How digitalisation and data are reshaping risk mitigation

The digitisation of risk engineering will close gaps in risk management and open up new ways to address complex risks, writes Fausto Steidle, head of operations at Zurich Resilience Solutions.

In a fast-changing risk landscape and a challenging insurance market, risk prevention is key. Whether its protecting critical supply chains, avoiding a cyberattack or facilitating risk transfer, companies are hungry for advice on risk prevention measures and how best to implement them.

Risk engineering has long been a valued part of the broader insurance proposition. Through site visits and recommendations, the industry’s risk engineers help corporate customers avoid costly and disruptive losses from major fires, floods and cyber attacks. However, there are gaps in the loss prevention journey.

Customers value insurers’ advice, but risk engineering is a limited resource that is typically focused on the largest and most complex risks, overlooking many other risks or locations. Even where insurers make risk improvement recommendations, the industry has tended to not support customers when it comes to implementation. Risk engineers will advise customers on where they can improve their risks, but not necessarily how to prioritize the risk improvement actions and who would be the appropriate implementation partner.

Completing the circle

For risk managers, turning risk improvement recommendations into action is often not straightforward. Specialist risks may fall outside their areas of expertise, while assessing and procuring the best solution or service partner is a daunting task for the uninitiated.

Many customers are also interested in extending the risk engineering methodology to other locations and exposures, including new areas like cyber, supply chains and sustainability. We see growing demand from customers for risk engineering services across our business, as reflected in the launch of Zurich Resilience Solutions, which brings together risk advisory services with the technology, tools and third-party service providers.

Closing the digitisation gap

Closing the gap in the risk prevention journey, however, is closely tied to the gap in insurance digitisation. The insurance industry’s embrace of technology has seen great strides in the digitisation of underwriting and claims, and risk engineering has also been undergoing a digital transformation.

Zurich, for example, has developed a suite of integrated risk engineering tools to support customers in their risk prevention journey. Using Zurich’s tried and tested risk grading methodology, the Zurich Risk Advisor platform enables companies to carry out their own self-assessments for a range of risks, including fire, employers liability and cyber. The free app helps risk managers devise a plan of prioritised risk improvements, as well as quantify the impact of risk prevention actions and budget spend. It also allows risk managers to get in touch with Zurich Resilience Solutions for implementation support of specific recommendations suggested by the Zurich Risk Advisor app.

The app also has a collaboration tool, that enables customers to connect to a risk engineer, facilitating greater collaboration, faster responses and verification of risk improvement actions. During the pandemic, remote risk engineering technology proved invaluable, enabling risk engineers to continue to service customers. Going forward, complex risks will continue to benefit from physical visits by risk engineers, but remote technology brings risk engineering expertise to customers whenever and wherever they need it, and can help speed up the risk engineering process.

Unlocking data

Risk data is of growing relevance with the increase in connected devices, sensors and industrial control systems, as well as open-source data. With digitisation, risk engineering will be able to make much greater use of data to gain insights, as well as inform loss prevention actions and implementation.

Digitisation of risk engineering is also about creating greater transparency of information, and the integration of risk engineering data and processes with those of underwriting, claims and policy administration. For example, risk engineering information is available through Zurich’s customer portal, My Zurich, while application programming interface tools (APIs) enable risk engineering data to flow between insurer, broker and customer, making data accessible to all parties.

Completing the journey

Technology will also enable insurers to support customers in converting risk improvement recommendations into successful actions. Insurers will increasingly be able to follow up on these recommendations by providing advice on solutions, and potentially offering loss prevention services, either through inhouse capabilities or through trusted third parties. Insurers are already expanding their collaboration with third party risk management and loss prevention providers, and building these into the insurance proposition.

Technology can also unlock the knowledge and experience of the insurance industry. It could reveal which risk management actions are most effective and guide companies as they select the most suitable solution or partner to implement recommendations. Zurich makes around 40,000 risk improvement actions each and every year, all of which need implementing and assessing. Up until now, it has been very difficult to meaningfully assess and quantify the effectiveness of these actions.

Extending insurability

Changes in the risk landscape will no doubt increase demand for risk engineering, in both traditional and non-traditional risks. Risk engineering is increasingly relevant with increased values and complexity of traditional risks, and with the growth of emerging risks, or those that typically would fall outside the industry’s definition of insurable risk.

The insurance industry is only at the start of the digitisation journey, but we are laying the foundations for future developments, where a wider range of risk data will be collected automatically and in real time. Data will open the door to new risk engineering and loss prevention opportunities and services, including those of critical importance, like cyber and climate change.

Originally published on Commercial Risk Online on January 11 2022.