Risk managers have moved into the corporate limelight recently, against a backdrop of financial and economic uncertainty.
Meeting in Bournemouth for their annual two-day convention, which starts today, they have much to compare notes on, according to John Hurrell, chief executive of the Association of Insurance and Risk Managers (Airmic).
“Every year we do a survey of our members to find out what is keeping them awake at night. Three months ago the answer was insurer financial security. However, that issue has since moved down the agenda significantly,” Hurrell told lloyds.com in the run up to the conference.
“Today risk managers' worries are around the economic downturn. Because of the prevailing trading conditions, they are very concerned about supply chain risk, counterparty risk and credit risk, for example,” he said.
Risk managers’ concerns
They are also watching the insurance underwriting cycle and looking for indications of price increases in certain lines or capacity shrinkage.
“Certain parts of the insurance market are signalling pricing increases. This is the worst possible time for our members,” he said. “Our members understand that many insurers need to recapitalise. But in this climate, businesses are not in a position to pay higher premium rates or to take on higher levels of self insurance.”
Best practices
Airmic may not agree with insurers on the need for price increases but it has improved dialogue with the industry in terms of claims and settlement best practice.
“At the conference we will be reporting on how insurers have responded to the Claims Best Practice Guide. They will be reporting to members on how they shape up against the eight criteria we have specified,” Hurrell said.
The document identifies eight components that determine the quality of a claims service, and the factors that help to demonstrate that they come up to standard.
The components are:
- Culture and Philosophy
- Communications
- People
- Infrastructure
- Claims Procedures
- Data Management
- Operations
- Monitoring and Review
“We've also done a lot of work on speed of settlement and we will be hopefully announcing an agreement with our seven partner insurers over a new claims settlement protocol. The agreement means that during the indemnity period, on a property or BI claim, the insured will be cash flow neutral compared to what they would have been in the absence of a claim, through a series of interim payments from the insurers. That's good news for our members.”
Enhancing risk managers’ authority
The financial crisis has caused all businesses to focus on risk and risk managers' influence in the boardroom is growing as a result, Hurrell believes: “We want to provide risk managers with the tools that will help them operate at a higher, strategic level.”
The association recently created the Airmic Academy, aimed at providing training from specialists in key areas. The first session was on understanding insurance company balance sheets and is intended to help risk managers answer questions from their chief financial officer about the security of insurance markets, for example.
Developing career paths
“Also, we’re doing more work on career development for risk managers and have developed a career development framework for our members that will be launched at the conference,” Hurrell explained. “We’re working with headhunters to see how risk managers can make the transition to creating a chief risk officer role. We expect to have more CRO members as this role expands out of financial services and into industry.
“The economic climate has created real opportunities for risk specialists and we are going to help our members grasp those opportunities.”
