Risk Management Tips for Insurance Companies
With escalating threats to cybersecurity, businesses are searching for ways to implement effective risk management. The goal is to protect their business if anything happens to them, as cyber insurance companies are struggling to keep up with demand and searching for ways to innovate and create a sustainable future in the market.
With the rise of third-party vendors and service providers, threat exposure has expanded and increased the chances of a security incident. Even a global pandemic couldn’t stop cyber criminals from exerting great efforts in all kinds of traditional and innovative cyber attacks.
Cyber insurance is a relatively young market and the opportunity to differentiate yourself from the competition lies in your ability to assess risk properly and empower your clients to boost cybersecurity and reduce their risk. The concept of insurance and risk management go hand-in-hand: Insurance is complementary to risk management, but risk management is crucial to insurance.
Here are 5 steps to risk management for insurance companies from the experts:
Step 1: Identify the risks
Start with a comprehensive risk assessment for your own company to identify your own company’s risks. Your clients will depend upon you for your services so the first thing to have in place is your security. Use an automated risk and compliance platform so that you can deploy risk assessments easily to all of your potential clients to have them take their risk assessments and identify the risks with each.
Step 2: Analyze the Risk & Decide How Much Risk is Acceptable
Analyze the risks you identified and measure the likelihoods and consequences that these risks may have on your company. Risks can prevent your company from achieving its business objectives. Decide on your risk appetite, how much of it you can absorb, how much you want to transfer, and how much you can mitigate (more in the next step about this).
In the case of an insurance provider, deciding how much and what type of risks you can handle will define who your clients are, what you are willing to cover with insurance, and what you will charge for premiums.
Step 3: Evaluate the Risk or Risk Assessment
Evaluate the results of your risk assessment to establish your risk posture. Ensure it is within reasonable limits and take appropriate actions to correct flaws and close gaps.
Do the same for your clients. Look clearly at the risks your client brings, and decide which risks are acceptable according to your risk appetite. Acceptable risks must then be constantly reviewed and monitored to ensure they are continuously acceptable. What happens if you find unacceptable risks? Your three options to mitigate these “unacceptable risks” are to avoid the risk (which may mean not accepting the client for business), to reduce the risk, or to transfer the risk. Transferring the risk will be within the category of risk that your insurance company accepts and allows under your coverage. Reducing the risk can be done with an efficient automated risk management platform with remediation capabilities, detailed below.
Step 4: Remediate or Mitigate the Risk
Now that you’ve identified your risks, and analyzed and prioritized them, it is time to remediate them. Remediation is the process of fixing the flaws you’ve found, closing the gaps, and addressing the threats. This will involve making certain changes within the company, inviting new policies or behaviors, adding security controls, or installing protections- depending on the risk you are remediating. Remediation is the goal of the whole process and is the action that will reduce the risks.
Remediation is when the risk can be eradicated in full. Mitigation comes into play where the risk cannot be eliminated, so it must be reduced as much as possible, a form of damage control.
Ensure your client portfolio is provided with clear steps to remediate and mitigate their risks. This will empower your customers to actively reduce risk, lowering the likelihood of a claim and benefiting both the customer and yourselves.
The key to efficient remediation is having full visibility: into the results of your risk assessment and that of your clients as well as into the steps needed for remediation. Look for a platform that will display remediation steps, measure progress and calculate your score based on real time so you can easily comprehend your security posture at all times.
Step 5: Monitor and Review the Risk
Continuously monitoring your risk posture will ensure that you remain safe from the risks you have identified and remediated. This stands for your own company and even more so for your clients, where you cannot control the operations or environment, yet are responsible for insure it.
Monitoring your client’s risk posture continuously will enable you and your clients to ensure the required standard of security is in place and relevant to operations, and ensure you are still willing to offer your client coverage on your terms. Monitoring your portfolio’s risk will reduce the cost of and preempt any difficulty in the investigation into the state of their security in the event of a claim.
Reviewing your risk assessments will allow you to evaluate if the level of risk you are covering is producing the result you want. Are you covering too much? Could you provide increased coverage safely? Are the security controls you require from clients providing a sufficient level of protection in practice?
Step 6: Reporting
Providing cyber insurance coverage involves an understanding of the field, the technical controls and risks involved, the industry-specific dangers, and much more specialist information. Using a risk and compliance management platform with pre-programmed industry-specific and general questionnaires eliminates the need for specialized knowledge of the field as everything is covered via these industry standards.
A modern risk management platform for insurance companies can also provide an automated reporting function that takes the technical risk assessment outcomes and translates them into financial and business terms so they can be evaluated and understood easily and used for business decision-making or by board-level or executive management. These reports will make it simple to evaluate each customer and decide on premiums, coverage, and risk tolerance levels for each or across the board.
Every insurance company faces unique sets of risks and challenges, and managing them effectively requires careful planning and consideration. Hopefully, this article provides you insight into risk management so you can protect your insurance company from unforeseen incidents.
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