Will Carillion’s Collapse Prompt a Rewrite of Government Outsourcing Rules?

The collapse of services and construction group Carillion this week will have a major impact in the world of outsourcing. It’s unlikely that the government will reverse its policy (and that of the previous Labour government) in awarding public sector service contracts to private companies, but politicians need to say something on TV and radio. The end result could be a change in the way insurance tenders are rated and awarded, although much depends on how things play out over the next few months.

The interesting thing about the insurance services supplier market in the UK is how Zurich currently dominate the sector.

A new ranking launched by Tussell – a data provider of government procurement information – has revealed the top ten Insurance suppliers to the public sector in 2017, which saw Zurich emerge with the highest value of Government awards and frameworks by a considerable margin.

insurance suppliers government contracts 2017

In 2017, the top 10 Insurance suppliers received a total of 385 new public sector awards/frameworks worth £0.6billion. Zurich ranked first in Tussell’s index of top public sector Insurance suppliers, winning an estimated £167m in awards and frameworks, over double the value of the others in the league table.

Arthur J. Gallagher & Co. ranked second with awards/frameworks valued at £58m, with JLT Speciality ranked third (£56m), Marsh and AON then both receiving £51m in contracts, Risk Management Partners sixth (£49m), Portmore Insurance Brokers seventh (£36m), UK General Insurance eigth (£36m), Protector Insurance ninth (£27m) and AIG in tenth position with £19m in contract value.

Gus Tugendhat, Founder of Tussell said: “In 2017 the value of wider public sector procurement was £144 billion – equating to roughly 7% of UK GDP – representing a significant strategic opportunity for UK business. Some 347 Insurance awards and frameworks, worth £140m, are due to expire over the next two years across the wider public sector, giving huge potential for further procurement activity.”

ITN politics pundit Robert Peston wrote this week that the Carillion implosion marks the end of the `love affair’ between government and private contractors. That may be true up to a point, but the wider issue for the insurance sector is the potential stream of reforms to the outsourcing and tendering process, which will head down the line via Parliament’s painfully slow Committee process.

It may take years, but eventually the rules may change so that in future NO single company can be exposed to the risks involved in underwriting and managing large percentages of public sector services, and that could include insurance cover.

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