How to achieve true value for money when tendering
- Choosing a risk management supplier is about more than just price
- It’s about finding the right provider, the right policy and the right service, at the right price
- We consider some of the most important questions to ask during the procurement process
Selecting a risk management supplier shouldn’t just be a case of opting for the cheapest provider – it should be about finding the right policy and the right service, at the right price.
However you go about you choosing your supplier, it’s important to ensure they truly understand your organisation and will work with you to protect it.
Sometimes, the importance of factors other than price can be underestimated. If these other factors, such as major loss capability or risk management support, are given insufficient weighting during the procurement process, this could have a serious impact on your organisation in the event of a loss.
Here, we consider five of the most important non-price factors to consider when tendering for a risk management supplier, and explain some simple, practical questions that you can ask to ensure you find the risk management partner best suited to you.
1. Sector expertise
To truly understand your organisation, your risk management supplier must also understand the sector you operate in, and how the challenges you face are developing and evolving over time.
Questions to ask:
- Can you demonstrate what expertise or influence you have in our sector, and how you would use this to help us better manage our risks?
- How do you work to influence policy and regulation on our behalf, and can you give any examples of successful lobbying that has had a material impact on organisations in our sector?
- Are you affiliated with, or members of, any organisations that are relevant to our sector?
2. Major loss capability
The breadth of experience and expertise in dealing with major loss varies significantly from organisation to organisation. It is important to challenge suppliers on how they would be able to support you to get back up and running if you suffered a serious flood, fire or other catastrophic event.
If a supplier cannot clearly demonstrate their major loss capabilities, you should think carefully about whether they would be able to provide you with the level of support you would need, in order to resume normal operations quickly after a major incident.
Questions to ask:
- Can you provide evidence of your track record in supporting customers with a similar risk profile to ours after a major loss, e.g. case studies?
- Do you have any case studies or testimonials that demonstrate the ability of your loss adjuster network to respond quickly following catastrophic events?
- Can you explain how you would work to minimise the impact on our organisation following a major incident e.g. by providing interim payments, or temporary replacement buildings?
3. Claims service
It is also important to consider how straightforward and seamless the process of making a claim would be.
A slow or complex claims service could frustrate your efforts to quickly recover to the position you were in before a loss. For example, if you found yourself constantly passed from person to person, providing the same details again and again, you might find it difficult to concentrate fully on getting back to business as usual. If your insurer quibbled over the tiniest details, that could prevent you from getting on with replacing lost equipment and furnishings.
It’s also extremely important to consider any factors that could influence whether your claim would be paid in full. Different insurers have different approaches to the Insurance Act, a piece of legislation which addresses how claims should be handled if the policyholder has failed to provide all relevant information.
Questions to ask:
- What level of experience/expertise would the person handling our claim have?
- Would we have access to the person making key decisions relating to our claim, throughout the lifecycle of the claim?
- What is your approach to the Insurance Act, and how might this impact claims payments?
4. Claims defensibility
Large compensation claims (e.g. public liability) can negatively affect your risk profile and therefore increase the premium you can expect to pay when you come to renew your policy.
It is important to consider how an insurer would support you to launch a robust defence of spurious claims, and reduce the risk of claims occurring in the first place, for example by helping you to improve your record-keeping, and running mock trials where hypothetical claims can be tested.
Questions to ask:
- How would you support us to reduce the risk of public liability, employers’ liability and other compensation claims?
- How would you support us throughout the legal process should a claim occur?
- Do you have any evidence to show how you have been able to improve other customers’ repudiation rates?
- What is your approach to taking a stand on important claims and potentially creating legal precedence? Can you provide examples of where you have done this?
5. Risk management support
Insurance can be viewed in one of two ways: as a transactional arrangement – that only comes into play when there is a premium to pay or a claim to be made – or a genuine risk-management partnership, in which insurers work proactively to help their customers better understand and manage the risks they face.
You should consider what an insurer can do for you before you have even taken out a policy, and between policy inception and renewal, and whether there is any specific support they can offer to reduce the risk of losses occurring.
Questions to ask:
- Do you provide risk management training?
- Do you have any data/insight to explain the top causes of loss in our sector?
- Can you give us any guidance or support to manage emerging risks?
- How would you help us to understand our Total Cost of Risk?
The value of a flexible approach to procurement
Asking the questions above will help to ensure you have given due consideration to some of the important non–price factors that could end up having a damaging financial impact on your organisation – either through increased claims costs, higher premiums or larger excess payments.
It is equally important to ensure your approach to procurement is flexible enough to give these non-price factors sufficient weighting. A scoring system geared too heavily towards day-one cost will always result in the cheapest provider winning the tender, but not necessarily the provider who will offer the best risk management solution.
How we can help
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25 years of protecting the public and voluntary sectors
Zurich Municipal has been committed to protecting the public and voluntary sectors for 25 years.
To find out more about our tailored protection and holistic support – including a number of customer case studies – visit our dedicated 25th anniversary page.