3 key points for more efficient risk management

The issue of insurance risk management

Today, the “Risk Management” is a more important issue than ever, because insurers are faced with an increasingly unstable environment, characterized by ::

• A rise in natural, climatic and technological risks.
• An increasingly volatile financial sphere.
• A regulatory framework constantly evolving.

The Solvency II directive, which took effect on January 1, 2016, illustrates this last point. It includes several requirements relating to risk management of insurance companies in Europe. These requirements relate to the calculations of technical provisions, organization and governance, but also on prudential information.

In this context, the function of Risk Manager Take an ever more central place in the strategy of insurance companies. Indeed, his work of identification, evaluation and control of risks becomes essential to support managers in their decision -making.

As such, several good practices can be implemented within the company to improve the efficiency of insurance risk management.

Well identify the different types of risks

Like any organization, an insurance company is exposed to a wide variety of hazards, likely to cause it damage or to engage his liability. Natural disasters, accidents, terrorist acts … so many dangers that can hardly be anticipated.

However, an insurance company must be able to effectively manage the risks to which it is exposed within the framework of its activity, that is to say by ensuring its customers. These hazards, which are mainly financial riskscan be classified into different categories ::

• Actuarial risk: It occurs when the premium collected in exchange for the insurance contract offered to the insured is not adequate, given the risk incurred by the insurer.
• Systematic risk: It is linked to fluctuations in interest rates, inflation and basic risk.
• Credit risk: It is linked to the inability to respect the contract clauses, for example in the context of a swap.
• The risk of liquidity: It occurs when the insurer is forced to sell assets while current rates are higher than the initial rates, following an unexpected increase in complaints. The result is a loss of capital.

Despite everything, a perfect knowledge of these hazards is not enough to anticipate and master them effectively. It is necessary to complete the system with other risk management tools.

Use the potential of customer data

Today, the exploitation of customer data is an integral part of the role of the CIO in an insurance company. Big data is notably a formidable tool to analyze the profile of each customer, in order to better assess and prevent risks.

To enrich the knowledge of its customers, the insurance company must however carry out important projects:

• To begin with, process and analyze data which she already has in their servers (and who are too often unexploited).
• In a second step, collect and cross new information Coming from different sectors of activity, but also from external sources: public data, social networks, etc.

In this way, the company is able to estimate more precisely risks linked to each insurance contractbut also to personalize your customer relationship. It is therefore an important loyalty factor.

Finally, Big Data is an effective tool for fighting fraud, thanks to the power of the algorithms used: enough to significantly improve the Insurance risk management.

Use suitable business software

No risk management measure can be effective if it is not based on a solid computer tool. Indeed, the use of suitable business software is essential to facilitate the profession of Risk Manager And help him better predict the vagaries.

Thus, the insurance company must have a capable tool:

• To effectively process and analyze customer data.
• To make projections based on a risk history.
• To carry out anticipated risk models.
• To use risk transfer techniques.

In addition, suitable business software offers the insurance company all the instruments it needs:

• For its daily management.
• For the configuration of insurance products and reinsurance treaties.
• For the definition of covers.

The teams thus have all the resources necessary to specifically quantify the risksbut also measure their level and their potential impact. Knowledge of risks can also be shared, in all transparency, with partners.

Without forgetting the many other benefits of insurance softwarewhich allows you to configure tailor -made products and manage their price, freely fix deductibles and limits, but also to adapt the guarantees over time.

Risk knowledge, data exploitation and use of an adapted business solution: three key measures that will help you better control risks on a daily basis And to approach your activity with confidence.

Are you looking for a complete tool to improve the efficiency of your insurance risk management? Try Infoelsa now: Ask for your demo.