Multiple forces—including some that have not yet fully developed—will help reshape the insurance procurement function over the next several years in exciting ways.

We already have seen what this evolution could mean for insurers. According to Accenture research, detailed in “Procurement’s Next Frontier,” the cost of procurement as a percentage of total spend has fallen dramatically over the past decade for large companies in various industries around the globe. And Accenture expects that cost to shrink substantially more by 2020.1

But the benefits for insurers that embrace the oncoming evolution of procurement should extend beyond significant reductions in cost as a percentage of both direct and indirect spend. Indeed, carriers can expect the value of their future procurement function to more effectively align with and contribute to their core business’ strategies, including EBITDA (earnings before interest, tax, depreciation and amortization), earnings per share, supplier innovation and time to market.

What has sparked this evolution, and why do we anticipate that it should lead to even greater benefits for insurers over the next several years? There are a few factors, as we note in our procurement report:

  • Controlled, strategic suppliers as a percentage of all suppliers doubled to 80 percent between 2007 and 2015.2 By 2020, we anticipate that insurers will have full control of all of their most important suppliers, thereby creating a virtually integrated enterprise.
  • Contract and policy compliance spiked 30 points to 70 percent in 2015 through procurement professionals’ use of cognitive systems.3 With the continued development of these systems, we expect compliance to hit 98 percent by 2020.
  • Insightful spends as a percentage of total spend multiplied six-fold to 60 percent in 2015.4 By 2020, we project that spends will be 100 percent insightful, as advanced analytics are used more extensively and the Industrial Internet of Things (IIoT) becomes more prevalent, further improving procurement efficiency.

Some of these factors haven’t even fully developed yet, including advanced analytics, the IIoT, cloud computing and the cognitive systems that are expected to replace routine manual work, and contribute to increased quality and faster and better decision making. Those important digital technologies will in my view become increasingly relevant over the next several years, giving rise to a new kind of procurement function.

In this blog series, I will explore how insurers should expect the procurement function to evolve over the next several years, what that will mean for their organizations as a whole, and how insurers can nurture this evolution.

Next time: The virtually integrated enterprise, and the organization of one.


  1. “Procurement’s Next Frontier,” Accenture 2015. Access at:
  2. Ibid
  3. Ibid
  4. Ibid

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