Tom Healy, Business Unit Manager, Knowledge Centre, Marsh Africa, says that knowledge is key to effective risk management.
Today information, while abundant, remains largely dormant ? stored as facts, figures and opinions in ever-new electronic and cyber formats. While theoretically available forever for retrieval, this information is largely useless until correctly spread amongst and used by corporate employees, where it becomes a powerful tool called knowledge.
In short, how the insurance industry uses knowledge has evolved to define performance and delivery, determining competition within the industry.??
Gone are the days where an individual broker can comprehensively manage all the aspects of risk that a large modern business encounters on a daily basis. Instead, only major, professional and global broking corporates specialising in all aspects of risk have the systems, scale and capacity to manage and deliver risk awareness effectively.
In today?s insurance market, highly knowledgeable operatives are key to interpreting risk and structuring insurances ? with active risk management supporting the survival, growth or profit goals of a business.
For example, say a few shareholders start up a brand new venture not yet presented to the insurance market. Without providing much detail about the business, the directors insure the business with an insurer for a premium of R100 000 per annum, with the expectation that their policies will adequately cover all their risks.
If the business in this example had rather spent R30 000 appointing a top brokerage to perform a detailed analysis of the real risks faced by the business, they might have secured an annual premium of R70 000. In short, the R30 000 reallocated could have better equipped the business with a sound knowledge of risks faced and how to manage them.
Beyond these fundamental knowledge advantages, using a top professional broking house introduces critical knowledge streams to appropriate operational personnel within the business, including:
? Enterprise-wide Risk Management practices,
? Insurance policy advice and placing procedures,
? Insurance market advice and insurer selection guidance ? ensuring the business goes to the best insurers for the business type,
? Insurance laws and regulatory guidance assisting with FAIS and CPA regulations and other compliance requirements,
? Claims support and recovery guidance,?
? The regular services of a professional and qualified broker, advising and guiding the business on a frequent basis, as opposed to just an annual renewal visit.?
Delivered through a top professional insurance brokerage and spread throughout a business enterprise, these knowledge streams provide competitive advantage in the management of risk in any modern business.
Yet, given the complexity and sophistication of modern risk exposures, this kind of high-value knowledge is, today, only offered by a handful of large, professional, multi-disciplinary, usually global, broking houses ? combining global and local knowledge with best practices in every risk area.
For instance, large global brokers in South Africa will have separate risk management departments, often made up of several hundred highly trained specialists dealing with every aspect of risk encountered by thousands of clients on a daily basis throughout the continent. The ability to manage and deploy this knowledge effectively throughout a business enterprise, is not within the ambit of your average medium-sized high street broker, less still the one-man broker.
Despite this, it is surprising how often cover is arranged and written without much knowledge or detail of the risks faced by a business.
There are over 140 000 registered intermediaries in South Africa, many of whom use off-the-shelf policies for very different businesses.? Some brokers tend to place risks within the same limited group of underwriters because they cannot access the wider networks of underwriters used by large global brokers.
The result is that, each year, there are literally millions of rand of cover written in South Africa without very detailed knowledge of the underlying risks that these policies are theoretically supposed to cover.
Having observed the industry for over 40 years, I believe better value for money is achieved when businesses take the time and effort to appoint a qualified and professional brokerage business, that can deliver high-value risk and insurance knowledge with tangible benefits.
With their large, sophisticated and globally connected placement and claims management departments, staffed by forensic accounting and investigative claims professionals, major global broker networks own first hand in-house knowledge of, for instance, unrest in Africa, fires in California, oil spills in the Gulf of Mexico, earthquakes in Japan and floods in China ? and every other risk in between.
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