Digital Risk Profiling Transforms Insurance

There are some large anomalies in the business insurance market, including:

• Small to medium-sized (SME) business spend billions of dollars on premiums globally, yet a detailed risk profile is rarely developed to ensure that insurance producers and carriers are seen as trusted risk advisers rather than just sellers of product.
• The absence of risk profiling, and risk control information, makes it very difficult for insurance carriers to recognize and reward businesses that commit to improving their risk management and lowering loss ratios.
• There are very few cost-effective risk management services that can assist the millions of SMEs around the world to reduce their costs of risk.
• Underinsurance continues to hurt the reputation of the insurance industry.

The capture of client- and industry-specific risk exposures and controls in a risk profile could be the key to correcting these anomalies, resulting in a decrease in claims, improved insurance industry returns and enhanced industry reputation. See also: Do You Really Have a Digital Strategy?   Until now, risk profiling through consulting has generally been unaffordable and inefficient for most SMEs, but RiskAdvisor now provides a pre-populated, online risk platform that enables affordable, client-specific, industry risk profiles to be produced in a matter of minutes. The platform library currently contains more than 160,000 risk exposures, controls and treatments, 6,000 benchmarks across more than 600 industries and 60 risk areas. The automated capture of risk exposure and control information by insurance carriers, producers and brokers has numerous positive effects:

• If insurance buyers, producers and carriers capture a client’s industry-specific risk profile, more intelligent and efficient buying, selling and underwriting would occur.
• The strategic aggregation and analysis of risk data is important in helping carriers and producers maintain relevance in the marketplace.
• Data-driven product development helps carriers and producers bring new risk products to market faster and with greater chance of success.
• Data holds the key to improvements in risk management, which is integral to pricing risk.
• Sharing risk data with all stakeholders will make everyone involved in the insurance value chain more customer-centric.
• There can be a greater focus on more comprehensive customer services and specialty products.

See also: Customers’ Digital Expectations   Through digital risk profiling, insurance buyers, producers and carriers can easily understand a business's industry-specific risk profile and controls to enable more intelligent buying, selling and underwriting of insurance globally. Advantages to carriers of accessing a digital risk platform include:

• A competitive advantage through superior risk selection, enhanced granular underwriting assessment and more accurate pricing of risk in a highly efficient and cost-effective manner.
• Having risk information in a timelier manner, before binding acceptance.
• Obtaining risk control information and data on a far greater proportion of a carrier’s books at much lower cost.
• Interrogation of risk control data by individual risk or at portfolio level. This allows the carrier to obtain valuable insights on the performance of the portfolio, including developing trends and mitigation strategies.
• Enhanced portfolio management through the ability to analyze risk controls at an individual and portfolio level.

The strategic aggregation and analysis of risk data promises to alter every part of the industry value chain. A customer-centric view powered by new forms of data, analytics and automation offers the ability to better price risks. Digital risk profiling can deliver benefits to insurance buyers as follows:

• Risk profiling helps support better decision making when managing risk.
• The risk of being underinsured, or not insured, is reduced through improved risk assessment.
• Resilience greatly increases for insureds to recover from loss events.
• Governance and compliance outcomes improve.
• Security and confidence are enhanced for key stakeholders such as financiers and equity providers.

Digital risk profiling can transform the insurance industry’s value proposition from insurance product sellers to trusted risk and insurance advisers. Capturing risk information at the point of client engagement can have a profoundly positive effect through the entire insurance value chain.