Risky Business: Strategic Risk Management in the Insurance Industry

By Asomi Ithia

As insurance leaders, you don’t need us to tell you that risk is the name of the insurance game. Your entire business model is based on assuming the risks of others through calculating and forecasting for uncertainties,and ensuring that all eventualities are provided for. So, it goes without saying that the insurance industry is already adept at modeling risk to protect customers…. But what about your business? What are you doing to protect your organization?

Protecting customers and your business is paramount

To protect your customers, you must first protect your business from risks and compliance oversights and malfunctions: Either of which could lead to regulatory sanctions, material financial losses or deterioration of brand image.

The current climate has done nothing to abate these demands. Even without political uncertainty, the pandemic, and economic crisis, there’s plenty of change to keep you occupied. For example, the relatively recent inclusion of insurers in the Senior Managers & Certification regime (SM&CR), as regulated by the Financial Conduct Authority, is still having a transformative effect on the industry. There’re also the regular Dear CEO letters from the FCA and changes to the general insurance pricing practices – all of which apply pressure to your business and operations.

As if these fundamental changes were not enough to contend with, there has been refreshed guidance and regulatory updates as a result of the Coronavirus pandemic and the potential post-COVID litigation that is rocking the very perception of the insurance industry in many lines, like business interruption and the travel industry.

Operationally, against this complex backdrop, insurers are challenged to continually juggle an ever-growing number of risk-related balls, including:

  • Ensuring compliance whilst managing large volumes of data stored across disparate legacy and modern systems
  • Making sure products, sales and claims managements systems and processes are all designed with the customer’s best interests at the center of them
  • Guaranteeing proactive identification and reduction of fraud across applicants, policyholders, third parties, and employees
  • Making every effort to protect the organization and its customers from cybercrime
  • Minimizing the potential for operational risk such as human error, out-of-date or inadequate procedures, sub-par systems or processes
  • Managing remote workers to make sure they are compliant with policies and procedures
  • Ensuring that third parties do not represent a risk to customers or to the business
  • Maintaining solvency in financially turbulent conditions

So how do you proactively manage risk and compliance issues – from assessing the potential impact of worst-case scenarios, to the implementation and management of controls and procedures?

The journey to success begins with clarity

We believe that to assess and implement risk management strategies, every business needs to be clear about its areas of focus. Today, for an insurance business, these might include areas such as:

  • General operations, i.e. the cost of managing claims or assessing fraud
  • Crisis management and response (See our recent blog on how the insurance industry should be using a crisis management team to respond to a rapidly changing world)
  • Remote working employees, including home working practices, customer data access and GDPR compliance, and management of the use of online collaboration and communication tools like video conferencing, team communication, and project management apps
  • Cybersecurity and how you are protecting your business and customer data
  • Finance and liquidity management, ensuring you are meeting regulatory levels despite an increase in claims, overheads, and customer contact, and in the face of reduced premiums
  • Business strategy, areas of focus and growth/scaling and how this can be achieved whilst ensuring regulatory compliance and best practices
  • Brand management, customer experience and engagement, and internal and external business perception

Risk management is more than merely assessing risk potential

It goes without saying that it’s essential to keep up-to-date with industry regulations and requirements at a Global and National level. And as always in this rapidly evolving, technology-driven world governance, risk and compliance (GRC) tools can play an important role in ensuring you are able to implement effective risk management strategies.

GRC tools have come a long way since the days of managing multiple spreadsheets and hoping that everything is covered. Today, they can assist you in:

  • Creating a concrete governance model that shapes risk management controls and helps you to seamlessly embed a strategic risk management strategy into your business; streamlining and integrating controls into processes
  • Creating and distributing policy and procedure documents and work instructions
  • Encouraging best practices in all areas and aspects of your organization

More than encourage best practice – a GRC tool can help you track, measure, draw comparisons, and correlations with multiple metrics and continually manage it.

By creating a centralized, holistic view of risk and compliance requirements and building them into how your business operates at every level, you can remove risks and compliance oversights and malfunctions, and avoid regulatory sanctions, material financial losses or deterioration of brand image.

One risk management tool, multiple applications

A GRC tool that includes process management capabilities would also allow you to connect your GRC requirements with your operations, so your workforce has clear and timely guidance and training, you reduce downtime and eliminate potentially costly or dangerous delays.

We believe that every business would benefit greatly from this kind of flexible, customizable way of managing all business processes. At BusinessOptix, we particularly identify that the insurance industry and its rapidly shifting risks and regulations is currently an acutely challenged market. If you can relate to the hurdles outlined here and would like to talk about how we can help you clear them, now and in the future, we are here to listen. Our team would be happy to demonstrate our platform’s capabilities for you and arrange a trial so you can see for yourself.

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