Maintain the chain

For seamless claims processing, insurers have to rely for a large part on a host of suppliers and contractors, all of whom must meet a range of standards, have transparent, measurable systems and, above all, a strong customer service ethic.

An important aspect of this chain is the repair and replacement industry - which has long been viewed as an effective means of stemming claims leakage. The idea is that if insurers are providing a fast, efficient repair and replacement service, most people will not try to inflate their claim.

Customer service
Therefore the main consideration for insurers when choosing their supplier or contractor is customer service.

Royal & SunAlliance household replacement and building repairs manager Bob O'Keeffe says that without strong customer service, other strengths, such as workmanship or pricing, count for little.

It is also the first point raised by the manager for Cunningham Lindsey's supplier management services division, Gavin Long.

Insurers focus on suppliers that have the ability to take proper care of the policyholder. For this reason, they tend to look at suppliers who have a high street presence and who are usually instantly recognisable to the customer.

This makes the policyholder more comfortable and, because of their high street experience, these suppliers can provide retail-style customer service to consumers.

The aim is to align the needs of the customer to the supply chains of the suppliers that are in place, and not force the customer to interact with a supplier that, under normal circumstances, they would never use.

However, O'Keefe stresses that supplier size is also an important factor. He says: "It has to be of a reasonable size because of the sheer volumes of work we are handling. On our main building networks, we handle, at the moment, just over 10,000 claims a month."

He is quick to add that insurers also have certain responsibilities towards their supplier network members. These help to achieve an insurer's goals of low cost materials and speedy customer service.

O'Keeffe adds that insurers must be able to deliver volumes of business to their suppliers. This helps to keep suppliers and contractors' costs (such as advertising or call-out fees) down and their cashflows up. He adds that slick payment processes are also essential.

"From a contractor's point of view, you've got the attraction of little by way of acquisition costs, little by way of credit risk and you've got good cash flow. Provided you [the insurer] can deliver those things, you can generally use them to drive down costs and to make strenuous customer service demands," he says.

Expanding business
Business volumes help to secure contractors' loyalty and keep them motivated to "contact the customer within two hours of getting the instruction".

For Gavin Long of Cunningham Lindsey, size is certainly a consideration, but an important factor is the ability of the supplier to grow and develop as the insurer's own business expands.

Cunningham Lindsey's own back-up panel of suppliers is used to maintaining a consistent service and cost benefits for its clients, should insurers' panels have problems sourcing products. But Long says, the service is proving popular with smaller insurers.

Another key requirement for a supplier is market share, a factor related not only to size but also the ability to meet every customer's replacement product needs.

Royal & SunAlliance UK purchasing manager Stewart Murray says that market share is measured in terms of a supplier's ability to provide brand width (different types of product) and brand depth (different types of brand such as Sony, Panasonic or Philips).

Another common theme for insurers when considering the make-up of their supplier panels is transparency. R&SA's O'Keeffe says suppliers and contractors should adopt an "open book" policy with insurers. He says it is important to know what suppliers' real costs are, what volumes they need and what their profit margin is.

"When you do that, you then start looking at internal processes, not only your own but also those of the contractors," he says.

He adds that by studying those processes, R&SA can help its suppliers improve customer focus and reduce costs. Which, of course, benefits R&SA too. "It's about continuously looking for improvement with contractors," he says.

Supply chain
For Cunningham Lindsey's Long, site visits to view each supplier's processes in action are vital. He says insurers want to see everyday working practices to ensure the processes are as good as they sound.

He adds that it is important for insurers to appreciate what a supplier has to deal with and to be aware of any issues that might affect the supply chain. This allows the insurer to work with a supplier on the procurement process to achieve better customer satisfaction goals.

He says: "Nowadays much more of that is happening. The working relationships are much closer and there is even a three-way process involving loss adjusters as well. It helps loss adjusters if they know of any issues on behalf of the common client.

"We have come a long way in the past ten years in terms of how we work with suppliers and how we choose the suppliers on to the respective panels."

Long adds that many of the successful suppliers have administration teams focused on serving insurers and their policyholders.

"These suppliers have dedicated teams and offices to handle calls and make arrangements. Having a staff that is knowledgeable about how the insurance industry works is a big advantage to a supplier as well."

A final prerequisite to making it on to an insurers' network, particularly a building one, is the ability to show compliance with service standards and with an insurers' costing models.

"Audit is a constant ongoing part of the relationship. It drives improvement and helps them [contractors] build businesses," says O'Keeffe.