BACKGROUND
Procurement Australia’s insurance team, InsureRight, were appointed by 17 Victorian Councils in the lead-up to the 30 June 2022 insurance renewal season to oversee an independent insurance tender process for their general insurance arrangements.
The Councils were all eager to save money after experiencing several years of escalating premium costs but were bracing for further bad results after being told to expect increases of between 10% - 20% by their existing advisers and insurance brokers.
The challenges faced by Councils are somewhat diverse and evolving. Their position within the government hierarchy and responsibilities to the general public mean they are susceptible to numerous high-frequency losses that can accumulate considerable costs over an extended period of time.
From an insurance perspective, one advantage of their position is their universal coverage requirements, given their exposures and subsequent risk transfer needs being virtually identical for the most part.
APPROACH
To assist the Councils in maximising their potential for cost savings, InsureRight’s approach was to manage a 'Request for Proposal' (RFP) insurance tender exercise on behalf of the Councils on a group or collective basis.
This meant that the Council tenders were advertised in the market simultaneously as a 'group' tender opportunity, which enabled the Councils involved to aggregate their insurance buying power from a marketing standpoint while still maintaining their own programs.
This concept was reiterated to participating brokers who supported the approach as it also afforded them the opportunity to engage prospective insurers with a far larger premium pool.
RESULTS
As anticipated, this approach intensified competition in the marketplace and helped 15 of the 17 Councils secure premium reductions, one of whom achieved significant premium savings of over $245,000. The remaining 2 Councils only incurred single-digit increases despite their individual claims costs being particularly large and pricey.
The InsureRight team were also able to work with the group of Councils and their respective brokers to ensure a more open, transparent working relationship between the two parties, thereby eliminating any potential or perceived issues regarding broker advocacy or support.
