Risk management: Where does it fit in insurance?

The aim of an increased focus on risk management is to ensure continuous improvement in advice and product solutions, as well as to add value to clients in terms of the service received from the insurer and broker.

There has been an increase in requests for insurers to provide greater input and guidance with regards to what client’s risk should ideally look like and how they should manage this.
There has also been an increase in the number of losses, and clients want to know how they can prevent a similar occurrence from happening again in the future at their premises.

Driving the emphasis in risk management

Quinten Matthew, Executive Head of Specialist Business at Santam, says “The insurance industry, as society’s trusted manager of risk, is one of the most vulnerable industries to an increasing systemic risk with climate change being one of the drivers.”

Insurers have always applied statistics and data in determining price risks to all areas known to be affected by certain risks (crime and now weather) to ensure fairness among all policyholders.

Impact on insurance

From an insurer point of view, client risk management practices will increasingly influence the underwriting and pricing of risks. “Our products already take account of, and differentiate between those clients that practice sound risk management, and those that do not,” explains Matthew. “Examples of this range from a motor risk where a tracking device is fitted, to a more complex industrial risk which requires disclosure on product labels or physical fire protection and prevention. Clients who practice good risk management suffer less downtime when a crisis happens and are more easily able to reinstate systems of work to maintain turnover. Reducing the risk in this way should positively impact their cover and their premiums.”

The risk management solutions

“The broker is the point of contact with the client and must have an in-depth knowledge of the risk, which is key when positioning the client to the insurer,” says Matthew. “Brokers play a critical role in providing professional advice and assistance on effectively managing risks.”

The insurer also plays an important role, and Santam works closely with service providers on a macro scale to present clients with experts to advise them regarding risk prevention. “Risk surveyors and engineers are engaged to evaluate the risks and implement a plan in place over a period of time to mitigate the risk. For commercial clients who face more complex risk, brokers have access to a risk management service team as part of the professional service offering,” says Matthew.

“We believe it comes down to partnerships and managing relationships, where the broker can consult their client on all the risks they face, and an extended network of service providers can offer solutions.”

Many businesses can also find a collaborative platform with government, NGOs, the science community and academic institutions to encourage better risk management while gaining quantitative and qualitative benefits for the company: for profit, for the people and for the planet.

Ensuring sustainability

“Our experience has shown that while the perception remains that insurance is there to cover unforeseen events, the organisations that plan for recovery are in a much better position to successfully move forward,” notes Matthew. “Clients that position themselves to take proactive steps to manage risk will ensure sustainability.”