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How Can Insurance Companies Benefit From Risk Management

Ever wondered if insurance companies require risk management? Like on one hand, they are the ones that promise you a theft-free life. From your cars to your homes, your life to your wife, everything can be insured but what about the risk associated with the company themselves? Do they face possibilities of risk themselves and if they, what are the measures taken to combat the same?

Well, that’s what this article is all about.


Challenges faced by the Insurance Companies

To put it this way, an insurance company, no matter how efficient it is, does not cover all the aspects of a business. Even though they can self insure or indulge in the buy-in of coverage from a reinsurer, not every risk is guaranteed covered. Also, a major challenge faced by the company is to abide by their customers’ expectations.

Poor quality customer service is one of the most infectious aspects. A single customer holds the potential to tarnish the image of a company, causing tremendous trouble. Imagine a customer just claimed for an incident. It’s been more than a month and even today, not much has been done by the company to reimburse their claim.

Secondly, the rising threat of cyberattacks is another big challenge for insurance companies. When customers sign up for insurance policies, they share their vital information with them, expecting all of it to be safe and well-protected. A single breach is enough to shatter the trust customers have in the company.

Thirdly, the GDPR compliance is a major issue. Why would a customer invest in an organization, that itself isn’t secured, right?

Owing to all of the above, it is pretty obvious that insurance companies are on the cusp of a major breakthrough. Given the series of cyber incidents, opting for risk management isn’t just an option but a necessity for all insurance companies.

In case, if you are still skeptical about the advantage of risk management in the insurance industry, here we have outlined some of the major ways in which insurance companies benefit from risk management.

Benefits of Risk Management

Improved Risk Assessment

One of the most significant reasons why risk management is a must for insurance companies is its enhanced risk assessment techniques. Risk Management comes with a series of steps with the first one being rigorous risk assessment. When your company opts for the inception of the risk management strategy, you will have a frequent and extensive assessment of the entire system within the organization. The tests performed are done with the core idea of detecting gaps and finding peaks within data.

This information is vital considering the fact that having knowledge about what’s going wrong helps risk management managers to proactively employ measures to deal with them and mitigate the effects of the risk. In fact, risk assessment helps keep the organizational system free from theft and threats.

Ensures Compliance

The inability to comply with the rules and regulations posed by the government with respect to security is one reason why insurance companies fail to grab user attention. When opting for risk management strategies, their infrastructure is then modified to be under intense scrutiny.

Also, all of the companies are expected to be totally aware of changes occurring at the federal and state level that might have a direct or indirect impact on the organization. The risk managers then need to align their business operations in terms of the rules, turning 100% compliant.

Certain organizations mandate risk managers to assess their system and find all possible risks that might occur in the foreseeable future. In case, these affect the ability of the insurer to map the policyholder obligations, the company needs to take certain steps to curb the same.

There are Risk Maturity Models powered by the NAIC, which determines how well the company is managing risks. These models generate report’s highlighting what are the weak areas that are prone to thefts so that the managers could then optimize it for better infrastructure.

Prioritize Risks

In simple terms, risk management is nothing but assessing and identifying areas within the organization that might be vulnerable to hacks. A well-drafted risk management strategy uses standardizes risk assessment programs. These programs are designed to highlight the top potential areas of risk and further sort them based on their relevancy.

This helps risk managers know which of the risks have the most destructive impact on the business and then take certain steps to deal with the same.

For instance, be it insurance or any other company, customer service is of paramount importance. In the absence of risk management methodology, it might so happen that certain customer complaints go unnoticed. This is fatal for the organization as customers can make or break a brand.

When organizations use risk management strategies, the programs detect all possible areas of risk and surface the ones that are most important at the top. Here, customer complaints would lead to the charts. So, the managers can identify them and take measures to deal with the issue at the earliest.

How to Deploy Risk Management Techniques?

Well, there are multiple ways to start implementing risk management methods within the insurance industry. Here is an example flowchart –

  1. To start with, the first thing to do is to perform a risk assessment on a regular basis. Also, this should be an internal program where every member works actively to assure that their system is threat free.
  2. Next, there should a standardized framework to identify threats from both internal and external of the organization. These frameworks should testify how and when can they be attacked or face risk. Similar to the process where insurance companies determine the possibility of a user applying for a policy, they need to find the likelihood of a breach.
  3. Next, there should a standardized framework to identify threats from both internal and external of the organization. These frameworks should testify how and when can they be attacked or face risk. Similar to the process where insurance companies determine the possibility of a user applying for a policy, they need to find the likelihood of a breach.
  4. Scan through the existing IT system and find gaps or loopholes within the same.
  5. Finally, have a risk mitigation plan in hand. So, no matter what the type of risk is or when does it occur, the organization is always ready to face and deal with it.


It is without a doubt evident that risk management tactics are the need of the hour for insurance agencies. In case, you are wondering where to get started, contact Claptek. No, we aren’t any cyber management company, instead, we are a group of skilled chartered accountants who work tirelessly to scan and scrutinize the data within your enterprise to find any leaks.

With us, you will never have to worry about your GDPR compliant needs. Our experts will help you remain compliant with all the government-laden security rules. We also conduct in-depth audits and assessments to notify you of any fishy activity, so that you can be prepared to deal with them and mitigate any possibility of risk.

Remember, your organization isn’t just a way to secure or insure services but it is one that is built on the base of audience trusts. One wrong step and you might lose all that you have earned in the past few years. Hence, the best way to manage risks or mitigate thefts long before they indict your system is by adopting risk management techniques, the faster, the better.

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