Managing the supply

Chair: How is the claims supply chain managed in your businesses?Nick Smith: We consider it a specialist function. We don't have a claims function, we have an operations function which deals with claims.Peter Tart: Within AXA it is part of claims, but it's a specific part of claims within the head office claims environment.Joe Robinson: Over the past two or three years we've been trying to have a team dealing with our claims supply issues which encompasses purchasing experts and claims technicians working in tandem with the legal people on the contract side.Chair: Which supply chain is most advanced?Tart: The motor claims supply chain, followed by goods replacement then probably legal services. This is primarily because it is the one that insurers have concentrated on.Robinson: Motor's quite advanced in Zurich. We have our own re-engineering unit in house.Stewart Murray: I don't see motor supply chain anywhere near as advanced as household. Motor is a fragmented market. I don't see service level agreements and the focus is purely on price. Household supply chain engineering, is the most advanced in Royal & Sun Alliance. Box shipping, replacing what the customer had before, doesn't take as much in terms of service level planning, so that's probably why we've invested so much in the supply chain, making sure that we have the right supply chain in place to manage the indemnity costs because that's the biggest cost on our expenditure.Smith: If you're talking value as opposed to customer satisfaction, I would say that goods replacement is more advanced because you are dealing with fewer suppliers. You'll have two or three suppliers that will get a significant volume of business, so they will be prepared to implement the infrastructure, whereas when you're dealing with a motor network you're talking hundreds, if not thousands, and will not have the resource to put the new systems in.Chair: From the legal services point of view how are the supplier/provider relationships changing?Alan Jacobs: It depends on the individual insurer, as they all have different agendas. I can't think where, over the past two or three years, we've ever had the same sort of set of criteria applied by any insurers.Often the criteria are completely invisible, so you don't have a clue what's being looked for.Smith: That's an issue for all suppliers. As a company that has a supply chain and is also a supplier, we have to provide different management information (MI) to each insurer and they each have their own requirements.The important issue is to ensure that only relevant MI is provided, as there is an awful lot of MI that is provided which doesn't really get looked at.Graham Jackson: In terms of delivering the MI, are there hurdles created by the buyers or the sellers of these services? Do you deal only with people who can approach MI in a certain way?Smith: At the moment most insurers still want their MI in a traditional Excel spreadsheet sent through to them on a weekly, daily or monthly basis.But an insurer could say: "We want you to download the MI directly into our systems." So you have to make sure that your systems are compatible with that insurer and are you going to do that for just one insurer?Alex Secchi: What about actually providing information to your suppliers - providing planning data and knowledge of what would happen? Is that happening?Robinson: The relationship with a supplier has to be a partnership and it's incumbent upon the insurer to give the supplier information about what's changing in the structure of an organisation. That's prudent. And by the same token I'd expect the supplier to give us early warning if it was going to change. So it's a question of trusting each other, although I'm not suggesting we share a five-year business plan.Chair: What are the biggest constraints on improving the effectiveness of the claims supply chain?Smith: Talking as the supplier, it's lack of long-term contracts. We should be moving towards three and five-year contracts, not one-year contracts. Most of the improvements that are required are IT issues and they're not cheap.Tart: Internal resources is one constraint. Internal compliance with supply chain arrangements is also an issue for us.Jacobs: From a supplier's point of view, the big barrier is communication - lack of knowledge of what's expected and what you're being measured against. The other big thing in terms of effectiveness would be a single point of contact, almost like a client relationship manager that I could deal with.Murray: The perception is that the supply chain is complex is the biggest obstacle. It's not complex; it's pretty simple. Also insurers are taking a 'one size fits all' approach, but at the end of the day one size doesn't fit all. It's about giving the right claims to the supply chain and taking a faster approach to settling the claims that don't fit the supply chain, such as where a cheque can be sent.Chair: Is there a role for standards for the interchange of data between suppliers and insurers?Smith: Yes, it would be great for interchange of data between suppliers and insurers. Realistically I don't think it's ever going to be possible for there to be an industry standard way of data interchange. There are ways of making it easier for that information to be exchanged, but I don't think we could have a standard way that's always going to be taken by all suppliers.Jacobs: The idea is great, but people have different views, not just as to what's important but also as to what constitutes value rather than cost or price for the service. I can't see it's going to happen. Insurers are going to continue to apply their own standards as to what is value for them.Murray: Even if you could get us all round a table and agree a standard process and a standard format, you would find that each insurer would want to change it.Jackson: The other question about standards is if you did have standards what would they actually do? How much would it improve the cost of running your supply chain?Chair: Are there any areas where there would be value in industry collaboration?Tart: There are benefits for collaboration. Motor is an obvious one, I'm sure we all ahve a pretty sound engineering network. But, there is an element of inefficiency there. Then again, taking three insurers and using one enhanced engineering network has its own difficulties.Murray: The insurance industry doesn't collaborate, probably for competitive reasons. That isn't to say that it shouldn't be done. There could be a huge benefit, specifically on motor and building, as the markets we deal with are so fragmented.Murray: What are we going to lose by sharing? Ford and GM collaborate on things that are not competitive. Pepsi and Coca-Cola collaborate on things that are not competitive - they share a bottle plant as an example.But they don't collaborate on anything that is close to the brand or their customers. The insurance industry's a long way behind that level of collaboration.Secchi: How far do you go to your suppliers and tell them they have to re-engineer the supply chain?Murray: We meet all of our content suppliers every two months to talk about process. They all have generic processes that we'll work on together.Let me take our relationship with Dixons as an example. We've taken a number of our content suppliers to its call centre in Sheffield so they can see what we mean by best practice as far as process is concerned.Chair: What can the insurance industry learn from other industries?Tart: There could be problems with benchmarking. If you don't understand the drivers in that market, if you don't have the intellectual property to know what made that work, then you have a problem implementing it. What may be best practice in one industry may not work in the insurance industry.Murray: When Coca-Cola and Pepsi launch a product, they'll understand the supply chain and have the capabilities to deliver it. The insurance industry doesn't do that. The procurement team usually gets a phone call saying that a product has been launched and a supply chain is needed the next day.Chair: Could technology be used to add value to the supply chain?Murray: We need to get back to basics and understood the process. E-enabling a bad process is just as bad, if not worse, as not e-enabling it at all.Robinson: We need new technology to make it easier for claims staff.Murray: Technology will enable us to add value by providing us with more detailed information.Chair: What do you see the claims supply chain landscape looking like in the next five years?Tart: It would be interesting to see whether supply chain management will simply be a passing fashion. It could develop in one of two ways.Either insurers will start to understand it. They can see that it isn't procurement or purchasing, that its about looking at the whole rather than just individual transactions and that it's not about price, it's about the overall value. Alternatively, insurers could look at it, say that it's not working and go back to looking at cash savings.Jacobs: There will be more use of IT, hopefully on the back of a greater recognition of the need for transparency, to give suppliers a clearer definition of what's expected from them.Murray: There won't be any change in the supply chain landscape in five years' time. It will still be too complex, there'll still be too many players in the market and there'll be too many people that don't understand it.Jackson: It gets back to why would you invest in a supply chain. One is to deliver excellent customer service and the other is to manage the players who will participate in it. I expect the insurers and some of the suppliers will actually set quite high technology hurdles for entrants.The ones who can demonstrate the performance of those processes best - the good MI and competence in how they're analysing it - will succeed.

The panel- Nick Smith, GAB Robins supply chain manager
- Peter Tart, AXA UK, head of supply chain (motor)
- Alan Jacobs, DLA solicitors, partner
- Joe Robinson, Zurich head of claims
- Alex Secchi, IBM, procurement lead for financial services
- Graham Jackson, IBM general insurance solutions, principal
- Stewart Murray, Royal & Sun Alliance, UK supply chain
- Chair - Michael Faulkner, Insurance Times.