Effectively managing risk today demands a holistic view of risk exposure. Insurers that implement processes and technologies for accurately assessing data and measuring risk across business lines and geographies before disaster strikes will weather the storm.
If the terrorist attacks on Sept. 11, 2001, and the 2004 hurricane season taught the insurance industry anything, it is that insurers must use more-sophisticated tools to mitigate the risk of catastrophes. By adding solutions that delve into granular variables and aggregate risk on an enterprise level, companies can create more-accurate rate structures and serve policyholders more efficiently.
The role of insurance companies often is to help policyholders get back on their feet after events that often are abrupt and difficult to predict. Given the importance of that mission, sifting through piles of paper-based files to gather data and assess risk levels is increasingly problematic. A mere 25 years ago, however, this was a common practice, which often stymied companies from pricing policies correctly, and, more important, challenged insurers to form a reliable understanding of risk exposure.
As technology evolved over time, companies began adding automated tools that helped them measure risk and underwrite policies. But early efforts tended to be implemented in piecemeal fashion. "A lack of confidence in data and disparate technologies cannot accurately reconcile information," explains Gail McGiffin, a Murray Hill, N.J.-based partner with Accenture. >>
Incongruent data sources and technology particularly can wreak havoc for insurance companies managing losses across multiple business lines and vast geographic areas. Sept. 11, 2001, was a sobering reminder of this challenge.
"Losses from the Sept. 11 terrorist attacks were the first to fall across multiple lines of business," explains Claire Wilkinson, vice president of global issues for the New York-based Insurance Information Institute. "The attacks accounted for an estimated $32.5 billion in insurance losses - these occurred across a range of coverage like commercial property, business interruption, work compensation, aviation, life and disability insurance," she says.