Thursday, February 2, 2017

Vendor Management Programs – Putting Together Your Dream Team

Insurance professionals are the recipients of added pressures to streamline processes in an effort to maximize results. Nowhere is this more palpable than in Latin American where the way “it is has always been done” customarily trumps the “new approach.”  Specifically, implementation of vendor management programs is a key transformative tool in the betterment of insurance business in Latin America leading to increase efficiency, higher customer service satisfaction and increased profits for the companies. A vendor management program seeks to implement and maintain acceptable parameters for vendors (i.e. claim adjusters, experts and attorneys) working for insurance companies, to ensure quality and consistency. Poor vendor management, or even the lack of a coherent and comprehensive vendor management plan is a leading source of bad results amongst Latin American insurers.

Following are some of the factors to consider in developing and evaluating a vendor management program: 

1.         Picking A Winning Team

Selecting cost-effective vendors with the necessary expertise is crucial. While the vendor’s skills and experience should be part of the evaluation, there can be other considerations. For example, the vendor’s resources and ability to manage a larger workload or different lines of business, or its willingness to grow geographically, are also relevant factors. 

Although having an established list of vendors is important, insurance professionals should also monitor market developments and be in contact with new potential vendors, as it may become necessary to work with those companies as well.

2.         Providing The Tools for Success

Vendor excellence in service is facilitated by insurers and reinsurers providing their vendors with all the necessary information and resources in a timely manner. For example, by supplying complete documents, promptly providing instructions or feedback, or approving the use of additional resources as may be necessary to investigate or negotiate a claim.

3.         Incentivizing Your Team Members

Vendors are managed by contracts or Service Level Agreements (SLA). It is important that these include properly worded performance benchmarks spelling out the obligations of the vendor. Additionally, creative accountability checkpoints for vendors discourage complacency.  Performance comparison charts may be used to evaluate vendors. 

On the other hand, insurers must recognize that vendors are businesses that must turn a profit to continue to exist. Strategies such as caps on fees for services should be established with caution, to avoid the risk of having claims mismanaged because there is no monetary incentive for the vendor to continue to perform. 

4.         Invest In Training Your Vendors

While it is important to require consistent performance from vendors, constructive criticism and flexibility are important to develop a successful business relationship. When insurers are dissatisfied with a vendor, it is generally advisable to invest some time into providing the vendor with guidance and constructive criticism to improve future service.

Conclusion

All claims departments need good vendors to be efficient and successful. Vendor management is therefore crucial for insurance companies. Choosing the right vendors, providing the tools necessary for success, incentivizing your team members to work hard, and providing training and constructive criticism are all key ingredients of an effective vendor management program.  

Posted by Daniel Baron*




*Not licensed to practice law in Florida.