Risk management in insurance

DOIhttps://doi.org/10.1108/eb024991
Publication Date01 Jan 1999
Pages13-16
AuthorDavid E. Bland
Journal of Financial Regulation and Compliance Volume 7 Number 1
Risk management in insurance
David E. Bland
Received: 25th February, 1998
Public Relations Department, The Chartered Insurance Institute, 20 Aldermanbury,
London EC2V 7HY; tel: 0171 417 4422.
Dr David Bland OBE has been Director
General of The Chartered Insurance
Insti-
tute since 1st January, 1990.
He is a Fellow and Past President of the
Institute of Company Accountants and a
Fellow of the Institute of Personnel and
Development, as well as an FCII and a
Chartered Insurance Practitioner. He is a
Visiting Professor in Insurance at City
Uni-
versity and at Changsha, China and is a
former Dean and Pro-Vice-Chancellor at
Sheffield University. He has written
sev-
eral books, and continues to publish
papers on a wide range of topics
though most are now within the insurance
field. He is a Warden of the Company of
Firefighters and a Court Assistant of the
Worshipful Company of Insurers.
ABSTRACT
This paper outlines the aspects of
risk
manage-
ment that are applicable to insuring and insur-
ance broking operations.
Insurance is a risk-accepting, rather than
risk-averse activity; thus its own risk manage-
ment has to
concentrate
on the proper apprecia-
tion of changing patterns of risk in an
economically developing world of
changing
cli-
mate and on the dangers inherent in the aggre-
gation of risks in globalised businesses.
Simplified 'commodity' insurance products may
be mis-sold by inept or unethical agents or
staff,
with a disastrous effect on profit and/or corpo-
rate reputation.
However large concentrations of capital in
insuring organisations may become, and how-
ever fully global the major broking houses
become, in the end the basic
insurance
principle
of good faith and the recognition of moral
hazard will determine the
success
of well-mana-
ged (and risk managed) insurance business
structures.
CLASSES OF RISK
In the early days of professional risk man-
agement, a risk manager was employed by
a company to reduce its needs to purchase
insurance, to optimise on the expenditure
that it did make on insurance, and to mini-
mise the company's exposure to both
insurable and uninsurable risks. Risks in
this sense can be defined as 'the calculable
probability of occurrences that deleter-
iously affect the economic effectiveness of
the company, whether financial, material
or intangible (ie to reputation or legal
status)'.
Nowadays, both insurance compa-
nies and insurance brokers offer their ser-
vices as business that generate solutions that
tackle the three classes of risk that face
humanity: gerontic risk; catastrophic risk;
and operational risk.
Gerontic risk
A person can now fully map out their own
medical, dietary, behavioural, social and
other status records; can make projections
on the basis of these data (from various
models and databases); can revise those
projections in the light of medical checks
Journal of Financial Regulation
and Compliance, Vol. 7, No. 1,
1999,
pp.
13-16
© Henry Stewart Publications,
1358-1988
Page 13

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