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Risk Insider: Chris Mandel

Risk, Disrupted

By: | February 22, 2016 • 3 min read
Chris Mandel is SVP, strategic solutions for Sedgwick and Director of the Sedgwick Institute. He is a long-term risk management leader and a former president of RIMS. He can be reached at [email protected]

With increasing frequency, the world of risk and insurance is facing challenges that are leading to disruptive interventions from a variety of sources, the aggregate of which portends some significant shifts in an industry often viewed as being stuck in a lower gear.

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Well known and understood among underwriters is the challenge of the investment environment, which has been disrupted continuously since 2008 with returns being artificially suppressed by the federal government’s economic strategy. This fact only exacerbates the reality of the conservative investment limitations already imposed on the industry by regulators.

In the health care world, the Affordable Care Act has surely disrupted medical benefit plans. Most Americans have been accustomed to leveraging their benefits to protect their assets from catastrophic health events and, perhaps to an even greater degree, manage their day-to-day medical costs.

While one of the few clear benefits of the ACA is the catastrophe protection enabled by the removal of aggregate expense caps (previously the lifetime maximum was $1 million in many plans), many other changes brought about by the ACA have been at a minimum, disruptive. Common sense would suggest you can’t expand an exposure and constrain an underwriter’s ability to charge the appropriate premium for risk underwritten, without a significant negative impact on premiums. Underwriting disrupted.

Disruption has the potential to drive innovation and improve the industry for the better as players are forced to respond to with ideas and solutions that are often outside [the box].

We find ourselves inexplicably surprised that the $2,500 average savings promised by the administration has been anything but the reality. In fact, just the opposite is emerging for many who are not eligible for subsidies (estimated by the CBO to be over $300B in 2016).  Corporate medical/benefits budgets and planning continue to be disrupted while benefit levels are reduced and/or premium increases are increasingly common.

In the property/casualty world, two new exposures are fanning the flames of the unknowns for underwriters. First, social media risk emerges as a potentially more damaging source of loss than even more well-known and better understood exposure to hacking. The latest example is hot off the press with Kalobios filing for chapter 11 after its CEO used both regular and social media to trumpet his decision to exploit the pricing of a newly deregulated drug to the detriment of the customer. This rapidly led to disclosures of alleged criminal (yet unrelated) conduct, leading to the CEO’s firing and now the demise of another potentially great company.

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Total elapsed time from first negative media to bankruptcy: three months.

Another emerging exposure of growing concern is “domestic” terrorism. Since Ft. Hood, San Bernardino, the Boston Marathon and other assorted instances of targeted violence in recent years, domestic terrorism is becoming more “expected” than one would have hoped, yet the industry’s ability to predict the impact or severity remains limited.

Assessing and pricing exposures accurately where there is insufficient historical data to support conclusions is a challenge for an industry so heavily reliant on data to accurately price risk. Disruption looks to be evolving into a more frequent and accelerating characteristic of this industry.

While challenging, disruption has the potential to drive innovation and improve the industry for the better as players are forced to respond to with ideas and solutions that are often outside the typical considerations of an industry constrained by regulation and the vagaries of new and often poorly understood exposures. Accordingly, I see disruption as a necessary sign of likely progress ahead.

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession: Curt Gross

This director of risk management sees cyber, IP and reputation risks as evolving threats, but more formal education may make emerging risk professionals better prepared.
By: | June 1, 2018 • 4 min read

R&I: What was your first job?

My first non-professional job was working at Burger King in high school. I learned some valuable life lessons there.

R&I: How did you come to work in risk management?

After taking some accounting classes in high school, I originally thought I wanted to be an accountant. After working on a few Widgets Inc. projects in college, I figured out that wasn’t what I really wanted to do. Risk management found me. The rest is history. Looking back, I am pleased with how things worked out.

R&I: What is the risk management community doing right?

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I think we do a nice job on post graduate education. I think the ARM and CPCU designations give credibility to the profession. Plus, formal college risk management degrees are becoming more popular these days. I know The University of Akron just launched a new risk management bachelor’s program in the fall of 2017 within the business school.

R&I: What could the risk management community be doing a better job of?

I think we could do a better job with streamlining certificates of insurance or, better yet, evaluating if they are even necessary. It just seems to me that there is a significant amount of time and expense around generating certificates. There has to be a more efficient way.

R&I: What was the best location and year for the RIMS conference and why?

Selfishly, I prefer a destination with a direct flight when possible. RIMS does a nice job of selecting various locations throughout the country. It is a big job to successfully pull off a conference of that size.

Curt Gross, Director of Risk Management, Parker Hannifin Corp.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

Definitely the change in nontraditional property & casualty exposures such as intellectual property and reputational risk. Those exposures existed way back when but in different ways. As computer networks become more and more connected and news travels at a more rapid pace, it just amplifies these types of exposures. Sometimes we have to think like the perpetrator, which can be difficult to do.

R&I: What emerging commercial risk most concerns you?

I hate to sound cliché — it’s quite the buzz these days — but I would have to say cyber. It’s such a complex risk involving nontraditional players and motives. Definitely a challenging exposure to get your arms around. Unfortunately, I don’t think we’ll really know the true exposure until there is more claim development.

R&I: What insurance carrier do you have the highest opinion of?

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Our captive insurance company. I’ve been fortunate to work for several companies with a captive, each one with a different operating objective. I view a captive as an essential tool for a successful risk management program.

R&I: Who is your mentor and why?

I can’t point to just one. I have and continue to be lucky to work for really good managers throughout my career. Each one has taken the time and interest to develop me as a professional. I certainly haven’t arrived yet and welcome feedback to continue to try to be the best I can be every day.

R&I: What have you accomplished that you are proudest of?

I would like to think I have and continue to bring meaningful value to my company. However, I would have to say my family is my proudest accomplishment.

R&I: What is your favorite book or movie?

Favorite movie is definitely “Good Will Hunting.”

R&I: What’s the best restaurant you’ve ever eaten at?

Tough question to narrow down. If my wife ran a restaurant, it would be hers. We try to have dinner as a family as much as possible. If I had to pick one restaurant though, I would say Fire Food & Drink in Cleveland, Ohio. Chef Katz is a culinary genius.

R&I: What is the most unusual/interesting place you have ever visited?

The Grand Canyon. It is just so vast. A close second is Stonehenge.

R&I: What is the riskiest activity you ever engaged in?

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A few, actually. Up until a few years ago, I owned a sport bike (motorcycle). Of course, I wore the proper gear, took a safety course and read a motorcycle safety book. Also, I have taken a few laps in a NASCAR [race car] around Daytona International Speedway at 180 mph. Most recently, trying to ride my daughter’s skateboard.

R&I: If the world has a modern hero, who is it and why?

The Dalai Lama. A world full of compassion, tolerance and patience and free of discrimination, racism and violence, while perhaps idealistic, sounds like a wonderful place to me.

R&I: What about this work do you find the most fulfilling or rewarding?

I really enjoy the company I work for and my role, because I get the opportunity to work with various functions. For example, while mostly finance, I get to interact with legal, human resources, employee health and safety, to name a few.

R&I: What do your friends and family think you do?

I asked my son. He said, “Risk management and insurance.” (He’s had the benefit of bring-your-kid-to-work day.)

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]