Will insurers adopt tools for NOW to minimise risk tomorrow?


Why are insurers ignoring the facts?

Why are they still trying to predict the future using incomplete data, assumptions and flawed models?

Just because these methods are “familiar” after many years of use are they still adequate or appropriate in an increasingly turbulent and inter-connected world?

The stakes are too high to dismiss viable alternatives…aren’t they???

Lloyd’s of London warns of ‘perfect storm’ threat to insurance market

The warning signs, from within and outside the industry, are there. Even other areas of the financial sector have flagged their concerns:

Transparency – Trust – Trends – TRANSFORMATION

Running Blind: Price Waterhouse – “Strategy: General Insurance”

UK P&C Insurance: Asleep at the wheel: Citi have their say

The COMPLEXITY of inter-connectedness and interdependencies established through non-linear networks and supply chains, determine that regulation and traditional risk management that are about compliance with a “mish mash” of legislation is no longer adequate.

We MUST commence with establishing that individual entities are robust and “fit for randomness“. This applies every bit as much to insurers and reinsurers as it does the Global banking system and companies everywhere.

EXCESSIVE COMPLEXITY is a recognised and serious threat – follow the links to learn more:

human bodycompanynetworksocietycivilization

The tools are able to measure current levels of complexity and to serve as an early warning of proximity to the upper threshold…the point of “critical complexity”…around which the system becomes unstable and beyond which functionality deteriorates. Sometimes in spectacular fashion.

Both IBM and McKinsey have had recent “tilts” at outlining the threat that complexity poses to the modern world but neither possess the tools to measure let alone manage.

Econosphere

For any dynamic system to function it requires complexity. The greater the complexity the higher the functionality.  The threat is based upon the fact that every dynamical system – company – structure – network has a level of “critical complexity” beyond which the system cannot function.

As NNT points out we have all seen the impact of complexity within financial markets but a major factor in this instance was the excessive presence of “man-made” complexity in the form of opacity (or ambiguity). It’s purpose to provide the smokescreen to execute a massive abandonment of moral principles in a greed-fuelled financial feeding frenzy.

Positive major developments are occurring as a result of these events, aided and abetted by the web tools that we now have at our disposal. The institutional model and perception of supply chains as linear are being questioned by those upon whom they depend…and weaknesses identified. Only those in positions of power continue to “defend the [often] indefensible”.

Academics, visionaries and Corporate leaders are emerging from their own networks and institutional silos to converse and collaborate like never before.We were always inter-connected but were merely limited by the tools at our disposal! Economic theory was executed in pursuit of wealth, often at the expense of any worthwhile consideration of environmental, social or cultural impact. Environmentalists have been dismissed as treehuggers intent upon over-egging issues relating to our global eco-system. As for any social or cultural concerns…well the data can be manipulated to say just about anything. The silos are disappearing. The awareness of a pressing need for change has grown. Have you noticed that, thanks to the efforts of people like Adam Werbach, SUSTAINABILITY [rather than environment] is on the agenda!?

The game has changed!

Citizens now have the tools that were once, exclusively, the domain of institutions. Like-minded people can find each other, forms groups, ask awkward questions, expose wrongdoers, raise their voices, seek, create and distribute solutions. We have a responsibility to each other and to the future generations. It isn’t about ME it’s about WE.

The convergence of many schools of thought and disciplines offer us the opportunity to bring about accelerated…much needed…change.

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