Moving Tryg to 'Next Level' with smarter procurement
A combination of a highly competitive market and severe weather events had seen Tryg’s combined ratio increase over recent years. Needing to reduce costs, Tryg worked with Efficio to create a Next Level Sourcing (NLS) program – delivering significant, rapid and sustainable savings.
Efficio identified a number of levers, both internal and external, which could be applied to reduce costs and simplify procurement processes – resulting in a potential 7% reduction in spend.
A series of initiatives across each insurance claim and indirect spend area, supported by comprehensive training, have delivered immediate success. So far, the program has delivered savings of €92m – and transformed Procurement at Tryg.
Tryg has been a leader in the Nordic Insurance industry for over 200 years. Today, it serves 2.7 million customers in Denmark, Norway and Sweden.
However, difficult market conditions had seen Tryg’s combined ratio increase to 98% - which meant they were paying out almost all of their premium income.
Efficio was engaged to identify whether savings could be made in procurement. Our analysis identified a number of opportunities for improvement. Limited transparency of claim spends made decision-making difficult, procurement processes and skills varied across departments, and a plethora of suppliers meant significant price variations.
To address these challenges, Efficio and Tryg co-designed the Next Level Sourcing program. A tighter supplier network using only the best and most cost-effective suppliers was created. For example, in motor insurance the number of car repair workshops was reduced from over 1,000 to a few hundred, all offering discounts. Car windscreen repairers went from over 1,000 to just two strategic partnerships.
Efficio also went outside traditional procurement levers to find opportunities to reduce costs. A new web-based claims system was developed with standardized depreciation calculations. Different claims procedures were also created which saw claims from ‘low-risk’ customers treated with a different level of thoroughness than customers who make repeated claims, where more enquiries are made.
Next Level Sourcing was a major contributor to delivering savings and without Efficio’s support, company results would have been different.
Cross-functional teams (including both Efficio and Tryg personnel) were set up to challenge the status quo in each area including Sourcing, Claims Management, Product Development, Sales and Marketing, IT and Facilities Management.
Across each of the Motor, Contents, Health and Home Buildings insurance sectors, hard negotiations were undertaken to establish networks of approved suppliers on more standardized and favorable terms. Expenditure reduced significantly – for example, claims expenditure on Home Contents was reduced by 9% while Motor claims expenditure was reduced by 7%. Another innovation was an eAuction approach for large Structural Building claims, which delivered savings of over 20% when piloted.
The success of the program depended on the ability and willingness of Tryg staff to adopt and implement the new ways of working. The project team designed and delivered a comprehensive training program on the new processes for claims handling staff. A formal training and coaching program was also designed to upskill procurement team members.
Efficio helped Tryg identify a potential 7% reduction in spend, delivered through the NLS program. So far, it has delivered €92m in total savings through a number of Strategic Sourcing and internal process improvement initiatives.
A much smaller number of partnerships with strategic suppliers across each part of the business has allowed Tryg to take greater advantage of its buying power with significantly improved pricing. Claims handling processes have been simplified and better valuation of lost or damaged items has also reduced costs.
To ensure the savings are sustainable, a new tracking system has been introduced, with benchmarking of expected versus actual savings and guidance on how to achieve KPIs.
As well as dramatically reducing costs, the program has also delivered many other benefits. Full spend transparency has enabled more accurate decision-making, processes have been standardized across the organization, and staff have gained new skills and knowledge.
The program has succeeded in helping Tryg build on its proud history to create a stronger, more sustainable platform for the future.