The Business
Like companies in many industries, insurance firms are built on trust. If an insurer is perceived as having breached that trust in any way, the tangible impacts will be immediate and severe. A range of federal and state regulations now exist to compel companies to avoid such unhappy consequences, but even more important are the efforts individual companies make to regulate themselves. A random audit of procurement contract processes at this insurance and financial firm revealed that some contracts did not contain the language required for compliance with federal and/or state mandates. In addition, the information necessary for proper management of vendor contracts – and satisfying the needs of senior management – was not readily available.
The Experience
The company reacted swiftly to remedy these issues, creating a new internal organization independent of both procurement and legal. This provider governance department became responsible for the entire lifecycle of buy-side contracts – from the point where a business need for vendor support is originally identified, right through to negotiation, contract signing, renewal, and ongoing reporting. The provider governance department began executing on its charter by evaluating existing practices and creating a list of essential data points for tracking compliance, meeting best business practices and regulatory mandates. The plan was to manually extract these 140 or so data points from each in-force contract – and from new contracts at the point of execution – and use them as indexing parameters to obtain the information required to respond to audit questions, executive requests, and day-to-day management issues associated with vendor compliance.
With this information in hand, the firm conducted a thorough contract lifecycle management (CLM) market search and product evaluation. Information access was the key driver behind the choice of Corcentric Contract Lifecycle Management, because without a flexible, searchable electronic repository, management and audit requests for information were manual and time-intensive. To upload contracts into the repository, the 140 data points are extracted for each contract and entered into the solution as metadata. To ensure the contents of each contract are searchable, the firm relies on an electronic faxing/OCR feature in CLM.
The Future
The true benefit of having contract data immediately accessible is illustrated by an actual situation that occurred at the firm pre-Corcentric: The director of the provider governance organization was asked to assess the risk of added costs associated with contracts that include fee escalation clauses based on an increase in the consumer pricing index. With 17,500 contract images to review, it was virtually impossible to obtain the information in a reasonable time frame. By restricting the assessment to contracts valued at over $200,000 per year, it still took 2.5 weeks to complete the report. With Corcentric CLM implemented, the same report can be created in about fifteen minutes.
Similarly, the company only had a laborious manual process for determining when contracts needed to be renewed. This meant that when contracts with negotiated renewal options expired, new contracts had to be negotiated, with lost leverage for gaining favorable terms. With Corcentric CLM, simple reports can be generated at user-defined intervals to quickly identify contracts up for renewal. Visibility into vendor relationships also enables the insurance/financial firm to achieve efficiencies of scale, eliminating the practice of purchasing similar products and/or services from multiple vendors and consolidating spend with vendors offering the best terms.
Spotlight
Solutions Deployed
- Contract Lifecycle Management
About the company
A financial wellness leader and premier active global investment manager with more than $1 trillion in assets under management has operations in the United States, Asia, Europe, and Latin America. Its diverse and talented employees help to make lives better by creating financial opportunity for more people.
World HQ
Newark, New Jersey
Size
$1+ trillion in assets under
management in 2020
Industry
Finance + Insurance
Results
10X
faster reporting creation time
improved
information access
compliance
facilitated by clause modification
ROI
12-18 months