Supply Chain Transformation Blog

Supply Chain Transformation Blog

Opinions expressed on this blog reflect the writer’s views and not the position of the Capgemini Group

Supply Chain Management Strategies for Insurance Claims

Insurers employ a score of supply chain vendors across the claims process. Examples include claim investigators, third-party administrators, auto body repair shops, defense counsel, engineers, offshore claims service providers, materials suppliers, case managers, and pharmaceutical benefits managers. As insurers consider more flexible and expanded business models in the Digital Age, the opportunity to bring business partners into the claims process and operating model will become more prevalent. Additionally, as claims become more complex--requiring more specialized expertise--and claims handling becomes increasingly regulated and subject to broader reporting rules under Sarbanes-Oxley, ICD-10, MMSEA (Medicare, Medicaid, and SCIP Extension Act of 2007), and similar laws and regulations, the number and diversity of these vendors will only continue to grow along with insurers’ costs and risks. It is not unusual for supply chain vendor costs to contribute 25 points or more to insurer combined ratios, although insurer experience in this area can vary.

Insurers have been slower than their counterparts in other industries to rationalize their supply chain management strategies. Hurdles to insurers’ adoption of more robust supply chain management programs are similar to those in other industries:

  • Talent – Analytics Finding talent with the right analytical skills to provide insight into your supply chain
  • Internal Optimization Pressures Top-down pressure to continually reduce costs and optimize working capital in the supply chain
  • Supply Chain Responsiveness Designing a supply chain that can respond to volatile customer demand in “real time”
  • Compliance: Business adoption of supply chain management program
  • Talent – Functional Knowledge Finding talent with the functional knowledge of effective supply chain processes
  • Visibility and Coordination End-to-end visibility and coordination across the supply chain (See:  Capgemini Supply Chain Impact Survey)


Because of the significance of supply chain costs to an insurer’s bottom line, it is critical for insurers to focus on reducing these costs now by adopting leading supply chain management practices.

The remainder of this article discusses current supply chain management issues and trends and imagines a brighter future for supply chain management in insurance claims if insurers incorporate visibility, data, technology, and customer focus into their supply chain management strategy.

Present State of Supply Change Management in Insurance Claims

In our experience, insurers’ use of modern supply change management techniques to manage and improve their supply chain process is generally at a relatively low maturity level in all but global insurance organizations. We also have observed that even such large, capable organizations often lack key components of a world-class supply chain management system: (1) standardized supply chain management processes across the entire supply chain; (2) clearly defined metrics for measuring supply chain performance; (3) the right supply chain performance data; and (4) a continuous feedback loop to drive supply chain performance improvement.

We have observed that some insurers centralize some of their supply chain management activities in a supply chain management office responsible for vendor selection, contracting, and, to a lesser degree, performance measurement. A single supply chain management function enables standardized supply chain management practices across the entire supply chain process and promotes optimal supply chain outcomes. However, to the extent that an insurer’s supply chain management function is not fully visible, i.e., does not encompass supply chain activities from end-to-end because of manual processes, the insurer is at risk of inconsistent, sub-optimal outcomes from its supply chain activities.

Important Supply Chain Management Trends for Insurers

We discuss below three key supply chain management trends that provide opportunities for insurers to reduce their supply chain costs and risks and improve supply chain performance.

Data Analytics (Predictive and Prescriptive)

In the past several years, one of the most important areas of supply chain management to undergo significant change is supply chain data analytics. Supply chain analytics, which impact every aspect of the business, enable alignment of the supply chain program with the enterprise vision and goals. These analytics provide executives with a window into supply chain financials, including expense analysis, forecasting, and contract compliance.

Supply chain data analytics can empower the business to optimize demand and supply planning, thereby reducing supply chain risk. Supply chain analytics can allow insurers to benchmark and improve supply chain vendor performance and identify instances of contractual non-compliance.

Supply chain data analytics provide a basis for measuring customer satisfaction and regulatory compliance related to the supply chain interaction, creating opportunities to improve the customer experience and retention and reduce regulatory fines and penalties. Finally, insurers can harness supply chain data analytics in an iterative way to continuously improve the supply chain process.

Supply Chain Control Tower and Big Data

The supply chain tower is a central hub with required technology, organization, and processes to capture and use Big Data to provide enhanced visibility into supply chain decision-making. While the supply chain control tower is not a new concept in supply chain management, what is new is that organizations are now increasingly turning to it to leverage Big Data. Big Data can increase supply chain visibility by giving organizations the ability to identify external factors such as weather events and civil unrest that may impact supply chain demand and supply. The accessing of Big Data through the supply chain tower can be a boon for insurers, allowing them to more quickly dispatch the right level of adjusters and other claim resources to locations affected by a loss event and more accurately forecast loss exposures arising from the event.

Social Media

Social media such as Facebook, Twitter, and LinkedIn provide means for insurers to more closely communicate and immediately share information with their supply chain vendors on such issues as best practices, performance outcomes, and training. Social media can be used as a forum for insurers to discuss performance issues with their vendors and quickly determine a solution. The immediacy of the information shared through social media can help insurers to avoid supply chain performance issues or nip them in the bud, thus reducing supply chain costs and ensuring that supply chain results remain on track.

Given the importance of social media as a communications channel in the personal sphere and business domain, particularly for Millennial and Generation X customers, insurers should encourage the use of social media by their supply chain vendors such as body shops and contract adjusters to communicate with the insured and claimant during the claim process. Today’s consumers expect to be able to communicate with insurers on a 24 X 7 basis by any channel of the consumer’s choosing. Insurers that promote a seamless All-Channel Experience, including social media, for their customers across the Claims Value Chain, including interactions with the insurer’s supply chain vendors, can expect higher levels of customer satisfaction and retention, potentially leading to greater insurer profitability.

The Future of Supply Chain Management in Insurance Claims

Here is a glimpse into what we believe the future for supply chain management in insurance claims may look like:

  • As insurers’ supply chain data analytics capabilities improve, the model for insurer supply chain management organizations will evolve from a largely procurement function to one that is more performance-focused and better aligned with business objectives. The supply chain organization will be less siloed and better integrated into business operations.
  • Better supply chain performance data analytics means that insurers will be able to better forecast and proactively plan for supply chain activity, more efficiently allocating the right supply chain vendor resources to achieve improved claim outcomes.
  • The wider availability of supply chain vendor performance data will enable the closer partnering of insurers and their supply chain vendors based on a common view of vendor performance and performance goals. This shared vision should pave the way for continuous performance improvement and supply chain cost reduction.
  • A wider array of commercial supply chain technology solutions, allowing for end-to-end visibility of the supply chain process and its improved integration into claims process workflow and decision-making, should become increasingly available.
  • Insurers will have access to better supply chain risk management tools, including dashboards and scorecards, to identify, manage, and remediate supply chain-related instances of contractual, legal, and regulatory non-compliance.


In “Supply Chain Trends Impacting the Consumer Products Industry: Five Forces to Understand” Capgemini notes that the quickened pace of change in the marketplace demands a “more proactive and aggressive approach” to supply chain management. As in the Consumer Products industry, changes in insurers’ rationalization of their supply chain management strategies have been “gradual and incremental” at least until now. And as with Consumer Products companies, remaining competitive will require insurers to continuously hone their supply chain management strategies for insurance claims, positioning themselves on the leading edge of future supply chain management trends.

In light of the above, we believe that insurers should seriously consider including supply chain management in their claims operational reviews, recognizing that supply chain management presents not only an opportunity for significant gains in efficiency, process improvement, and cost-reduction, but also an area of material risk, financial and otherwise. Finally, insurer investment in supply chain management should be balanced against potential financial, regulatory, reputational, and other returns. Given the relative immaturity of current insurer practices for managing their supply chain vendors, we believe these returns could be substantial.


About the author

Mark Nobilio & Claire Louis
Mark Nobilio & Claire Louis
Mark Nobilio :

Mark Nobilio is VP and Insurance Industry Leader for Capgemini Consulting, working with insurance industry clients on Digital and Business Transformation programs to enhance their business performance and digital presence by improving overall customer experience, implementing flexible business models, and increasing operational efficiency.

Claire Louis :

Claire Louis is a Managing Consultant and Insurance Claims Leader for Capgemini Consulting, working with clients to manage their operational, financial, regulatory, and marketplace risk in connection with claims transformation programs, claims performance optimization, regulatory readiness assessments, reserve studies, insurance program diagnostics/oversight, and re/insurance dispute resolution support.

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