"Risk management is shifting" – The Institutes CEO

There is a growing emphasis on mitigating losses before they occur

"Risk management is shifting" – The Institutes CEO

Risk Management News

By David Saric

A predict and prevent approach to risk management is becoming more significant as technological developments create added value for both brokers and their policyholders.

“With new technologies and capabilities, we can predict when bad things are going to happen and stop them, rather than waiting for an incident to occur and making sure the person is financially whole, which is a great thing and will always be,” said Pete Miller (pictured), CEO of The Institutes.

Miller spoke with Insurance Business about how insurance companies can pinpoint avoidable losses and minimize claims by embracing innovative tools, including AI.

Switching to a more holistic risk management approach

Miller has been the CEO of The Institutes for 17 years, an organization that provides professional education for the risk management and property-casualty insurance industry.

Throughout a multi-decade career, Miller has been able to witness firsthand how risk management’s more precautionary mindset is a beneficial progression.

“As a policyholder, it is not an ideal scenario to have a loss,” Miller said. “No one wants to have to deal with the anxieties of having a flooded basement and take that time off from work, which can result in an unintentional loss of funds.”

There is also the likelihood of premiums increasing in the aftermath of a loss, especially because of rampant inflation, or supply chain issues that can create a more burdensome remediation experience.

“Implementing this predict and prevent model at the beginning can create a much more positive relationship with a client, where their best interests are dealt with in a more holistic way rather than just providing a game plan in advance of a potential loss.”

Innovations worth knowing about

As new technologies become available for use in the insurance industry, there are even more opportunities for insurers and brokers to add value added services to offer their clients peace of mind.

When speaking about the homeowners’ industry specifically, Miller points out two new instruments that have a potential to prevent and decrease the impacts of a loss.

“On the electrical side, there is a device that is available in both the US and Canada that can monitor micro spikes in electrical currents,” Miller said. “It can be plugged into a wall and used to analyze if those currents will expand and cause a fire since a major cause of fires in older homes is due to bad wiring.”

This device sends its user real time reports that can track whether the wires are at risk and can allow the homeowner to remedy the situation before it even begins, lessening the chance of catastrophic damages or complex claims.

Similarly, on the plumbing side, Miller notes how “there are actually smart plumbing companies, with a few of them being bought by insurers, that are providing novel services for many common but potentially detrimental issues.”

“A plumber can install a small valve in a pipe that measure water pressure to predict if there’s a split pipe. In real time, it will send the information to you, your insurer and your plumber and can shut off the water to avoid any potential leakage and breaking.”

How can AI fit into predict and prevent?

Miller studied towards a PhD in AI and has insight into how this technology, which is only gaining more traction thanks to ChatGPT and other emerging platforms, can work in the predict and prevent mindset.

“The essence of AI is pattern matching, which means these technologies can be effective at analyzing input data and recognizing a policyholder’s potential for encountering a risk,” Miller said.

“It works on statistics and confidence intervals. In general, statistics are great, and they can be incredibly specific.”

However, the analytical findings from AI services need a human translator for the information to be properly digested by policyholders, which is where brokers and agents come into play.

“These sorts of interventions are, in most cases, better than the standard intervention that an AI engine might spit out,” Miller said.

“Customers mostly view insurance mostly as a remediating agent in the face of a loss, which is going to require some greater explanation on what the benefits of taking a prevent and predict approach are.”

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