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InsurTech for Risk Management
Nov 02, 2022
Introduction: Building a modernized future for risk management
Corporate entities often retain a significant amount of risk through captives or self-insurance deductibles. Generally serviced by a small, internal risk management team, these programs most likely started out decades ago, on a small scale, without digital technology.
Fast forward to today. Insurance programs have evolved to become larger and more complex, though often without changes to legacy processes. Risk managers typically find themselves piecing together manual data processes (which are often jeopardized if a risk team member departs) and struggling to explain claims and/or cost trends or to articulate risk insights. Moreover, risk managers are often surprised by the impact of growth on business operations, as well as changes the insurance market cycle has on risk programs.
Reporting approaches and tools that lack useful metrics compromise communication with leadership, business units, and other stakeholders. In fact, despite good analysis and modeling being key components of proactive, adaptive risk management, only 39% of business executives say that they’re currently making better decisions and achieving sustained outcomes by proactively consulting with risk professionals.
A corporate risk management strategy needs more than captives or self-insurance deductibles: implementation should encompass data, analytics and reporting.
The challenges of modernizing
According to the results from PwC’s 2022 Global Risk Survey, nearly eight in 10 organizations say keeping up with the speed of digital and other transformation is a significant risk management challenge. Risk leaders across several sectors are likely to increase spending on data analytics, process automation and technology to support the detection and monitoring of risks.
Unfortunately, those external risks can increase due to insufficient internal operations and processes. Lack of access to digital tools and solutions that don’t work together — as is common when quick-fix tech is added on without an overall transformation plan — can often compound risk.
However, there is hope. The combination of insurance and technology has provided a revolutionary path to using data, analytics, machine learning and computing power. The availability of advanced technology has risk managers looking at their internal insurance operations and inspiring change to modernize.
Proactive risk management: Modernization through risk modeling
The ability to fully leverage data can be key to managing risks and new technologies are enabling it:
- Automation can provide transparency for a robust internal control framework (e.g., data reconciliation, financial reporting processes and compliance with accounting and regulatory standards).
- New modeling capabilities harness enhanced data analytics, often hosted in cloud applications.
- Digitization can provide agile, real-time risk insights and analysis to support risk-informed decision making.
- Key risk indicators (KRIs) can provide early-warning signals to leaders and allow them to reevaluate strategies, capabilities and mitigation activities.
Organizations’ risk management and broader resilience capabilities should be able to quickly interpret data through a digital infrastructure. Supporting business agility by contributing proactive, robust and timely risk insights that help decision-making can be critical for your stakeholders.
Key takeaways
Innovative data infrastructure and models helps streamline the data collection process, reduce administrative burden and delays and allow companies to take on risks with confidence, while providing a trusted source of data.
By enhancing strategic risk management and leveraging new capabilities, risk managers can deliver modernization that adds value to stakeholders.
References:
https://www.iii.org/article/background-on-captives-and-other-risk-financing-options
Other parts of this blog series
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