Procurement: The Hidden System Enabling Claims Excellence

What The Article Discusses And Provides:

This article explores how procurement enables claims excellence in insurance, shaping both cost and customer outcomes.

Insight into how procurement influences up to 80% of claims spend and connects cost, service, and data across the value chain.
Examples of how supplier design and contract discipline translate into financial and customer performance.
A practical framework of five levers to improve cost efficiency, cycle time, and customer outcomes.
Key questions for boards to reposition procurement from an operational function to a strategic driver.

The Reality – Insurance Runs On Third Parties

In insurance, much of the claims experience depends on external partners. Repair networks, loss adjusters, contractors, and call centres deliver a significant share of what the policy promises, supported by in-house claims teams.

Third-party spend represents one of the largest cost blocks for insurers. Across financial institutions it averages 40–45% of operating expenses, but in insurance it often exceeds 70%, reaching 80% in claims-heavy portfolios. Yet the way these suppliers are sourced, contracted, and managed has evolved little over time.

This dependency has a direct effect on both margin and customer experience. Across Europe, the gap between top- and bottom-quartile claims performers is about 13% on indemnity cost – a difference driven less by technology and more by execution. Despite their reliance on partners, few insurers have fully integrated procurement into the claims value chain.

Why The Pressure Is Structural

That dependence now sits under growing pressure from structural cost and capacity shifts.

Repair inflation in Europe remains around 25–30 %, raising the baseline cost of every claim.

Property reinstatement and labour costs continue to climb, adding further strain.

Climate events repeatedly test repair networks and surge capacity.

Customer expectations have shifted toward real-time updates and rapid resolution.

Regulators demand tighter control over ESG standards and supply-chain continuity.

As these pressures build, claims cost management is emerging as the insurer’s most controllable source of margin, revealing how well each insurer manages its supplier network.

The Organisational Blind Spot

Every carrier faces the same structural question: where should claims procurement sit?

Inside Claims: close to the frontline but often missing commercial rigour.
Inside Central Procurement: strong on governance but detached from service realities

Neither model alone works. True performance sits where commercial discipline meets claims insight, and teams share accountability for outcomes, not transactions.

Procurement As The Hidden Enabler

Procurement does not replace claims leadership, digital tools, or analytics. It powers them. It is the wiring that connects those capabilities into results.

By influencing which suppliers receive work, how they are rewarded, and how their performance is measured, strong procurement turns design choices into measurable outcomes on both cost and satisfaction.

Supplier Network
- Operational shift:
  Concentrate work on proven, high-performing partners
- Impact:
  Two to four days faster repair cycle, fewer reopens
Contract Terms
- Operational shift:
  Link payment to SLA and NPS outcomes
- Impact:
  Ten to fifteen percent lower leakage, steadier cost
Readiness
- Operational shift:
  Dual sourcing and surge clauses with ESG tracking
- Impact:
  Stable service during peaks

Questions For The Boardroom

Procurement design is no longer a back-office topic; it is a board-level lever of performance. The conversation has evolved from “How much are we saving?” to “How do we drive outcomes?”

Forward-looking boards ask:

How do our supplier incentives translate into renewal and retention?
Can our repair networks absorb cost surges without eroding margin or service quality?
Are we investing in analytics and digital tools that make supplier performance visible and actionable?
How well are Claims, Procurement, and Technology collaborating to turn supplier performance into customer trust?
Are our contracts driving measurable customer KPIs, or just compliance metrics?

The Executive Agenda: Five Moves That Raise Performance In Claims

Procurement’s value appears when decisions are data-driven and tied to measurable outcomes. These steps demonstrate what many executives already suspect: procurement moves both the P&L and the customer experience.

1. Define joint value impact and shared ownership

Align Claims and Procurement on KPIs that drive both cost, quality and experience. Build one shared dashboard tracking total cost of claims, average cycle time, and NPS, not just savings. Review these together weekly to keep teams accountable

2. Leverage supplier performance for steering and volume allocation

Use data-driven insights to steer more volume to top-performing suppliers and embed performance-based incentives. Make supplier performance visible to executives and use it to drive continuous improvement and network optimisation. Reward these suppliers accordingly, more business volume, co-investments, co-innovations, specialized training in some fields, etc.

3. Create one data view of supplier performance

Integrate supplier performance data into monthly reviews. Analyse repair times, delays, and leakage trends to identify bottlenecks, highlight top performers, and align commercial terms with operational outcomes. Share performance with suppliers and create jointly improvement plans.

4. Build resilience and a clear response plan for high-impact events

Design networks and contracts with built-in flexibility. Dual-source critical categories and require suppliers to have contingency and ESG plans that protect continuity during surges, shortages, or other shocks.

5. Measure what works and embeds it in planning

Test one improvement, track its impact on cost, cycle time, and satisfaction, and integrate proven models into next-year budgets. This creates a continuous loop of evidence and refinement across claims operations.

The Takeaway

As EV adoption, climate volatility, and new customer expectations stretch every part of the claims ecosystem, procurement excellence in claims is becoming the control system that links cost control with customer trust and resilience – the foundations of competitive advantage in claims.