Risk Management & Insurance

Are traditional insurance organizations (insurance agents and brokers and insurance companies) responding well to our clients’ needs, particularly in the area of risk management?  Do our clients want us to be in the insurance business or the risk management business? A recent effort to dramatically reduce hospital errors produced positive results, and a recent report concludes that the trend towards alternative risk mechanisms continues.  Both of these indicate clients are searching for more than a pure insurance approach.

The railroad industry faced challenges from other industries, noted in a post on marketing (see here) which quotes Theodore Levitt, author of Marketing Myopia, from 1960:

The railroads are in trouble today not because that need was filled by others (cars, trucks, airplanes, and even telephones) but because it was not filled by the railroads themselves. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business.

Risk management works, and our clients know this.  The recent effort to reduce medical errors (see here and here - $$$) in hospitals had a significant impact according to its leader.  The effort involved about 3,100 hospitals sharing information and procedures, and they claim the effort saved 122,300 lives in 18 months.  (Maybe a stretch.)

The alternative risk market (formal self insurance, captives, etc) has taken a large chunk of the commercial insurance market over the years, and continues to do so.  This is driven by clients wanting a more flexible and controllable approach to funding risk.  Conning has released a study on the future of the alternative insurance market (see here for limited information).  The study suggests that the trend towards alternative risk mechanisms will continue.  The first wave of alternative risk mechanisms, large SIRs and single parent captives, has reached maturity.  The next round of alternatives will be based on capacity-driven, rather than price driven, mechanisms.

Food for thought.