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A guide to maximising value fromfinancial services providers

Issue 4: Professional Services, Insuranceand Employee benefits

Introduction

02 Introduction

But all this professional advice comes at acost and, as with every other cost basewithin your business, it may be larger thanyou think and larger than it needs to be.

This guide - the fourth in our series lookingat different areas of cost reduction - aims toprovide a range of practical advice andexamples from experts in the financialservices field to help ensure your business ismanaging its costs effectively and efficiently.

It includes tips and advice on the following areas:

• Professional advisors – why an open andhonest relationship between client andadvisor will deliver value

• Insurance – as well as a competitivepremium, how do you negotiate thecomplex broking market to ensure you’rereceiving the right levels of cover andservice too?

• Employee benefits – is your currentpackage an effective tool for motivatingand retaining key staff?

Few companies these days have the resources or expertise tomanage all of their business functions in-house. We all depend on a range of outsourced professional advisors and service providers to maintain the vital processes, especially finance-related, whichunderpin the operation and staffing of our organisations.

Insurance 03

Insurance

A successful programme is about far more than just a competitivepremium, how do you negotiate the complex broking market toensure you’re receiving the right levels of cover and service too?

The insurance market is a complex one, often built on entrenchedpersonal relationships. This means that the sort of competitive pitch or price comparison exercise that you might carry out whenpurchasing certain types of product or service simply don’t workwhere insurance is concerned.

1 Avoid the ‘incumbency’ factorIf your broker has successfully retained yourbusiness without major changes to theprogramme over a number of years, theremay be a reluctance to change the status quofor fear of admitting there were gaps ordeficiencies in the existing cover. This canobviously lead to a lack of innovation withthe result that you may not be purchasingthe most appropriate and up-to-date coverthe market currently has to offer.

“Expense Reduction Analysts savedus time and money and provided thetotally objective confirmation thatour cover and programme were inorder that we were seeking.”Purchasing Manager, Tower Hamlets College

2 Don’t confuse the marketWhilst inviting a number of brokers to look at your business might seem the logicalresponse to point one above, in reality thisstrategy risks restricting the quality ofresponses you receive as insurers, faced withsimilar – but not identical – presentationssupplied by competing brokers may simplydecline to quote for your business at all.

Further, if your incumbent broker feelsthreatened by the competition, it may simplyprevent others from accessing the market byapproaching as many insurers as possible. Itis a quirk of the insurance industry that, oncean insurer has quoted on a particular piece ofbusiness, it is then obliged to offer the samequotation to all other presentations of thesame case.

04 Insurance

Furthermore, says Expense Reduction Analysts Insuranceconsultant, Scott Ingham, market rates for certain classes ofinsurance have been falling for some years now, so it has beenrelatively easy for insurance brokers to offer attractive premiumswhich may disguise the actual value of the overall package of price,cover and service you’re receiving.

Scott explains the reasons why the only real way to benchmark yourinsurance arrangements, is to use an independent assessor which isneither a broker or an insurer.

3 Presentation mattersThe insurance market sets its prices on thebasis of its perceived exposure to risk. Soyou will only be getting the best results ifall your efforts to reduce risk in yourorganisation are being accurately reflectedin the presentations your broker makes tothe market on your behalf. Unless the timeand investment you are making and thepositive impact this is having on yourclaims experience and exposure to risk isproperly presented then the benefit of suchwork will be lost.

“Expense Reduction Analystsprovided us with access tosignificant knowledge, technicalexpertise and experience of theinsurance market which is not readilyavailable to any organisation whenthey undertake this type ofinsurance review on their own.”Deputy General Counsel, Volkswagen Group UK Ltd.

Insurance

Professional Services 05

Professional Services

1 Set the goalposts clearlyA successful client-adviser relationshipdepends on both parties sharing a commongoal. The client needs to have a clear viewof the outcomes they want to see and beable to communicate that effectively to their adviser so that there is an absoluteshared understanding before the project commences.

2 Agree who does what – and whenThe very reason for commissioning externaladvice is to supplement and enhance theexpertise within the organisation itself. Anyclient therefore needs to be happy that theiradviser is only spending time on matters thatare (i) necessary to achieving the agreedoutcome and (ii) not within the client’s owncompetence or resources

Your adviser should be expected to provide aformal agreement of terms and conditionsand a project plan that specifies key datesand outcomes, as well as clearly outlining theroles and responsibilities of both parties.

3 Keep talking…Don’t run the risk of frustration building upand eventually exploding into a breakdownof the relationship because you have failed totackle perceived poor value or performanceduring the project.

Avoid this by insisting on a clear and properfee estimate up front (where fees are to bebilled on a time basis), followed bytransparent reporting on costs and timelywarning of changes in expectations. Don’tshrink from asking you adviser to explain inwhatever level of detail you require why thetime and/or the rates charged are reasonable.

4 Compare the marketUltimately, if you do not think your adviser’saccount is reasonable, test it in the market.This is a positive for both sides as, without a flourishing market, it is not possible toestablish market rates for work and so to satisfy all concerned that costs are reasonable.

Unlike death and taxes, fees notes from your professional advisers are not inevitable and immutable, says Expense Reduction Analystsconsultant and specialist in financial services, Paul Seddon, and afatalistic approach to professional fees can only hinder the relationshipbetween client and adviser. Instead, an open and honest relationship iscritical to obtaining value for money. Paul offers the following tips toget the best value from your external professional advice:

Employee benefits

06 Employee benefits

Is your current package fully up-to-date, competitive and operating as an effective tool for motivating and retaining your key staff?

Your people are your most valuable asset and the employee benefitsyou provide should go a long way to helping you retain and motivatethem. But, with an ever growing range of products and a bewilderingarray of providers, it’s easy to pay more than you need and yet stillhave a package that isn’t valued by your staff and doesn’t deliveragainst your business objectives.

Scott Ingham provides the following advice:

1 Don’t delayIf you haven’t reviewed your package forsome time, there will almost certainly bepremium savings and cover refinements to be gained.

Unlike your general business insurances, youcan choose to review your employee benefitspackage at any time, meaning that availableimprovements and potential cost savings canbe realised very quickly and start to impacton your bottom line all the sooner.

2 Bespoke benefitsEvery business and its staff is different. Somake sure that the cover you are buying istailored to your individual organisation andproperly serves your business objectives.Recent developments mean that oncestandard approaches don’t necessarilydeliver the best results today. For example,now might well be the time to look atwhether replacing your private medicalinsurance (PMI), cover with a cash-planmight offer a more effective, cost-efficientsolution. Equally, it’s worth asking thequestion whether the rates you are currentlypaying for fundamental cover such as death-in-service are still competitive when setagainst your current risk profile?

07

The cornerstone of most employee benefitspackages is the provision of Private MedicalInsurance (PMI) for staff. However, this isalso one of the most common areas in whichemployers find the cover in which they areinvesting is not delivering the requiredbenefits. Does your company recognise anyof the following scenarios?

• Limited penetration – in most cases,younger employees are not members ofPMI schemes but they are also the mostactive and prone to sports-related injuries inparticular. Dependency on the NHS forthese key team members could meandelays of several weeks and subsequentimpact on productivity at work

• Increased short term sickness leave –whilst staff are signed off by their GPpending further consultation, the businessneeds to make unexpected adjustments toresourcing and work programmes to coverthe absence

• Associated ‘healthcare’ costs – it’s not justthe cost of running the PMI scheme itselfthat costs your business but the additionaladministrative or resourcing issues ofservicing regulatory regimes such as theDisplay Screen Equipment regulations(DSE) or counselling services such asEmployee Assistance Programmes (EAP)

Expense Reduction Analysts is the world’slargest cost management consultancy andfocuses on reducing non-core operating costs for private, not-for-profit and publicsector organisations.

Handling an annual supplier spend of millionsof pounds on behalf of clients in all sectors, theconsultants at Expense Reduction Analysts usetheir significant purchasing influence toachieve optimum value from suppliers, oftensuccessfully retaining incumbents and usingexpert analysis and market intelligence tocombat ‘contract fatigue’.

Expense Reduction Analysts has 170 consultants across the UK, as well as having a global influence in over 35 countriesspecialising in more than 100 non-core business expenditure categories.

Other topics covered in our series of cost reduction guides include:Issue 1 – Property and PremisesIssue 2 – Banking and FinanceIssue 3 – Back Office Supplies

For more information contact Expense Reduction Analysts on: 02380 829 737

or visit our website at: www.expense-reduction.co.uk

Expense ReductionAnalysts

www.expense-reduction.co.uk

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