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Managing declining supply chain capacity


In late 2023 we published an opinion piece called “Managing the ultimate competitive weapon” in which we explained the importance of supply chains in delivering a competitive advantage. We looked at the theory behind capacity management and highlighted how important it is to have a strong understanding of capacity and an ability to manage and incentivise suppliers to maximise outcomes and available capacity.

Products, such as insurance policies, can be easily copied, but a supply chain can provide a true competitive advantage. Insurers’ suppliers come to the aid of their customers in their hour of need, when they are suffering financial and emotional stress and when the consequences of delivering a poor service can create significant reputational damage. So why isn’t the insurance industry appreciating the fragility of its property claims supply chains and investing more time, money and effort in them?

The problem

As Elon Musk said, “The supply chain stuff is really tricky”. And this is especially so when capacity is declining. Since we published our previous article the Government’s Insolvency Service has published insolvency figures for 2023. 4,378 construction firms in England and Wales went out of business in the year to December 2023. UK construction insolvencies were also at their highest levels since the financial crisis, more than ten years ago. They are 5% higher than a year ago and 36% higher than in 2019, pre-pandemic.

Construction firms accounted for 18.2% of all insolvencies in England and Wales in December 2023. As construction firms accounted for 13.8% of all registered businesses in the UK, this suggests that the industry is disproportionately affected by insolvency.

The sharp rise in insolvencies in the last 18 months has affected large and small construction businesses, and is due to:

Here at MA Group we are also seeing increasing numbers of suppliers in all areas retiring early, winding up their businesses voluntarily deciding that the stress and financial challenges are too much.

How insurers are dealing with declining capacity

As older people leave the repairs and restoration industries we aren’t seeing many new businesses being set up by younger people. The construction industry has failed to invest in training and apprenticeships for many years, it was ill-prepared for the impact that Brexit had on the available workforce and the long-term effects of Covid-19 are still being felt. Then there are also the very large construction projects such as HS2 that are sucking resources out of the industry by offering lucrative, long-term work. It will take many years for the labour force to increase to the levels required. This reduction in capacity isn’t just affecting insurers, it is affecting everyone. So what are insurers doing about it?

Cash settlements

Simply increasing the number of cash settlements for property claims doesn’t solve the problem, it simply pushes it onto the customer. Homeowners have the same challenges when it comes to arranging repairs to their homes and run the risk of dealing with shoddy builders or fraudulent individuals. Often, they just don’t get the repair fixed, creating more problems for the future. Insurers who push customers into accepting cash settlements can be breaking the Consumer Rights Act and may breach the FCA’s Consumer Duty which sets higher and clearer standards of consumer protection across financial services and requires firms to put their customers’ needs first.


Many insurers talk about collaboration, moving away from a purely transactional relationship focused exclusively on cost. For this to be successful, an insurer needs to accept that a supplier is an expert in his/her field and should be treated as such. Unfortunately, client contracts and subsequent audits then destroy any sense of collaboration by focusing entirely on cost and SLAs that do not achieve the right outcomes for customers.


Suppliers are increasingly being seen by insurers as a source of innovation. They expect suppliers to deliver integration into their systems to save claims management costs and require technological innovation by suppliers to deliver indemnity savings. However innovation isn’t just about technology, it’s also about other things – using independent schedules of rates designed for insurance repairs reduces indemnity spend, makes life simpler for suppliers and reduces scope manipulation. Also, eliminating silos in supply chain management enables claims managers to manage a claim from start to finish, coordinating all parties to reduce claim durations, frictions and costs. We talk about the innovation we have developed at MA Group later in this article.

Good procurement practice

Reliable and robust suppliers require clients whose purchasing behaviour is responsible and conducive to the long-term sustainability of the supply chain. Adopting good procurement practice will ultimately improve performance and drive down costs, benefitting insurer and supplier alike. However, this behaviour needs to be adopted in the operation teams within insurers, as well as the procurement teams, and we often see a significant disconnect between the two departments.

Transparency of future demand

Whilst surge events can’t be predicted, an insurer can predict minimum levels of claims and should guarantee a volume of steady work. This is critical to the efficient operation of supply chains, allowing suppliers to confidently invest in skills, equipment and capacity informed by knowledge of when and where future opportunities will emerge. We have yet to come across an insurer that does this contractually!

Managing own supply chains

Many insurers think they can manage indemnity costs by managing field suppliers in house, cutting out the “middlemen” like MA Group. But insurers do not have the detailed knowledge of construction and cannot collect and manage the data needed to manage and motivate supply chains. The overheads needed to manage lots of independent suppliers are enormous. Also, the indemnity costs rise as the validation and technical knowledge is not available to compare supplier performances, identify issues and quickly identify capacity problems.

What’s important to suppliers?

Our suppliers tell us that the following are important to them:

We look at each of these in turn, explain what we are doing to address these needs and suggesting ways that insurers can help.

Steady and consistent flow of work

Claims volumes can be unpredictable – none of us can control the weather. But we can ensure that during calmer times we continue to provide a steady flow of profitable work to suppliers. Not only does this ensure that they survive and are available when needed, but it also creates trust and partnerships that strengthen performance during surges.

MA Group has developed a sophisticated, data driven approach to measuring available capacity for all of its supply chains. Called Know Your Limits, it measures capacity by supplier, region and nationally and ensures that we provide suppliers with a consistent flow of work that is well within their capacity. It provides early warning signs when a supplier is stretched, allowing us to reduce the work being sent to them so they have some breathing space to get back on top of their WIP. It also incentivises suppliers to prioritise our work. More details are provided below.

Calculating capacity is not simple, it requires multiple factors to be considered and strong data collection and analysis. We look at suppliers’ average invoicing over the last six months and their planned completions over the next three months. We then apply a lead time factor and a WIP factor to calculate the capacity that the supplier has available for MA Group. The more a supplier invoices, the more capacity he/she is freeing up and the more work we provide – this creates an incentive for the supplier to finish MA Group work.

The underlying data is key to making this a success. We require suppliers to provide us with key dates for each job – start dates and planned completion dates especially.

Collection of such data also enables us to predict lead times – we can provide our clients and their customers with predictions on when works will start, with a clear confidence level based on the quality of the data we are receiving from the supplier. The better the data the supplier provides and the more confidence we have in their lead times, the more work we can assign to them.

When invoicing drops or the percentage of jobs with a start date falls, we immediately investigate to understand whether the supplier has capacity issues and whether we should be diverting work to other suppliers.

Our algorithms use this data to tell the system the best supplier to appoint to a claim. We share capacity data with suppliers and we also provide it to clients, helping them to manage customer expectations and improve communication. By sharing this data with clients they can see how we appoint the best placed supplier to their claim and their confidence in our ability to manage workloads increases.

In times of surge, this capacity management and lead time tool is incredibly valuable. Lead times will always increase in surge, but with this accurate data we can appoint the right supplier, manage customer expectations and ensure that suppliers are not overloaded.

What can insurers do?

Consistent payment terms

Every business needs reliable cash flow to survive, and this is especially important for our property claims suppliers. Often they have cash outlays at the start of claims and can’t invoice for them until works are completed. Also, HMRC’s reverse VAT rules mean that our building contractors cannot add VAT to their invoices to MA Group, removing cash inflows that can help fund their businesses.

We pay our suppliers to contracted terms every week. We also issue them with remittances in advance, telling them how much money will hit their bank accounts and when, which helps them manage their businesses enormously. However, payment delays still happen because insurers and loss adjusters take weeks to authorise costs or fail to co-ordinate the various suppliers on a claim, causing delays that impact MA Group’s cashflow as well as that of its suppliers.

In the past we have written about the requirements of the Construction Act when it comes to timely payments. It is amazing how many insurers and loss adjusters break this law when it comes to paying supplier invoices by with-holding entire invoices for small snagging issues or simply just not paying invoices in a timely manner.

In 2023, 58% of our invoices issued to insurers and their third parties were paid late, outside of contracted terms.  By contrast, we paid 99% of supplier invoices on time in 2023.

What can insurers do?

Good communication and support

We communicate with and support our suppliers in many ways, directly and through our extranet communication hub. We use our extranet to send weekly and monthly updates to suppliers of the following:

Our Supplier Performance Managers have regular face-to-face reviews with all suppliers and provide help and support when they need it. They are the first port of call for any supplier when they have questions and issues. They share feedback from suppliers with the rest of the MA Group business and share feedback that MA Group has for the supplier. We run training sessions on everything from using our technology and scoping and estimating, to drying techniques and business management, and ensure that all suppliers go through a detailed induction when they join our networks.

Most insurers talk about collaboration, moving away from a purely transactional relationship focused exclusively on cost, but few achieve it. Detailed contracts focus on extensive SLAs, audit timetables, cost and hard and soft leakage and completely miss the big picture on Time, Cost and Quality. Client audits then enforce strict terms on highly detailed individual claim analysis to levels of minutiae that can be completely out of proportion (we have even been marked down in client audits for spelling mistakes), without ever considering whether we have delivered value for money or a happy customer.

Property claims are complicated and require excellent construction knowledge and project management. Below is a Gantt chart that demonstrates some of the activities we undertake following the approval to start works.

Scheduling a start date can be difficult when there are so many moving parts to co-ordinate before turning up on site, and managing customer expectations for start dates becomes even more difficult when the customer has already endured delays before we have been appointed. But good communication can make a positive difference.

What can insurers do?

Profitable work

Every business needs to make a profit to survive. Unfortunately, this is becoming increasingly difficult in the world of construction and property claims. One of the biggest reasons for this is sub-contracting to smaller firms, pushing costs and risks down the supply chain whilst delaying payments. Sadly, we see this behaviour in insurers as well as large construction companies. Examples of pushing cost and risk onto suppliers include:

“The bitterness of poor quality remains long after the sweetness of low price is forgotten” – Benjamin Franklin. We have always argued that the model needs to change, and some of our clients have accepted this. Using our detailed understanding of our claims data and many years of experience we have developed our MINERVA risk and reward pricing model. MINERVA reduces indemnity spend without any deterioration in performance and it has a number of elements:

Those clients who have adopted this model have seen significant savings and happier customers.

Below is 2023 data for two clients. Client B uses our MINERVA model, allowing us to manage the whole claim and appoint and manage the relevant suppliers. Client A uses its own bespoke schedule of rates and has a siloed approach to appointing us on the different services separately. Both have similar delegated authorities and claims profiles:

The average claim values for Client A are 44% higher than for Client B.

National Schedule of Rates (NSR)

We used an independent organisation with over 30 years of experience in publishing schedules of rates for the building industry – National Schedule of Rates Management (NSRM). NSRM are the trusted name in Term Maintenance Contracting for buildings and highways and their schedules are the only national basis of pricing that is truly independent. Some of the key benefits include:

Our NSR rates have real benefits for clients. Because they allow for fewer provisional sums and ensure more detailed scheduling, scopes of works are more accurate and consistent. There are fewer variations, thus speeding up the claims process, improving customer retention for insurers and ensuring that reserving is more accurate. They also reduce claim management costs for insurers and MA Group as a claim gets closed more quickly. And finally, there is better cost and performance comparisons because consistently prepared scopes mean that suppliers can be compared easily for average claim values and claim durations.

Other industries (e.g. local authorities) use one SoR making the procurement and management process so much simpler. Why doesn’t the property insurance industry do the same?

Bronze, Silver, Gold

Making sure that our suppliers receive profitable work is essential, but we also need to reward good performance. So we use a Bronze, Silver, Gold model where we pay rates according to performance – we pay the best performing suppliers a higher Gold rate. We happily give up margin for those five-star suppliers who prioritise MA Group work, consistently deliver high customer satisfaction rates and low complaint ratios and provide reliable data on key dates.

What can insurers do?

Know Your Limits

After 25 years of managing property claims we have developed a sophisticated data driven method for measuring and managing capacity. We are industry leaders in this field and here is why.

MA Group has developed a capacity management system called Know Your Limits (KYL). This system cleverly combines data on volume, value and supplier performance to create a clear picture of the available capacity by supplier, postcode, region and nationally.

The capacity we assign to each of our suppliers is based on the value and volume of work they have closed and invoiced over a prescribed period as well as the work they are planning to start and complete in the coming months.  The idea is simple – the more a supplier can evidence that they are prioritising our work and moving it through to completion, the more work we will give them.

We’ve also designed a way of looking at what’s coming through the pipeline for our suppliers so we can ensure that they have a steady stream of work and therefore cashflow.  We specifically look at their start date lead times to understand how much resource they are putting onto our claims. This impacts the amount of work they can take from us.

All of this is overlaid with performance metrics in terms of time, cost, and quality to make sure that insurers and their customers remain satisfied with the service being provided.

Work is assigned to suppliers by our Pulse software, based on the results of KYL. So there is no favouritism or bias in the way we assign work – it always goes to the supplier in the best position to deliver a great service.

At any given time we know exactly how much work in progress we have in terms of volume and value and how much is due to complete over the coming months. But more importantly, we also know exactly how much more work we can deal with – by supplier, postcode, equipment availability and type of work – so we can easily communicate with insurer clients in times of surge to give them up to date and accurate information about remaining capacity and expected lead times.  This applies to all elements of our supply chains, whether it’s surveying, restoration or repairs. This helps us and our insurer clients manage customer expectations and reduce complaints caused by delays and communication.

All of this data is shared with our suppliers regularly so they can see how their daily activities impact their available capacity, how long they take to start work and what they’re planning to complete.  Our insurer clients have a view of this too so that they can help their claim handlers to manage customer expectations from FNOL.

Digital innovation

MA Group has been innovating for years and we are starting to see the fruits of that innovation. Know Your Limits, MINERVA, our independent NSR rates, Bronze, Silver, Gold payments and Know Your Skills are all examples of the industry-leading innovation we have undertaken.

We have also carried out some extensive digital innovation to make life easier for our suppliers so they like to work for us.

Scoper, our mobile scoping and data collection app, is used by our networks extensively. Our Virtus surveyors use it to capture photographs, videos and voice recordings on site as well as building scopes and reports for clients. Our Revival branches use it for collecting moisture readings, logging equipment on site, as well as creating reports and capturing photographs. Our MA Assist suppliers use Scoper to carry out risk assessments and construction phase plans.

TREVOR uses data, algorithms and Scoper to apply the science of drying. This digital solution supports trained technicians to deliver certainty around drying by accurately predicting how long a drying regime will take and alerting technicians and Revival when the regime is not working as it should.

Using the data collected by our Revival technicians we have created mathematical models showing how long it takes, on average, for each type of building material to dry. We are using this data to monitor and manage drying regimes across the UK, eliminating the challenges and uncertainty our industry faces when drying properties. TREVOR is reducing claim lifecycles by ensuring optimal restoration regimes and enabling us to plan in reinstatement works before a drying certificate is raised.

TREVOR is creating more capacity within our network to deal with more claims and surges, and he is helping technicians with the hundreds of complicated calculations needed to efficiently dry a property.

Automation in Virtus has supported our excellent surge performances during 2023 and 2024. Our systems are integrated with our clients’ systems so new instructions automatically feed through our claims management system, Pulse, straight through to the surveyor within minutes. At the same time, a text is automatically sent to the customer telling them that we have the claim and a surveyor will be in touch. The surveyors use Scoper on site to collect all the information and photographs they need, and it allows them to build the scope and write the report whilst mobile. This all syncs back into Pulse, with the report automatically being forwarded to the client and the job closed and invoiced. Our surveyors love the fact that their fee invoices are automatically raised and fed into finance, speeding up payments to them.

Tableau is the business intelligence software that helps us see and understand the wealth of data that we hold. It links into all of our software applications to provide real-time data on the suppliers – including supplier performance and complaints analysis, NPS results, Know Your Limits reports and compliance statuses. This information is sent out to the suppliers through the extranet every month automatically, thanks to clever bots. Suppliers get the data and feedback they need to run their businesses well, in a digestible format.

Digital compliance for all suppliers is in place. Via the extranet they can see their overall compliance status and can easily view documents and evidence that is soon to expire, enabling them to submit the required information easily and quickly to avoid them going onto veto for having expired compliance issues.


The property claims industry is experiencing a significant decrease in capacity due to a high level of insolvencies, fewer new entrants into the industry and challenging market conditions. Insurers need to take action to ensure that they protect and nurture the supply chains that remain. As capacity declines further insurers will have to pay more for property claims repairs and restoration, it’s simple demand and supply. And remember, climate change will increase demand! So insurers need to get ahead of the curve if they want to retain customers, control costs and keep complaints under control.

Insurers need to work with suppliers like MA Group to:

MA Group has industry-leading capacity and supply chain management systems which are well documented and supported by the data we hold on not just our WIP, but on our last 25 years’ worth of property insurance claims experience.  We have an excellent track record in proactively managing surge situations as evidenced during the recent storm and flood season. And we know how to get the best out of supply chains – we could do even better if insurers fully accepted our expert advice.

Tim Cook, CEO of Apple said “We care about every worker in our worldwide supply chain… what we will not do – and never have done – is stand still or turn a blind eye to problems in our supply chain.  On this you have my word.” That will be why Apple is one of the most valuable companies in the world!

It will be years before the repairs and restoration industry recovers, so strong supply chains will become even more of a competitive weapon for insurers. Insurers, take action now.