As data analytics and digital capabilities improve and advance, carriers will find it nearly impossible to build market-level solutions in-house. Establishing sound vendor relationships through thoughtful contract negotiations will play an increasingly essential role in the business and technological strategy of insurance carriers. Novarica has learned the dos and don’ts of building sound relationships supported by appropriate contract language; these findings are being outlined in a series of CIO Checklists for IT leaders to use when working with solution providers.
There are several general principles to consider when approaching a new vendor relationship. Even the most experienced IT, procurement, and general counsel professional can benefit from reviewing them. These guidelines are also a good starting point for individuals embarking on a selection process for the first time.
The following three categories have been highlighted as major focuses for carriers to consider.
Create a Team
The contracting team is the foundation of any successful negotiation. Having the right people in the room facilitates communication across departments, ensures that every acting member understands their role and responsibilities, and reveals any fears or reservations that should be discussed. Developing a team of decision makers and subject matter experts early will allow the carrier to present a unified front in the negotiating room. This core team can also act as project evangelists, performing the crucial task of explaining the reasons for the selection and the overarching project vision to the rest of the company.
Orchestrate the Selection Process
A well-thought-out and tiered selection process is the best way of making sure all technical and organizational needs are met. Solution or service offerings should be evaluated against a consistent set of prioritized requirements and reflect functional desires as well as partnership and risk mitigation needs. Requirements should be given weights to reflect their relative importance to the overall decision. Carriers should be focused on building their unique list of requirements and spending time educating themselves on current market standards. Novarica often sees carriers waste time discussing capabilities the carriers see as differentiators when they are really table stakes for most solution providers in the space.
Control the Contracting Process
It can be said that a carrier is never more powerful than before it signs on the dotted line. Understanding this helps carriers maintain leverage throughout the negotiations, manage the relationship through delivery, and future proof the contract for the inevitable changes that occur down the road. Regardless of the nature of the relationship being created, carriers need to provide for its active management after the contract is signed.
For a more in-depth look at designing and building relationships that create desired business outcomes for all parties involved, read Novarica’s latest report, Establishing Solution Provider Relationships: General Principles.
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