Enabling the future at FSCS

When the Financial Services Compensation Scheme (FSCS) announced its new vision for the future, transforming customer experience and delivering greater value for money were paramount. Efficio played a key role in helping to meet these goals through a new customer proposition that will significantly improve customer service over time, while dramatically reducing costs and providing flexibility to meet changing customer requirements in the future.

FSCS was established in 2001 to protect customers of authorised financial services firms that are unable to pay claims. A significant portion of claims to FSCS are outsourced to multiple third parties. Efficio was engaged to ensure the outsourcing arrangements were fit for purpose and supported the organisation’s future vision.

Efficio worked with FSCS to define clear business requirements, then helped to manage a complex competitive process to consolidate outsourcing into a single provider against a rigorous commercial framework. It also worked with the FSCS to meet the requirements of public procurement regulations.

Background

FSCS process claims relating to bank, building society and credit union deposits internally, relying on outsourcers to process non-deposit claims such as insurance, investments and mortgages (including customer contact and other related services), and some more complex deposit claims.

As part of its vision for the future, FSCS wanted to review its outsourcing arrangements. In particular, it wanted to:

• Improve the customer experience by ensuring a faster, easier, seamless end-to-end claims handling process
• Improve productivity, reducing costs and increasing agility to deal with surges in workload or other changes
• Improve reliability and reduce the risk of business continuity issues
• Improve its supplier’s ability and willingness for risk-sharing, investment and innovation.

Efficio was engaged to review the current situation and provide recommendations to achieve these objectives. The review identified a number of barriers to success.

For example, the existing multi-supplier model made it difficult for FSCS to leverage volume or optimise the end-to-end operation. In addition, the existing contractual arrangements made it difficult for FSCS to examine value for money. They also provided little certainty for suppliers, which made them reluctant to invest in improvements or innovations. As a result, the relationships between FSCS and its suppliers tended to be short term and transactional rather than long term and partnership-focused.

Approach

Following an extensive discovery phase, Efficio used its methodology and extensive experience to help FSCS define its service requirements. It conducted more than 25 workshops with a range of stakeholders to define service levels and business outcomes, along with a new operating model to ensure they were delivered.

This work confirmed the view that moving to a sole partner was the best option to achieve FSCS’ objectives. A competitive procedure with negotiation (CPN) was used to select the new outsourcing partner and Efficio supported end-to-end management of the process, including:

• Building a comprehensive pricing model to provide a fully loaded ‘price per claim’ which enabled FSCS to pay for outputs, while still understanding the individual cost elements of each claim
• Using market intelligence and best-practice outsourcing principles to advise on key contract schedules, as well as drafting for both technical and non-technical schedules
• Identifying and mitigating risks including commercial and transitional risks
• Establishing a robust commercial framework
• Supporting the negotiation process, including parallel negotiations running during detailed due diligence activities.

Efficio’s commercial expertise was crucial in ensuring that FSCS’ objectives were achieved and that its risks were managed in the process.

Results

The new sole partner outsourcing arrangement is expected to deliver outstanding value and exceed expectations.

• It meets FSCS’ key objective of improving value for money through a 32% reduction in total contract value for the same scope of service.
• It addresses FSCS’ other key objective of improving the customer experience through improved, best-in-class service levels, along with a list of embedded benefits (underwritten by the new partner without reliance on FSCS). The contract also includes an overview of potential transformation initiatives to deliver further benefits.

The project has also succeeded in meeting a range of other objectives, including:

• Improved reliability – detailed business continuity, disaster recovery, transition and service delivery plans were developed as part of the negotiations
• Greater flexibility – the new sole partner has a large network to manage unexpected events, such as a surge in demand
• Seamless claims processing – customers now have a single point of contact and a single provider managing their claim.

Importantly, the new commercial arrangement provides strong incentives for the sole partner to work in partnership with FSCS, share risk and invest in ongoing innovations – setting a strong foundation for the future.