Risk used to be relatively simple. If your local bakery wants insurance, you’ll be concerned about its structure, location, and how it operates, and you’ll likely have a pretty good idea of its risk profile. Today, that same business is much more complex and interconnected.
- A third-party POS system is used to process transactions
- Companies have a presence on the web and do many online and interstate sales.
- We use Software-as-a-Service providers to manage payroll, benefits, and accounting
- We have special boxes, materials, keepsakes and more sourced from all over the world.
These additional connections and interconnections may increase potential business interruption, liability, and even property risk for the Company.
spider web risk
This shows that risk is everywhere these days and is constantly increasing.annual Accenture Pulse Index of Change We found that the percentage of changes impacting business has steadily increased since 2019, rising to 183% over the past four years. The risk landscape has never been more complex. It’s like a spider’s web of interconnected chaos. This was born in our annual report. Accenture risk research Nearly nine in 10 (88%) insurance respondents say complex, interconnected risks are emerging at a faster pace than ever before. Insurers have identified financial, regulatory and compliance, and operational risks as the most rising risks, all of which have a knock-on effect on each other. Additionally, 77% of insurers say risks from other sectors are impacting their business as companies and industries become more interconnected. Underscoring the seriousness of risk interdependence, our global research participants warn that individual risks can quickly become strategic and existential threats.
When a risky business is a risky business
For major risks such as cyber and NatCat, insurers may choose to reduce and limit coverage because there is a lack of certainty in accurately predicting whether losses will exceed premiums. is increasing. One extreme example of this new risk landscape is to investigate the potential impact on the cyber insurance industry if one of the leading cloud providers goes down. This may be worse than NatCat 5. Given that insurance companies are affected by risk from three different angles: 1) as risk takers who provide risk transfer to insureds, and 2) as investors who invest large premiums in these areas. and 3) as a company you have unique operational risks, making your risk management ability to assess, balance, and respond to this complex situation even more critical to your success.
To illustrate this, consider an event where a major pier is closed due to a port fire. The carrier bears that core risk and may have an insurance claim. There may also be other insureds affected by product delays. Carriers may also have investments in some of these companies that will be affected by the financial implications. Additionally, airline equipment and supplies may be delayed, potentially impacting flight operations.
Risk management ability that lags behind
Despite their efforts, insurance companies are not adequately prepared to deal with this situation for a variety of reasons. First, there is a lack of integrated data that can assess risk. 72% of our insurance respondents say their risk management capabilities and processes are not keeping pace with rapidly changing conditions. Cloud usage to derive value from data is low at 30%, likely because insurers don’t have enough risk data in the cloud. Core data is not captured with the manuscript endorsement where the risk characteristics are locked away in a PDF and not easily accessible. 22% cite data quality as the biggest challenge they face when gaining insights from data. 18% also cited basic data availability.
Second, even if they had the data, they lacked the appropriate access or tools to evaluate it. 17% executive they still say do do not have obtain satisfactory results with Delete data silo. Therefore, even though the data exists, it is not yet readily available for practical use, let alone to interpret it and derive insights from it.
And third, we lack the skills and technology to take advantage of it. 22% cited lack of relevant skillsets as their biggest challenge, and 17% cited legacy technology as their biggest barrier.
A leader in risk management emerges
To meet these needs, better risk management is expected in the future. 28% of insurance companies have already started using generative AI to process and derive value from data, which is promising at this early stage. Additionally, our study identified a group of risk leaders (14.5%) with advanced risk capabilities in our global respondent base. The difference between leaders and laggards when it comes to risk is both the speed at which they identify risks and, more importantly, the speed at which they take action. These risk leaders are better at detecting and mitigating threats than other risk leaders with less mature capabilities. They are also more likely to take actions that strengthen their risk capacity and are much more satisfied with those actions.
To support these leaders, our Accelerating the future of insurance through technology The report cites technology and platform modernization and predictive analytics as key drivers of profitable growth for insurers. Eliminating technology debt could become a defining KPI for generative AI.
Connect the dots to power your business
How pervasive is risk management across the insurance company? How much do you know about your exposures? And how quickly do you respond once they are detected?
This depends on the integration of risk processes, resources and capabilities. One example is ensuring guidelines and update profiles are updated appropriately. 75% of insurance participants in this study say companies outside the risk function are also becoming more aware of the impact of new and interconnected risks, but building an organization’s risk culture and mindset , more needs to be done. The same percentage (75%) say their risk function struggles to support the development of a risk mindset across the enterprise, and that the enterprise as a whole is struggling to strengthen its risk capabilities and improve business resilience. Only 36% said they were very satisfied.
Turn risk into opportunity
In response to the challenging risk environment, insurance risk departments are prioritizing several initiatives. Among these are implementing technology to improve decision-making (36%), bringing new skills to the risk function (36%), and keeping the board and executives informed about emerging risks. That (36%). All of this is good, but good risk management activities focus on bringing the identification and response of risk issues to the frontline underwriting and claims process, so that the risk department can further contribute to business success. should be placed and should have the greatest impact.
But the insurance risk function may be juggling too many priorities. Further emblematic of this, a majority of insurance respondents (78%) want their teams to spend more time on the next frontier of value creation and innovation, but there are There is a disability. More than 7 in 10 (73%) say risk professionals don’t have enough connections to the business to deliver on risk, and 80% balance existing work with value-add activities He says that this is a major issue.
The ‘Back to the Future’ model is no longer fit for purpose
We can no longer let the past predict the future. Traditionally, insurance companies have set rates based on historical predictive models. This alone no longer works.
The importance of data cannot be overstated in both detecting and mitigating risks, and in informing decisions about plans of action at both the corporate and individual transaction level.According to us Transforming claims and underwriting with AI According to the report, insurers are underutilizing the vast amounts of structured and unstructured data they collect from vehicle telematics devices, Internet of Things devices, customer interactions, third-party databases, and more. You can access your assets.
The right data lake architecture enables the cross-pollination of data between departments needed to eliminate silos, speed up data ingestion, and power predictive analytics. Ideally, we would be able to provide frontline underwriters, claims analysts, and decision makers with risk-tailored insights to make more informed decisions. In this way, businesses can be empowered to truly manage these interrelated risks. Without it, the web of interconnected exposures will only grow and we will become blind to our assumed true exposures. This is not a risk that can be easily avoided or transferred. You can only improve by taking action.
The Accenture Risk Study 2024 found that risks are everywhere, and that individual risks interact to form a web of threats.
