The insurance industry has cultivated a thriving insurtech scene in the past few years, but much less is being done to utilize technology for risk managers – who face a growing set of uninsurable risks.
We are in need of a ‘risktech’ revolution that could help risk managers to address the emerging risks that aren’t covered by traditional insurance policies, says former RIMS president and the director of the Sedgwick Institute, Christopher E. Mandel (pictured).
According to Mandel, who has more than 25 years of experience in corporate risk management leadership, the technology wave has mostly been focused on insurance buying thus far – with few solutions available to help manage or mitigate risks that fall outside risk transfer options.
“From my vantage point as a former buyer, doing risk for major corporates usually on a global scale, there wasn’t a lot of attention being paid to risk managers’ needs. That became an acute issue for me,” Mandel told Corporate Risk and Insurance.
For the past 60 or so years in which risk management has been a profession of its own, its professionals have been largely focused on traditional, insurable risks. But the risk landscape has been evolving at pace in recent years – not least because of technology and the rise of cyber risk – and, as a result, risk managers must now take a much broader view of risk.
“That gets a lot of different labels in our business, Enterprise Risk Management (ERM) being the most common, or strategic risk management,” Mandel said.
Many of the risks that have emerged are difficult or even impossible to insure. Risk management association Airmic warned at its annual conference this year that the rise of intangible risks amid the fourth industrial revolution is “changing everything for the risk manager.”
Amid the transformation, most of the technology offerings from the insurance industry today leave large swathes of risk untouched.
“If you can’t find an insurance solution for your risk problem, you’re pretty much out of luck,” said Mandel.
But what exactly would a risktech revolution look like?
“Risktech is nothing more than insurtech applied to buyers – it’s really about giving buyers technology solutions to some of the problems that come from [uninsurable risks],” Mandel explained.
Many risk managers rely heavily on their insurance brokers, who are fundamentally there to sell insurance solutions. But as businesses’ risk profiles digitize and become increasingly complex, risk managers need to work on mitigation strategies outside of insurance. That’s where risktech offerings come in.
“I think what risktech looks like is something that begins to move more aggressively beyond just a risk management information system (RMIS) platform, where information is primarily collected and stored for the purposes of reporting on traditional exposures, to providing additional functional capability that allows you to look at these other non-traditional exposures,” Mandel said.
Today, there is a growing awareness of the potential for exposures such as reputational risk to cause major losses. Risktech platforms could help manage those, according to Mandel – but they could also help find opportunity too.
He added: “[Non-traditional exposures] can, frankly, cause much more significant loss, but on the flip-side can actually represent much more significant potential for value creation, if exploited and leveraged properly.”