NU Online News Service, June 24, 11:20 p.m. EDT
Improvements in analytic capabilities allow companies to get the best price for their insurance and allow prudent risk transfer choices, but risk managers need to share the information they glean with upper management, insurance brokers at Marsh said.
In a webinar titled, "Analytics in Action: Capital and Risk Finance Decision–Making Support," held yesterday, Brian C. Elowe, a managing director of Marsh's Global Risk Management division moderated a discussion with four other Marsh executives concerning risk management analytics and how it has changed risk management and insurance placements.
Mr. Elowe noted that in a survey of risk managers, few share the results from analytic tools with upper management. While there may be several reasons for this, he said, the benefit of sharing this information and discussing it with others in upper management is underappreciated.
"Used appropriately, analytics is more than a mere running of the numbers; it is a deep dive into the numbers that is important to individual firms and their industries," said Mr. Elowe.
It allows firms to quantify and understand risk, reach the best decision, spend the company's capital more efficiently and maximize the return in risk management, he said.
Ben Fidlow, national practice leader for Marsh analytics said that today's analytics takes the "game to another level." In the past, risk retention decisions were made without adequate support and risk managers were slaves "to an inefficient pricing mechanism," he said.
Today, there are more discussions about the impact of the rare catastrophic events that can strike a company, and with that, risk managers are able to bring more data than was ever available in the past.
With the advent of computer power, the risk management transaction is "based more on analysis and not gut instinct," he said.
Lou Ann Layton, leader of Marsh's U.S. Financial and Professional Liability (FINPRO) practice, said that within the past 10 years the emphasis on analytics for directors and officers insurance has grown, but the number one exposure remains security class action litigation. With a strong set of analytics behind a risk manager, they are able to eliminate a lot of guess work and "walk into the board acting with more confidence to justify their risk placement choices."
Duncan Ellis, leader of Marsh's U.S.–Global property practice, cautioned that while catastrophe models are being used more, risk managers must make sure that the information insurers are using is accurate.
He also advised that buyers should be running their own models to provide themselves with the ammunition they need to fight a carrier's pricing if they decide to do so.
"They will have modeled your risk and so should you," said Mr. Ellis.
A rebroadcast of the webinar is available at www.marsh.com.
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