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What are the most dangerous risks to your company in the coming year?

2018's Most Dangerous Risks for Insurers


In a recent survey completed by Willis Network, they asked insurers the same question in December 2017 that they asked in December 2016

What they found was that insurers’ concerns have shifted. Last year, other than the top entry, cybersecurity and cybercrime, most of the concerns were the usual suspects – the traditional risks that insurers have always faced – pricing, IT, competition, underwriting, regulations, investments, catastrophes.

The 2018 responses to that same question suggest that many insurer managers are concerned that the industry is now closer to becoming the next victim of the modern wave that has emptied out shopping malls and closed many book stores.

Based on responses of more than 200 participants, their list of the top 10 most dangerous risks for insurers in 2018 is outlined below:

 

1. Cybersecurity and Cybercrime (Number 1 in 2017 also)

As insurers transform business operations to become more digital, they grow more susceptible to cybercrime and require heightened cybersecurity. 

2. IT/Systems and Tech Gap (Third in 2017)

If information technology systems are not up to par, insurers run the risk of not being able to satisfy customer service expectations, presenting both an operational risk and a strategic risk. The amount of investment in computer systems is the strategic issue while the successful operation of those systems is operational.

3. Strategic Direction and Opportunities Missed (Eighth in 2017)

Respondents show a lack of confidence that management can get it right. They’re afraid top management will take the company off in a rush – but in the wrong direction, while leaving valuable options on the table.

4. Pricing and Product Line Profit (Second in 2017)

Insurance has always been a business where sales are made and prices are fixed before the cost of goods sold (claims costs) is known. The data analytics revolution ties this risk firmly to technology issues.

5. Runaway frequency or severity of claims (19th in 2017)

Nothing like the highest natural catastrophe claims year to bring about a major jump in this insurance risk. Even if prices and underwriting are just right, chance can result in more claims or larger claims than anticipated.

6. Disruptive Technology (14th in 2017)

No one knows what it will be, but many survey respondents are sure that someone, maybe Alphabet or Amazon, is quietly developing the insurance company killer app.

7. Customer needs not served by traditional approaches (New in 2018)

Insurers fear that the younger generation does not see much value in the insurance products that have been sold for 50 years or more and do not have interest in a sale or claim process that cannot be completed with a few clicks on their smartphones.

8. Emerging Risks (10th in 2017)

Emerging risks may have moved up because there’s increasing confidence in management’s ability to handle the risks that have been identified above.

9. Competition (4th in 2017)

Competition is always a major risk for insurers because of the high degree of price sensitivity of most customer bases, along with low barriers to entry.

10. Underwriting Performance (5th in 2017)

Respondents still think it’s highly important to execute the basics of the insurance business.

What can you do with this information?

We hope you’ll use this list and its ranking to challenge your own list of top risks. Think about how this list and the changes from last year compare to your company’s thinking. Are there highly ranked risks here that aren’t on your risk register or that have a lower ranking.


If you are looking for business insurance or are coming up for the renewal of your current policy, do give us a call on 01473 408408.