How is insurtech related to risk management?
Now that we have reached the eighth article of this series, you should already be familiar with most aspects of insurtech. In this article, we want to open your eyes a bit wider. Insurtech is not always about the sale of insurance products or claims. It is sometimes used as a tool for addressing regulatory requirements. But how?
To give you a bit of background, recent insurance regulations are aimed at strengthening the compliance of insurance companies, specifically on risk management. For instance, a new enterprise risk management regulation has recently been announced by the OIC, requiring companies to increase the intensity of their internal risk management. The regulation introduces various requirements to reflect the new concept for enterprise risk management, which seeks to ensure that all functions of any insurance company take into account risk management schemes and regard them as a top priority.
The key requirements include:
- risk management framework;
- risk management culture;
- duties of directors;
- risk management committee;
- risk management unit;
- risk management process; and
- stress test.
In addition to these requirements, the regulation also obligates insurance companies to set up a reliable information technology system to support their risk management schemes. The information system must provide secure storage space for storing data and must be able to perform data recovery when needed.
A new enterprise risk management regulation has been announced by the OIC, increasing the intensity of internal risk management.
Insurtech as a supporting compliance function
Insurance companies are urged to familiarize themselves with the new regulatory changes to ensure compliance in order to help safeguard their business from any unforeseen disruptive threats.
So how is insurtech related to risk management?
Currently there are some insurtech companies that focus mainly on offering a system that is purely designed to ensure compliance with risk management requirements.
By combining data science; cybersecurity; and economics, these insurtech companies operate a unique analytics platform that quantifies the financial impact of cyber risk. Such tangible and comprehensible financial numbers help the insurance industry understand the impacts of cyber risks and the threats they pose on its business operations.
This has become a tool used by leaders across the financial services industry to forecast and select risks, assess and price risks, manage portfolio risk accumulations, and bring new insurance products to market.
What actions should be taken?
Perhaps one day, the insurance business could be run entirely by a smart system or AI. Who knows, some day insurtech might even be able to perform actuarial tasks, making precise calculations on the probabilities of events and consequences. For all we know, the market needs these smart systems and AI.
Again, we cannot stress enough that the boundaries of insurtech are limitless.
Players in the industry who are creative enough to spot opportunities from these emerging issues, will most likely be able to stay ahead of the game.