Strategic Thought

Disciplines of RM >

 Insurance Management

Insurers can reduce the capital adequacy requirements imposed on them in accordance with Solvency II by understanding the effectiveness of managing risk. Companies can also reduce their expenditure on insurance by decreasing the extent of blanket mitigation strategies (insurance policies).

Benefits that Risk Management can bring to Insurance Management:

• Organizations that manage risk well enjoy a ‘virtuous circle’ when it comes to relationships with underwriters. By controlling risks and reducing costs, they can enjoy discounts on their premiums and cope better in a hard insurance market.
• Use of loss information to help identify the key cost drivers, so that the organization can prioritize cost control efforts.
• Ability to measure loss trends so the organization can focus on high-impact areas.
• Proactive timely feedback to managers, thereby facilitating proactive and properly targeted loss control practices.
• Ability to insure 'categories' of risks rather than individual risks – leading to a more efficient insurance program.
• Reduction of the cost of claims through proactive post loss communication, review and monitoring (it’s a known fact that the earlier a loss is addressed and investigated, the quicker it takes to resolve and the less the total cost will  be to the organization).
• The ability to report near misses and issues will bring to light high risk activities, which enable active management of risk rather than just claiming insurance payouts.
• Allocation of insurance charges to individual projects calculated according to the risks associated with that project (better visibility means project managers motivated to actively manage the risk involved),  means the company can control some of its financial risk exposure without the involvement of expensive insurance