RIMS: The future of risk management will be determined by risktech
The emergence of risktech from InsurTech was inevitable when the money that has flowed into InsurTech is examined.
(NEW YORK) — Risktech, a new subset of InsurTech, and how it will innovate and disrupt risk management was the talk of the town at the inaugural RIMS Risktech Forum 2019 on Dec. 9 in New York City.
As InsurTech was adopted throughout the industry, more carriers have data points with which to determine the wants and needs of their customers, where they were exposed to loss and much more. As more insurers deployed wearables, smart home sensors and artificial intelligence (AI), the data produced from these technologies showed how insurance could be disrupted and innovated.
It was in a similar vein that risktech was born. Risktech consists of tools related to InsurTech that are specifically designed for risk management professionals. As risks continue to evolve and multiply, risk managers will come to rely on risktech tools and greater data-driven insights to chart a risk’s trajectory.
But many risk professionals are either unsure about risktech or don’t know enough about it. So RIMS sought to answer any questions risk professionals might have about its merit or how it can help them effectively manage risk with Risktech Forum 2019.
“As we think through some of the issues that RIMS is exploring around data and technology, it’s fascinating that about 14% of risk managers really just don’t know how to use and incorporate the data that they really need,” said Laura Langone, head of insurance operations at Airbnb Inc., in her opening remarks. “Organizations as a whole are struggling with [the question of] how do we integrate ourselves into these tech solutions, how do we leverage what these solutions can actually do for us, and how do we think the data and what the data can do for us.”
The future is here
While data is improving the insurance experience for both carriers and consumers, there are still many in the industry who haven’t fully embraced its role. Whether it’s a resistance to change or an unwillingness to leave behind legacy systems and older investments, adoption challenges continue to persist throughout the insurance industry.
For risk professionals, artificial intelligence is increasingly being deployed in risk assessments. But Beaumont Vance, executive vice president of AI and analytics at TD Ameritrade, stressed that risk professionals need to understand the pros and cons of AI. While there is a perception that AI will overhaul risk assessments completely, Vance says the reality with AI is that it’s best at spotting patterns in data feeds. He adds that it’s important that risk managers know that it doesn’t “teach itself” and requires massive human training.
Like any other new technological innovation in insurance, risktech and any related tools are meant to support risk professionals make better, more efficient decisions that are backed by data-analytics by leaving the more mundane and simple assignments to tools like artificial intelligence.
Follow the money
The emergence of risktech from InsurTech was inevitable when the money that has flowed into InsurTech is examined. Drew Aldrich, managing director at American Family Ventures, said there has been a 50% increase in financing volume in InsurTech from 2013-2019.
This level of investment creates a feedback loop: Capital invested in InsurTech leads to new founders having access to capital, which then leads to the emergence of new business models and technologies, and then InsurTechs and incumbents either partner or compete — on and on goes the cycle.
This is becoming the new normal, and risktech is just the latest byproduct to emerge as a result. ”That capital [has] created pathways that didn’t exist before,” says Aldrich.
What does this mean for risk professionals? There has been an explosion of startups that they can partner with on issues like cybersecurity, workers’ compensation, employee risk mitigation, data & analytics, audit, compliance and environmental, social and corporate governance.
Aldrich says that InsurTech and risktech are driving value for risk managers by providing more data, clarity and more opportunity to create provable value. He says the ability to “do that today versus five years ago is radically different,” but adds that it still hasn’t reached its full penetration potential.
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