risk exposure and sensitivity / GAP analysis;
7. Monitoring changes in business risks and their effect on your level of coverage provided, such labour hire and contractor risks;
8. Premium benchmarking and understanding available pricing and coverage options available;
9. Negotiating insurance contracts, structuring service level agreements and fee levels;
10. Investigating consolidation of insurance programs and risk financing alternatives.

The above issues make the insurance review a challenging undertaking. How does an organisation structure an insurance review to ensure it achieves the best result?

While the need for purchasing insurance remains integral for any business, there myriad of due diligences required in an insurance review require substantial commitment of a company's time and resources. Because of this many organisations are reviewing how they procure insurance.

For some organisations, an insurance tender is purely a means to reduce both premium costs and fees payable to the broker. The premium quotation model has historically been the insurance procurement method of choice because the top three risk metrics companies use to measure the effectiveness of their insurance program have been:

* Total cost of risk financing;
* Claims management;
* Loss prevention / control.

Managing the Insurance Procurement Process

When conducted professionally, the insurance procurement exercise can actually enhance the organisations' market profile, improve return on investment, provide a real evaluation of the alternatives available, and/or affirm the strengths and benefits of the current relationship.

Some of the important issues to be addressed in the procurement process include:

* Timing & Frequency;
* Deciding which Procurement Method to use;
* Developing a comprehensive Insurance Tender Document;
* Finalising an evaluation methodology;
* Gauging interest from brokers/ insurers;
* Assisting with evaluation of Tender Responses and performing Due Diligence;
* Dealing with broker / insurer questions and issues;
* Post tender service monitoring;
* Finalising broker appointments such as fee structure and Service Level Agreements (SLAs).

It is essential companies explore alternate ways to secure the right relationships that add strategic value to their operations. When considering your next insurance procurement exercise, it may be worth considering independent insurance procurement specialists who is experienced in insurance tenders and can work in partnership with you to manage the process.

Our Service Offering

Epago Group, with our extensive procurement experience, has partnered with Boutique Risk to provide clients with a leading independent insurance procurement consultancy that understands the importance of nurturing an effective insurance procurement process. The insurance offering can be structured to include one-off projects or long term projects and ongoing arrangements focusing on continued support.

Some benefits of using our services include:

* 100% independent strategic insurance advice;
* Insurance consultants with significant experience;
* A partner who can clearly demonstrate strategic fit with your governance needs;
* Fee for service (FFS) model that clearly aligns with your desired objectives;
* Insurance premiums and service benchmarking;
* Full assistance in planning and implementing suitable insurance tenders;
* Proactive involvement in reviewing business risks and policy coverage;
* Finalising comprehensive tender documents;
* Liaising with risk specialists and 3rd parties;
* Analysis of risk transfer versus risk retention (self-insurance) strategies;
* Full Confidentiality and transparency;
* Organising competing tenders through our insurance procurement network.

Contact Epago Group today and find out more about our Insurance Procurement program and other Category Management offerings and how we can assist your organisation. For further information please contact us at +61 3 98427557 or email us [email protected].

Website: http://www.epagogroup.com.au

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