We think insurance might just be the next big thing in social value
There’s a huge amount of untapped potential for the insurance and risk management industry to create social value. That’s why we are working with global insurance broker Gallagher and industry bodies like ALARM, to see what this looks like in real terms.
The insurance and risk management industry already helps local authorities to de-risk their day-to-day activities in support of the public, they provide things like liability insurance and climate insurance.. So that means if risks do happen, then the industry can pay out claims. And local authorities and government departments can protect their budgets to avoid cutting services or diverting funding from other sources. Put simply, insurance protection means community and public services can stay in place for longer.
Are public bodies missing a trick?
Social Value Portal has worked with Gallagher and ALARM to estimate that there is £40 million of untapped social value available to local authorities every year from the buying of risk management and insurance policies.
Gallagher’s intel shows that insurance premiums for public sector organisations range from £1m to £25m, over a five-year term, equalling premiums of £200k to £5m annually. With 400 public bodies in the UK, ranging from parish councils to local authorities, this represents a £400 million annualised spend.
If we can assume a 10% social value allocation is added to procurement contracts as a proportion of contact value, we think £40 million of social value is an achievable aim.
But it seems that systems don’t yet align when it comes to social value delivery between public bodies and the insurance sector, as:
- Public bodies don’t always put social value requirements into insurance and risk contracts. This is because insurance spend is low in the procurement pecking order for local authorities.
- Public bodies aren’t sure what to ask insurers for, or know what they can do in their communities. Often insurers don’t have a physical presence where local authorities need support.
- When social value is a contractual requirement, insurers and brokers see limited compliance reporting from local authorities on delivering what was promised.
- Insurance brokers, like Gallagher, often front the procurement relationship with the local authority, but have little input and margin from the insurers to negotiate social value deliverables.
- Insurers have very little visibility or understanding of what brokers or public sector clients expect them to deliver in terms of social value from their premium paid.
How do we gain the extra value of £40 million per year?
The evidence for this misalignment is anecdotal so far. But we will quantify it over the next few months.
Social Value Portal will be talking to Gallagher’s large group of clients from across the public sector. The aim is to maximise community spend where possible and realise the potential of that additional £40 million of social value creation in communities across the UK.
The ball is rolling and the need to innovate in all parts of the chain is clear. We must build upon the important role the insurance sector already plays to protect public funds every single day..
It’s not only about mitigating risk, and protecting the needs of community services, but also how you can actually maximise that through a unified approach to social value.
