Wednesday, 26 October, 2011 Leave a comment
I have lifted this text from a recent Linkedin discussion – once I establish the source I will share that too – and wonder what will it take for the insurance industry to tackle known limitations?
“Recent experience in the Americas has shown that the hidden indirect costs of ignored or unforeseen risks are between five and ten times higher than claims payments which implies an inability to see, anticipate and measure the scope of risk interdependence in complex business environments by clients, brokers and underwriters alike.”
This is precisely the point that I have been making and WHY I WILL persist with my attempts to make COMPLEXITY ANALYSIS & MANAGEMENT a cornerstone of future insurance rating.
I am far from alone in highlighting (1) the problem (2) the potential impact. In 2010 and, again, in 2011 Mactavish Consulting produced really worrying reports. The commentaries from PwC and Citi should have very loud alarm bells ringing…I can’t hear them! Rather the findings are labelled as “inconvenient truth” and swept under a well-worn carpet in the hope that the spark, that will betray the increased fire risk, doesn’t happen on the current watch!!!
Are the Strategic risk functions and shareholders being kept in the dark whilst “wider economic climate” is readied as the excuse for the inevitable losses?
“British firms contain new risks that have not been properly understood or reflected. As a result of this combining with existing pressures on insurers, the insurance sector and the companies it serves could be facing a perfect storm that would form another phase of the financial crisis.Our research suggests that company managements, insurers and investors all need to wake up to face this reality.”