The gathering of risk management professionals at the recent RIMS meeting in San Antonio saw the release of the fifteenth "Excellence in Risk Management" survey from our colleagues at Marsh and the event sponsor, RIMS. Drawing on the responses of about 450 risk management professionals, Maintaining Relevance Amid Technology Disruption tackled the key issues around the risk management professional's role in technology innovation. How well do risk managers understand the technologies impacting insurance and risk management? Are they employing technologies like AI, Blockchain, and IoT and if so, where are they using it?
The report makes for some interesting reading. Clear among the findings: risk managers recognize the importance of these innovative technologies and they are optimistic about the opportunities they offer. These findings underscore our observations of technology disruption in insurance - from back office processes to front line interfaces with customers (for more on these changes see the report from Oliver Wyman and CII on The Underwriter of the Future and our survey of insurtech innovation with Zhong An, Technology Driven Value Generation in Insurance ). But, importantly, risk managers know they need to build their knowledge of insurtech innovations to better advise their companies on where to focus and on what to do next.
Take the willingness of companies to reward innovation providers as a sign of the potential for innovation to disrupt the market for an area of real opportunity. As noted in Oliver Wyman's InsurTech Caught on the Radar report with PolicenDirekt, claims management is the most attractive operational area for insurer innovation. Among the focus areas for claims-centered insurtechs are reducing loss adjustment expenses, mitigating fraud, and digitally enabling restitution, including making payments before a claim is made. When asked, a full 40% of respondents said they'd consider switching insurers and other advisors based on their ability to deliver innovative solutions in claims and another 43% didn't rule out such a move.
Digging deeper, respondents indicated, not surprisingly, that reducing costs was the number one area where they'd like to see improvements in the claims process. Internet of Things (IoT) advancements, in particular, have real potential in this area by reducing total cost of risk (TCOR) if they can fundamentally reduce the number of claims that organizations face. IoT data, when combined with predictive capabilities powered by AI, may enable early detection and resolution of issues, potentially avoiding damages and operational disruptions. Such a system could, for example, monitor an employee’s physical exertions, and use predictive analytics and other analysis to recommend job task improvements that would reduce the chance of injury.
These innovations are important and have real promise to reshape areas of the industry, but respondents recognized that they need to become more knowledgeable about them to be better strategic advisors on them. Only by understanding the underlying technologies and their uses can risk professional appreciate the associated risks and treat them accordingly. Looking at respondents whose companies already use or are exploring the use of these technologies, less than half felt their understanding was at a a strategic level. As expected, those whose companies are not using these technologies rated their knowledge level even lower. The answers to questions focusing resident knowledge on AI, blockchain, and IoT, are instructive (see below).
The survey also included deeper dives into these three technologies, as well as on cyber liability and the engagement of risk committees. The report concluded with a set of recommendations. Read more from Maintaining Relevance Amid Technology Disruption.