Insurance
BPS provider The Innovation Group (TIG) has won a contract extension with key UK customer Direct Line Group for newly notified subsidence claims. The deal expands TIG's growing UK subsidence claims business, which it launched in August 2011 via a major win with RBS Insurance (see TIG signs £40m deal with RBS Insurance).
TIG expects this latest deal to be worth £20m over three-years, based on ‘anticipated claims volumes and assuming normal weather conditions’. The deal, which covers the December 2014 to December 2017 period, will bring TIG’s total contract value of business with Direct Line to £60m since its start in August 2011.
This extension is a really good win for TIG, providing further confirmation of its innovative model for the subsidence market. TIG's model is a form of volumes-based BPS contracting, in which demand for services is dependent on the volumes of subsidence claims passed through from the client. These volumes are dependent on external factors like the weather, which could have a direct impact on the volume of claims TIG will end up handling. This is a very different model from FTE-based BPS contracting, in which the supplier gets paid according to the number of people deployed on a contract.
This approach is much more flexible for TIG since people costs can be redeployed on to other contracts, and for the customer, since it is only paying for services as and when needed. Although TIG’s business is dependent on volumes from Direct Line, it charges a ‘fixed per-claim' price 'fully backed with reinsurance’. TIG partners with a reinsurer to offer this service with the aim of giving the client certainty on its subsidence indemnity spend. It can do this by providing accurate subsidence cost data from its own records.
Because TIG backs up its model with reference data, it is able to mitigate the risks to its own business and to its client. We would like to see other BPS providers using data and analytics in this way to build transparency and certainty into BPS contracting - something ever more critical for suppliers today following recent scandals.