Jim Loughran, CEO of e2e Total Loss Vehicle Management, explains the benefits of using a network model in the motor insurance claims supply chain, including risk mitigation and access to diverse sources of investment and ideas.
There is much for insurers to consider as they seek service certainty from their salvage and vehicle recycling partners and look to increase their use of reclaimed parts to control claims inflation and motor repair costs. The UK salvage and vehicle recycling market is witnessing consolidation and uncertainty, with the findings of the latest stage of the Competition and Markets Authority’s extended investigation into Copart’s acquisition of Hills Salvage not expected until the end of May.
Strength in depth becomes increasingly rare when claims service suppliers are consolidated into large single entities, greatly increasing the risk profile of their work with insurers. e2e’s UK network of salvage and vehicle recycling agents is unique in the market, and its risk management rules cap maximum exposure to any one network member at any time. Only e2e has a business model that insulates the insurer from dependency upon one supplier, with the increased risk of supply interruption should the supplier’s operations be disrupted. The network approach, spreading demand across multiple suppliers and assets, reduces risk and provides the flexibility and capacity to cope with surges in demand. These advantageous operating principles also ensure that network stability is never undermined in the event a member is acquired and required to leave the network. Good governance dictates that risk mitigation and contingency plans exist for every member of the e2e network, ensuring seamless service transition in the event of a change in membership and uninterrupted adherence to Service Level Agreements and agreed KPIs with clients.
Insurers are familiar with network models, and many successfully utilise them in the building contractor and motor repair supply chain, benefiting from:
- real UK-wide coverage with local knowledge;
- one management and audit function;
- multiple sites reducing travel and lead times;
- diverse sources of investment and ideas;
- strength in depth.
There is the option for insurers to build and manage their own networks, but this is costly. Time and resource are needed to onboard and manage multiple suppliers, information sharing is more complicated, integration with multiple systems is more complex, economies of scale are reduced, and quality control and consistency become more challenging.
Claims inflation is driving huge interest in reclaimed parts, and here, the network proposition again outperforms a single supplier approach in terms of demand fulfilment. e2e network members, all of whom are certified to the VRA UK Standard for Reclaimed Parts, have made multi-million-pound investments in the extraction, cataloguing, storage and timely dispatching of reclaimed OEM parts. Insurers benefit from a combined investment that is diversified, distributed across the UK and would be unavailable from one single company. The result is a huge inventory of quality-graded, warranty-assured, and provenance-validated parts, available for delivery in 24 hours.
As published in Modern Insurance Magazine – April 2023
