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What is RiskOps for Insurance?
Risk Operations (RiskOps) is not a new concept - in industries like finance and cybersecurity, it’s a well-established framework for modern risk management. Until recently, however, RiskOps was relatively unknown in insurance. That’s changing fast, as more and more insurance organizations see how the RiskOps framework can benefit their underwriting.
In this blog, we’ll go over what RiskOps means for insurance companies, and why there’s never been a better time to adopt it.
Definition of RiskOps for Insurance
Risk operations (RiskOps) is a set of practices, tools, and processes that help insurers achieve strategic portfolio objectives by providing underwriters with the context needed to make better decisions on each individual risk.
Instead of looking at submissions as separate, unrelated transactions, RiskOps considers how each of those transactions impacts the strategic portfolio goals. This helps underwriters and their teams understand how individual underwriting actions ladder up to larger portfolio outcomes, and what they can do to achieve their objectives.
Traditionally, most underwriting organizations have had a hard time consistently putting their strategies into action. From an overwhelming volume of submissions to inaccessible guidance to a lack of visibility into the ongoing status of the portfolio, underwriters have faced significant barriers to executing on their organizations’ plans. The RiskOps framework addresses these issues to enable a more effective, efficient underwriting process.
Visibility for the Whole Portfolio
For most insurers, visibility into the portfolio is a challenge. Traditionally, underwriting performance data has only been available a month or more after the fact. By the time underwriting leaders can see how their portfolio is trending towards goals, the information is already out of date. This obviously makes it difficult to track their teams’ progress, and can leave underwriting organizations vulnerable to problems like accidental risk accumulation.
RiskOps leverages AI to deliver real-time visibility in the portfolio, tracking information changes and updates more effectively than humans can manage. With RiskOps, underwriting leaders can see exactly what’s happening in their portfolio at any given time, including progress towards goals, potential trouble spots, and how underwriters’ individual decisions are contributing to the whole.
Better Context for Better Decisions
For underwriters themselves, the real-time visibility into the portfolio adds important context to evaluating risks. When an underwriter is considering a submission, RiskOps surfaces the current state of the portfolio and how the specific submission would impact it, letting the underwriter take that information into account when they make their decision.
For example, a submission may come through which meets the appetite guidelines issued by underwriting leadership. Traditionally, an underwriter would have no way of knowing if that submission was still in appetite, or if the team was already approaching (or past!) their limits for that type of risk. RiskOps supplies this current appetite information, as well as surfacing any relevant guidelines and third party data needed to evaluate the risk. Underwriters are able to make better decisions with more complete information, without needing to waste valuable time searching for it.
Focusing on the Right Deals
Finally, RiskOps surfaces information to help underwriters focus on the right things to begin with. By looking at the portfolio as a whole, rather than individual submissions in a vacuum, RiskOps can offer meaningful decision support from triage to quote, that actually drives towards the goals of the organization.
For underwriters, this translates into focusing on the right business from the very beginning. Once again, AI can accomplish something no human could do: reviewing every single submission that comes in, and flagging the most promising ones for underwriters’ immediate attention. Underwriters themselves might touch fewer submissions than in a traditional first-in, first-out triage system, but since the submissions they do touch are a better fit, the percentage of quoted and bound business goes up.
Why Does Insurance Need RiskOps?
The landscape of risks is far more volatile today than even a decade ago, battering insurers with increasing (and increasingly expensive) catastrophes. Natural disasters, social and economic inflation, and cyberattacks are all driving high losses, with a dramatic acceleration over the past two decades. Some national insurers have responded by pulling out of the most-affected markets. Other insurers struggle to price in-demand policies for skyrocketing risks like cybercrime, which generates billions in losses annually.
But pulling out of entire regions or industries is not sustainable long-term - particularly as risks like inflation and cyberattacks permeate nearly all markets. At the same time, simply carrying on like nothing has changed is equally nonviable: in Florida, 5 P&C insurance companies liquidated in 2022 alone.
To succeed in today’s world, insurers need to make deeper use of their data to more accurately evaluate risk, adjust guidance as needed to stay on strategy, and above all shift their mindset away from incremental improvements around individual transactions, and towards a holistic portfolio view. The RiskOps framework addresses all of these needs, and the effects are already visible in the market today.
The insurers absorbing unsustainable losses are still trying the same things that worked decades ago. The insurers keeping their combined ratios low have already moved on to the RiskOps approach.
Learn more about the Federato RiskOps platform with a self-guided product tour, or connect with us for a live demo today.
