Are the payment of Insurance Premiums exempt from the procurement process? And if not, what would be a best practice approach to drive value?
I don't believe they should be exempt….
Like the procurement of any service/ product; One size doesn’t fit all regarding insurance either.
Weighing up excess amounts versus premiums and establishing if the cover is still appropriate (many businesses purchase insurance at start-up then 30 years later it’s simply had add-ons to a policy when there’s been a whole host of changes affecting the marketplace and the business itself) should both be considered at the start of a process.
Also, starting the process early (60-120m days out), work with an insurance broker that can engage the whole marketplace and communicate well with the broker to identify what you’re looking for/ need.
Finally, no two insurance policies are exactly the same but it’s important to accurately compare (apples with apples). It can be difficult to compare and contrast or even knowing where to look for the differences. Utilise an independent professional to help manage the process and provide side-by-side comparisons (not just on the premium).
In Saskatchewan the school boards purchase insurance collectively through the school boards association. A specialist there works with an insurance broker to go to market and get the best rate for all the school divisions in the province collectively. I am not directly involved in the going to market but the insurers bid on the coverage. We all provide the information necessary to determine the insurance coverage needed. It covers property and liability.
Neil: The procuring of Insurance cover by Public Bodies is not generally exempt from the Public Contract Regulations. Whether it is treated as a procurement exercise by Private Sector bodies is up to them and it's not for any third party to say that it should be. Personally, I don't see the logic in not so treating it.
I totally agree with Gemma that the Insurance Premiums should not be outside of the procurement process, all spend no matter the category must undergo a procurement process even if it is known by a different name such as Travel and Expense policy.
However the purchase of insurance does require specialist knowledge and unless you have that available in-house, external advice must be obtained as certain cover types you are legally obliged to hold.
As Gemma has suggested work with your insurance broker, but remember that their fees can be negotiated and service levels should be reviewed so your first task could be to undertake an RFX process and appoint a new broker.
If the broker is to be effective in marketing your business to the insurers it is important that the broker fully understands your business and the risks. Do not isolate the broker from the business units and operations.
Once the broker understands your business they are more capable to persuade the insurance market that you are a lower risk, thus your rating should reduce and your premiums follow on.
As the broker understands your business and risk profile so they can better advise you on levels and type of cover required, with an ever changing market new types of cover may be more appropriate or types of cover required for future operations.
Finally, remember that the cost of insurance is driven by the value declaration of what you are insuring as well as the rating, an annual audit of values is well worth while. Whatever you do, do not rely on a report from Finance alone have the values sensed checked by the relevant departments and visa versa. Remember as Procurement our cost reduction focus should be on the rating not the Premium cost, you cannot control an increase of assets values or the wage roll.
Insurance procurement is not easy with many pitfalls, but as with any Procurement process agree your specification (cover levels, deductions, self insurance etc.) with the business. Once done get the broker to do the work and deliver a reduced rating that is better than any market trend.
Hi Neil, Has anyone said why they've previously excluded Insurance from the process? (The site wouldn't let me add this reply in the appropriate box)