GRC & Archipelago Explain Why Data Leads to Better Insurance Outcomes

Risk managers are facing a hard property insurance market, rising inflation, coverage gaps, and more. The common denominator for handling those issues is clear: data.  

Accurate, robust data enables risk managers to “sell” their risk profiles to underwriters, gain favorable insurance terms and conditions, make strategic risk decisions, and create more resilient organizations. Leading risk managers are increasingly adopting advanced data analytics tools to take control of their risks.  

To create additional perspective for risk managers on the power of data, Peter Linn, Vice President of Risk Engineering at TÜV SÜD Global Risk Consultants joined Hemant Shah, Co-Founder and CEO of Archipelago for a speaking session at RIMS RISKWORLD 2023 in Atlanta. They discussed property market dynamics, the changing role of the risk manager, and how utilizing data makes organizations more resilient. 

Here are three takeaways from their presentation:  

1. Market conditions highlight the need for accurate, contextualized risk data. The current property risk market is experiencing several unique trends.

• Natural catastrophe exposures exacerbated by climate change have led to historic losses and a bifurcated market where businesses in certain regions struggle to get coverage.  
• Carriers have reduced capacity resulting in increased property insurance rates.
• The additional cost of recovery and risk mitigation has led to property valuations that may not fully cover rebuilding or replacement costs.

“Risk professionals on the brokerage side, carrier side, and in various industry trade publications expect the hard market to continue for the remainder 2023 and possibly 2024. Some are even saying 2025 and beyond,” said Linn. “As a consequence of this, some risk managers are retaining more risk and leveraging alternative risk financing options to respond to the market conditions. The evolution of the data, data quality, and risk quality is already playing a greater role in risk management and mitigation, with further advances expected.” 

Shah explained that the “incredible convergence of these trends” has led to a market that is “rewarding and encouraging those who can make more effective, data-driven decisions with better outcomes across the value chain,” he said. “It feels like this is a real tipping point in how data is the critical factor in how decisions are made.” 

2. From buying insurance to selling risk. Risk managers are shifting from a mindset of buying insurance to selling risk.

“It sounds a little like semantics but it’s a powerful shift in the expectations of the behaviors and strategies,” said Shah. He argues that data is not only valuable when negotiating with underwriters, but also with internal stakeholders. 

“Decisions shouldn’t just be about how to transfer risk, optimize risk placement, restructure retention, or form a captive,” said Shah. “They are also about holistically understanding risks so you can invest in mitigating them and increasing resiliency.” 

3. The role of the risk manager has evolved. Risk managers now find themselves addressing broader issues than in the past. Over the past few years, climate change, sustainability, and the regulatory impacts around those and other issues have risen to a prominent position for many risk managers. Also, risk managers need to consider geopolitical risks, global economics, and other macro trends. In response, they have increasingly explored non-traditional insurance solutions such as captives and predictive analytics.  

Taking those actions requires strong risk management data. 

“Across the board, businesses are investing extraordinary amounts of resources into their digital strategies,” said Shah. “I think there is a necessity and opportunity for the risk management function to contribute to those strategies to help resiliency and take advantage of the investments that companies are making in other departments. That will power data-management strategies that can power a whole host of data-driven decisions.” 

Want to learn more about the how data analytics and artificial intelligence are changing risk management? Register now to watch Peter Linn and Hemant Shah in a RIMS webinar on May 18 titled Harness the Power of Data for Better Insurance Outcomes.