Risk Insider: Chris Mandel

Insurtech or RiskTech?

By: | April 3, 2018

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].

I was recently invited to participate at a technology-focused forum at a Siemens location in Houston, Texas. The meeting was centered on the technology that Siemens built to better manage operational risk among energy companies.

While the meeting was seemingly narrow in its design and intent, the exchange of ideas and discussions became broad and far-reaching as attendees ranged from insurers, reinsurers, brokers, consultants and other risk stakeholders.

The core question posed at this meeting was whether or not Siemens’ insurtech solution could be expanded and applied to the broader energy sector and beyond.

Within this context, my role was to share a more strategic message related to the bigger picture of risk and the increasing challenge it has become to most risk leaders. The ensuing discussion led me to a “light bulb moment” that I believe others will find interesting.

While the big picture of strategic risk is often seen as an enterprise-wide practice that attempts to apply the fundamental risk process to all significant risks, the insurtech world seems singularly focused on technology that solves insurance-related problems.

This is well and good, as I continue to believe that insurance is a critical mitigation and risk transfer tool, whose importance to efficient commerce and economies worldwide cannot be understated.

However, there is a bigger picture, both with respect to risk itself and in the world of technology, and that is risk technology.

My light bulb moment was when I realized that as important as insurance — and by extension insurtech — is, “risktech” is the future of technology that will be the most helpful to risk leaders going forward.

Even today, cyber risk is still often addressed and managed by insurance solutions. And yet while necessary, those techniques are often very limited in their affect.

I am not talking about today’s popular governance, risk management and compliance systems framework, but rather the technology solutions that will help mitigate risk by more effectively navigating the digitization of the risk profile of organizations.

I believe this emerging reality was signaled first and most significantly by the challenges of cyber risk. Even today, cyber risk is still often addressed and managed by insurance solutions. And yet while necessary, those techniques are often very limited in their affect.

For example, most high-profile hacks result in related insurance proceeds totaling a few hundred million dollars; and yet, total loss costs will often exceed $1 billion.

Admittedly, insurance is not available for much of the consequences of these events. Nevertheless, an organization’s board of directors, shareholders, executives and customers may have bigger expectations.

While I am not saying there aren’t other mitigation techniques available to address cyber events, I am suggesting that we need more of them. More specifically, we need other “risktech” mitigation tools to manage the risks of an increasingly digitized risk profile.

The good news is that these solutions are already beginning to emerge and are broadening the technology solution set that was previously tied to insurable risks.

The remaining question is whether or not risk leaders are up to this new world challenge and how they’ll respond. But, that’s the subject of another day.

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