The term Insurance Risk Management is a relatively recent evolution of the term “insurance management.” And “risk management” together birthing the concept of ‘Insurance Risk Management’.
The concept of risk management encompasses a much broader scope of activities and responsibilities than insurance management. Risk management is now a widely accepted description of a discipline within most large organizations. Basic risks such as fire, windstorm, employee injuries, and automobile accidents, as well as more sophisticated exposures such as product liability, environmental impairment, and employment practices, are the province of the risk management department in a typical corporation. Insurance Risk Management is the assessment and quantification of the likelihood and financial impact of events that may occur in the customer’s world that require settlement by the insurer; and the ability to spread the risk of these events occurring across other insurance underwriter’s in the market.
In the world of finance, risk management refers to the practice of identifying potential risks in advance, analyzing them and taking precautionary steps to reduce/curb the risk. Such as when an entity makes an investment decision, it exposes itself to a number of financial risks.
Writing in Best’s Review, Tim Tongson recommended that business owners take the following steps in implementing an enterprise-wide risk management program:
1) incorporate risk management into the core values of the company;
2) support those values with actions;
3) conduct a risk analysis;
4) implement specific strategies to reduce risk;
5) develop monitoring systems to provide early warnings about potential risks; and
6) perform periodic reviews of the program.The Risk Manager and insurance department must therefore have reliable, relevant indicators to allow them to:
• produce an ongoing inventory of risk objects, such as movable assets, real estate, industrial assets, commercial assets, intellectual property, liability, and damage insurance.
• produce an ongoing inventory of active or expiring policies that cover the company’s assets, executives, and activities and the corresponding premiums.
• monitor claims of any nature, their financial stakes, and the implementation of compensation.
The Legal Suite solutions allow risk managers and insurance departments to control the risks related to their company’s assets as well as the optimization of their coverage.