“There’s no other business in the world where contracts have so much at stake,” declared Chris McGloin, chair of UK insurance and risk management association Airmic, at its 2014 conference in Birmingham.
“There’s no other business in the world where contracts have so much at stake,” declared Chris McGloin, chair of UK insurance and risk management association Airmic, at its 2014 conference in Birmingham.
“Firstly, insurance should not just be about procurement: the emphasis being on price. It should be about efficacy and does the product do what the buyer expects when called upon to do so.”
He continued: “Secondly, risk is not just about compliance, it’s about resilient and effective risk governance: can it underpin its corporate strategies and in many instances corporate competitiveness?”
The questions were the base of the Airmic conference and gave the risk managers, underwriters and fellow industry experts food for thought as McGloin asked a question which may be considered when entering a contract.
“This is the moment of truth: will the insurance policy pay out as intended, ie, in full and in a timely fashion?”
He added that there are a number of procedures available, especially if the insurer is given a defence point by its coverage lawyer, so it can be very difficult to proceed to settlement.
“In almost every case these problems can be avoided by taking on a rigorous process to underpin coverage prior to inception and as we know there is a significant amount of money at stake.”
McGloin had a clear message: avoid the red tape and choose an insurance company that delivers.
At another session, Geoff Taylor, executive director and client advocate of Willis, Lisa Connolly, senior operational risk manager at RBS, and Seamus O’Neill of Prudential Risk, assessed the question proposed: are risks changing or our perception of risks?
A table of risks was presented to the panel, which stated risks companies face from 2004 to 2014. Business and strategic risks, economic market and credit risks and legal and regulatory risks were identified as continuing risks.
Following the presented table, Connolly led with the opinion that risks are changing and while the main risks are as prevalent as they have been for the past 10 years (as the chart showed), the variables have changed.
“There are fixed risks, such as technology risks, legal risks, regulatory, people and process risks, and they probably haven’t changed, but I think there are a set of variables below that, which do change and so change your landscape and risk management.”
She said that conduct is a variable that has changed under regulation and boards have become more “nervous—people are scared of social media”. As processes become more sophisticated, companies become more exposed to risk, she argued.
“People used to steal money by coming into branches with a revolver, and you’d have to hand over the money, but now they are thousands of miles away and they can still steal money.”
“As your products become more sophisticated, you create more risks and therefore the risk environment is changing.”
Taylor offered a counter argument to the view held by Connolly: “Risks don’t essentially change, but the immediacy might change. We face the same risks as organisations consistently.”
According to Taylor, the risk environment is not changing, but “our priorities change because of external events in the world”. He added: “We sometimes overreact and apply priorities to what we perceive as new risks.”
As Taylor and Connolly held opposing views, O’Neill offered a medium between the two points. He addressed the issue of social media and company reputation.
Leading with examples of recent companies that have been the subject of extensive press coverage for oil spills, he argued that what is in the newspapers today is “chip paper tomorrow, but media coverage can have an impact on reputation and therefore share price”.
“Inevitably, complexity is the food and drink for a risk manager. CEOs have less and less time, that’s why the risk management is such a crucial role. If one can simplify complexity that is worth its weight in gold.”
As the world of health becomes digital and the rise of medical monitors enters more sectors of health, panellists at Airmic reviewed whether or not insurance is even possible as the cyber world booms and insurance plays catch up.
“Just because you can do it, doesn’t necessarily mean you want to do it, or you should do it”, stated panellist Lisa Hansford-Smith, senior underwriter at XL Group.
Smith began the discussion by suggesting how insurers can and should plan to cover themselves when there is already a wide range of devices on the market. Even “dipping your toe” into legislation on this matter is a big risk, she said.
The panel presented the audience with scenarios where handheld devices are relied on for health monitoring and fail. Ian Birdsey, senior association at Pinsent Masons LLP, commented on products that are on the market, including a walking stick with a sensor, which sends a notification to family members if the walking stick has fallen on the floor.
If a device like the above fails and the consumer is left harmed in some way, the insurance is anticipated to be high. However, as Birdsey began to list the numerous privacy issues with devices of this nature, a number of questions arose.
It brought into question the responsibility of applications. Whether or not the onus is on the company or customer was contended.
Smith raised the question of whether companies need to make more explicit statements when a consumer accepts the terms of conditions of an app they are downloading, or device they are using.
Smith also asked whether risk managers felt equipped enough to insure against devices, which they may not know enough about, yet.
“Technology is moving much faster than regulation in this area”, added Birdsey, and improvements in technology “move beyond the current regime”.
While privacy and security issues arise, advancements in technology show no sign of slowing down, so risk managers and underwriters may need to get tech-savvy sooner rather than later.
