Nobody likes rules, at least not those that stop you from running your business the way you would prefer. However, rules and regulations have become a fact of life for insurers. And as Accenture’s Insurance 2020 studies confirm, they are likely to play an even bigger role in the future.
The question executives face is: what should our approach be? Compliance is the minimum requirement, and it’s not a trivial one. For many insurers it is a costly and complex undertaking, one that demands as much as they have to give.
At Accenture, we believe the tightening regulatory environment is an opportunity for committed insurers to gain a decisive competitive advantage. By aligning risk with the overall business strategy, and integrating it into all key business processes, carriers will improve their ability to make risk-based decisions about growing the business and reducing costs.
This will enhance their position when they are assessed by rating agencies, analysts and regulators. An enterprise-wide risk management framework also avoids one of the biggest drivers of cost: inconsistent execution in different processes, resulting in data, standards and responses that may not be standardized, integrated and replicable.
Better decision making
Most importantly, though, enterprise risk management makes it possible to review the existing process landscape, remodeling and redesigning as required. It provides a formal statement of risk appetite that guides strategic decision making. By helping align strategic objectives with risk tolerances it prevents excessive risk taking, fosters greater efficiency in capital allocation, and tells stakeholders the firm has clear boundaries for overall risk.
Enterprise risk management is first and foremost a compliance-driven function that protects the value of the organization. But to an increasing degree it is strategy-driven, with a focus on maximizing rather than simply protecting enterprise value.
This is the last in my series of posts in which I’ve discussed the findings of Accenture’s Insurance 2020 studies, and the implications for life insurers. Feel free to contact us if you would like more information about the studies, and click here if you would like to read the other posts on this subject.