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Insurers’ risk functions are experiencing significant change as disruptive forces buffet the traditional industry. To survive—let alone thrive—insurers need to evolve. Accenture’s Global Risk Management Study 2017 finds that insurance companies are responding to change by taking a more fluid, progressive approach to risk management. The report uncovers three key trends in how insurers are changing the way they manage risk: harnessing digital innovation, balancing old and new skills and integrating across the business.
Harnessing Digital Innovation
Advances in technology are transforming the insurance industry. Innovation in data analytics is helping insurers better understand risk and build better predictive models, new platforms are transforming business models, and robotics and AI are replacing high-volume, low-value-added tasks. The result is cost efficiencies, improved delivery, and increased consistency.
Since our 2011 Global Risk Management Study, data analytics capabilities have matured, showing how important analytics have become. As more insurers migrate their legacy systems to the cloud, risk analytics is expected to continue to transform the risk function.
The biggest areas of opportunity for cloud technology are greater efficiency and improved regulatory data management. Cloud is also crucial for cost control, and beyond any single application, it underpins all digitalization—the technological innovation insurers need to meet future customer needs and business objectives.
While insurers are exploring these technologies, few risk teams have fully exploited them. The report found only 13 percent of insurers are realizing robotic process automation’s full potential. It appears some insurers are waiting to see how disruption will affect their business, while others are leading the way and taking advantage of opportunities technology offers.
Balancing Old Skills and New
Risk teams of the future will need more diverse skills and experience. As technology shifts its focus to become more human-centric, risk teams will have to adapt to new tools and processes to interact with internal and external stakeholders.
To build these teams of the future, insurers are bringing staff into the risk function, hiring from diverse disciplines—including economics, law, and engineering—and teaming up senior actuaries and risk leaders with a new generation of tech-savvy protégés.
Since our first risk study in 2009, top priorities have shifted from managing risk related to market instability to understanding emerging technology risks such as cyber. In the 2017 report, 75 percent of insurers say their risk management workforce capabilities are effective or very effective at understanding technology risks.
Integrating Across the Business
The spread of risk teams across several locations, each having its differences and specialized risk types, poses challenges for insurers. The outsourcing of risk reporting, technology, and maintenance, which is expected to increase over the next two years, is also an issue. Insurers must find a balance between centralization and decentralization of their risk management functions to improve consistency while also capturing nuances in local markets.
Overall, there is a trend towards greater centralization of risk management at the group level, with further centralization expected across all risk types and business lines in two years.