It is hard to believe, even for insurance industry professionals, that first notice of loss (FNL) is the beginning of the P&C insurance claim management process.

But that is too myopic a perspective.

The beginning of the P&C insurance claim management process is the underwriting process that determines acceptance or rejection of a risk (or set of risks).

No, that still isn’t the beginning of the P&C insurance claim management process.

The beginning of the P&C insurance claim management process is the process to create products or enhance existing products.

No, that still isn’t the beginning of the P&C insurance claim management process.

The beginning of the P&C insurance claim management process is the creation of the insurance carrier’s strategy to manage the changing risk landscape.

That seems reasonable to me.

The P&C insurance claims management process is not an island onto itself. It is an integral, and critical, component of an insurance carrier’s contribution to society of managing or otherwise mitigating risk (through the use of legal contracts that stipulate the terms, conditions and restrictions defining which risks, or parts of risks, will be paid and which risks, or parts of risks, will not be paid.)

See also: P&C Commercial Lines in 2021

From an insurance business/operational systems viewpoint, there is only limited value in an insurance carrier having a claims management system that is not part and parcel of the other core administrative systems required to keep the insurance carrier operating.

I suggest that if the entire set of core administrative systems is not part of a communications and collaboration system that encompasses the entire portfolio of systems of record, systems of engagement and systems of insight, the carrier is hobbled in any attempts to compete.

This article was first published here.

At a time when consumers and business owners are focused on cost efficiency more than ever, telematics solutions offered by insurance carriers present a prime opportunity for customers to leverage their driving data’s potential to enable discounts and operational savings. 

Nationwide’s latest Agent Authority survey found that 65% of consumers would be willing to allow telematics to capture their data if it provided an insurance premium discount, but an overall lack of knowledge on the solutions and benefits available to them is a major hurdle. On the flip side, middle market business owners demonstrated a high level of awareness of telematics and support for investing in the technology due to its safety and operational impacts but could use more guidance on which solutions fit their needs and how insurance ties in. 

The results emphasize the important role carriers play in offering innovative but easy-to-implement solutions, in tandem with robust sales and marketing resources for distribution partners like agents and brokers, to help drive home the benefits and instill confidence in customers in using telematics.

Lack of telematics knowledge a barrier for consumers

Just over a quarter of consumers (27%) surveyed say they know what telematics is and over half agree lack of knowledge is a key barrier to using the devices. They’re also fairly split on how much they think telematics could save them each month. 

Notably, while 67% of consumers have not discussed telematics with an insurance agent, it’s clear that they’d greatly benefit from an agent’s counsel. Consumers who say they don’t use telematics were likely to also hold key misconceptions about costs with using the devices. A quarter (24%) said they believe there’s an added cost to using telematics, and more than half (57%) believe using a device could make their rates go up. 

In fact, in 2020, drivers enrolled in our usage-based insurance programs are saving an average of more than 20% compared with a traditional policy. By 2025, we project usage-based programs will account for 70% of personal lines new business. 

Through innovative partnerships with companies like Cambridge Mobile Telematics, Nationwide is also delivering new features like monitoring and informing drivers of their distracted driving risks – a major concern of 42% of consumers. 

Telematics can solve business owner challenges

In addition to managing their business, many middle market business owners face added concerns related to the safety of their drivers and fleet vehicles. They also experience 7.5 accidents per year with their fleets, so it’s not surprising their top concerns include distracted driving among employees (83%), rising cost of insurance for fleet vehicles (82%), safety of drivers and accidents with business vehicles (81%) and knowing the location of their vehicles (76%). 

Interestingly, business owners may overestimate difficulties of implementing telematics. Many cited the costs of investing in telematics (35%) and the time it would take to install the devices (21%) as top barriers for using the solutions. The majority of respondents don’t see costs as an issue, however, with 52% of business owners saying they’d pay $30 or more a month per vehicle to ensure safer driving and 87% saying the benefits outweigh the financial costs. 

See also: The Evolution of Telematics Programs

Telematics can address many of fleet owners’ concerns, and the opportunity is ripe for carriers and agents to change conversations with customers about telematics from an "add-on" perk to what it really has become – an essential tool for managing a business. With nine-in-10 business owners agreeing telematics improves driver safety and improves operations, providing clear information can give them a full view of telematics’ advantages for their operation. 

Nationwide’s Vantage 360 Fleet program is available at no cost to small commercial auto customers and delivers valuable business insights based on a number of driving factors, including speed limits, hard braking and acceleration, phone distraction and location and trip history. The technology is simple and takes just a few minutes to install. Vantage 360 Premium Partner Program brings comprehensive fleet management and GPS tracking to middle market business customers.  

Consumers, businesses agree telematics benefits outweigh concerns

The survey found many consumers (25%) and business owners (37%) who don’t use telematics view data privacy as a barrier but agree that the advantages overshadow those concerns when they’re receiving some sort of discount. 

The results reiterate the need for today’s telematics programs to make it very clear to customers how data is being collected and used, and the benefits customers can gain. The driving data collected by Nationwide is used for insurance purposes only and never sold to any third-party entities. 

Carriers have an opportunity to step up in addressing these challenges with partners and customers, supplying expertise and resources to better educate drivers on how telematics data is tracked and used and arm partners with resources to help dispel common misconceptions customers may have about telematics. 

See also: Driving Into the Future of Telematics

About the study: 

Initiated in 2020, Nationwide’s Agent Authority research seeks to understand what business owners and consumers value when buying or renewing insurance policies, explore the different challenges each audience faces around insurance, gauge perceptions of the economy and how each audience is managing uncertainty and find out the actions business owners and consumers have taken as a result of COVID-19 and the conversations they’re having with agents. Previous Agent Authority research reports include: Agent-customer relationship; Small business owner needs and challenges; Middle market business owner needs and challenges; Agents’ top concerns through the pandemic; Consumer and business owner cyber preparedness.

Just as personal lines have become commoditized and moved to a world of digital distribution, the online sales of small business and workers’ compensation insurance is fast increasing. There has been an explosion in online offerings — from online agents, to managing general agents (MGAs) to insurers. Because we were curious about whether direct-to-consumer would increase, we conducted a survey of small business insurance buyers.

We surveyed 190 small business owners about their practices, attitudes and preferences when it comes to purchasing insurance.

The rich data set from this research can guide insurers as they think through how to approach the acceleration of digital direct for small commercial. The key lessons drawn from the data are:

• No respondents currently purchase online. This was not by design; it was simply that, in the random solicitation, no respondents happen to buy direct. The direct-to-consumer market is still relatively nascent, and that was reflected in the response rate.
• Eighty-one percent use an independent agency that represents multiple insurers.
• More than half of small businesses are delighted with the process of insurance buying but wish that there were more comparison options available, that the coverage was less confusing and that the process was simpler and faster.
• Half of small businesses are not likely to buy commercial insurance online, with the biggest barriers being the lack of familiarity with insurance and the desire for an agent. But 33% say they would be likely to make their next purchase of commercial insurance online.
• Those who want an agent are looking for a personal relationship. They want advice on what coverages to purchase, someone who can answer their questions and someone who will intervene with the insurer, if needed.
• No surprise: Low price is the most important factor in the insurance buying process. By contrast, the least important factors — which include fast claims payment and fair claims payment — likely aren't priorities because small customers generally do not have many claims and do not expect to. Without other sources of value, price becomes the dominant feature.
• When presented with two value propositions, Concept One with a lower price and no agent and Concept Two with a stated higher price that includes an agent, we found that 61% chose the more expensive, agent-assisted option. However, one-third of small businesses preferred an online buying experience at a lower price even though none of them use that option today.
• The question for insurers is how they want to address this growing desire for purchasing commercial online. It is a potentially $20 billion market, by our calculation. Insurers can look at going after the online buyer — through a digital agency, by involving the agent or by selling direct themselves. Or they can focus their investments by supporting independent agents who want to keep buyers satisfied with the traditional process and avoid digital disintermediation.
• Regardless of the option chosen, we have identified a variety of strategic questions insurers should answer about the role of the agent and priorities to address in the online market. Depending on the approach, insurers may need to invest not only in new technologies but also in new internal processes to provide services for online buyers or to support agents in retaining those customers.

You can find the full report here.

As we close out a year that brought "Blursday" into the lexicon and that feels like it's been going on for decades, I'll actually stick with the prediction I made at the start of the year: that innovation is poised to accelerate greatly in the insurance industry.

As I wrote in Six Things on Jan. 7, I thought the industry had been focusing on innovation for long enough that it had begun to see what worked and what didn't and "will begin to get better at… getting better." I had no idea, of course, that a global pandemic would compress five years or so of digitization plans into one. But I don't think this year's phenomenal progress marks the end of a round of innovation. Rather, I think we're at the beginning. The structural pieces that were in place at the start of the year, because of our collective experience, are still there, and this year's progress creates lots of opportunities as we come out the other side of the crisis that has gripped us all.

We certainly have hard days still ahead of us. Vaccines won't inoculate enough people until perhaps May or June to let life even begin to return to normal, and an awful lot of people will die between now and then. Although the economy could be poised to snap back, many economists warn that the stimulus plan just passed by the U.S. Congress will soon need to be reinforced to sustain small businesses (and their many employees) until next summer. In normal circumstances, Washington, DC, could be expected to respond to the nation's needs, but the capital seems to be getting more dysfunctional these days, not less.

Still, needles are going into arms with COVID vaccines a month or two sooner than I had thought possible and with far higher effectiveness. Lots of good things can happen once the virus is vanquished.

I may be a tad biased as I write this -- I somehow always feel lighter when we pass the winter solstice and I know the days are getting longer, even if I won't feel the difference for a good while -- but I'm confident that insurers will be creative once employees start returning to offices, perhaps in new physical and temporal arrangements, and as customers' lives and businesses start to return to normal.

Customers can continue to be steered to online resources for much of the drudgery, such as supplying basic information, while agents will be able to provide more of the high-touch counseling that they're trained for and enjoy. Likewise, now that clients have become more accustomed to digital connections, companies will be able to expand on what they've been doing with automated and semi-automated customer service systems, such as chatbots that rely on artificial intelligence. Such systems not only lower costs but eliminate often-boring work while providing better service -- what customer wants to call in and wait on hold, listening to bad music or sales pitches, when she can just text the insurer and get an immediate response about the status of a payment?

With customers now used to avoiding personal contact when processing claims, insurers have license to continue developing the processes for no-touch or low-touch claims, especially in auto insurance but increasingly in homeowners insurance, too. Such processes, like AI-based communications, cut costs while speeding processing and making customers happier. What's not to like? And what now stands in the way?

Work processes can go to the next level, too. Much of the hard work of digitization has been done over the past several months. It's not as though people working remotely can share paper any more. You don't just casually walk a file upstairs to the coworker who is the next stop in the process, not with that coworker somewhere across town. So just about everything has at least been scanned and exists in digital form. Companies can now build on that digitization to optimize a host of processes. No more phone tag required, or even emailing in most cases. In optimized processes, documentation can take care of itself, making queries of data bases or of people when information is needed and then automatically moving on to the next stage of the process. AI can help manage the workload, using all this newly available digital information to prioritize where adjusters or underwriters should be allocating their attention.

We're still months away from relief from the COVID scourge, but at least we can all start planning, with confidence, for what comes next. And I'm betting that 2021 will see at least as much innovation as 2020 did.

In the meantime, I wish all of you a joyous -- and safe -- holiday season.

Cheers,

Paul

P.S. We'll send a year-end wrap-up of the most-read articles of 2020 next week. Six Things will return in early January.

P.P.S. Here are the six articles I'd like to highlight from the past week:

Record Insurtech Fundraising in Q3

Relatively well-known but not particularly well-established insurtechs across the board could be about to face their toughest moment to date.

No More Apples-to-Apples Comparisons

Yes, insurance is complex, but such comparisons oversimplify insurance, make it a commodity and serve neither the client nor the agency.

Long-Overdue Change in Commercial Lines

Commercial insurers need to leap forward with a big vision for the future of underwriting, then reverse-engineer a holistic strategy to deliver on it.

Diversity and Respect: Best Insurance Policy

"Insurers must not only diversify their agent base but create and market plans that reward those living in areas they once punished.”

5 Risk Management Mistakes to Avoid

Because of the dynamic nature of markets, risk management programs need to be regularly updated or they, themselves, become at risk.

5 Things to Keep in Mind for Benefits in ’21

Insurance providers looking for a reset that strengthens relationships with customers and HR departments have a real opportunity here.

The sins of fathers, including the Founding Fathers, visit their iniquities upon the sons of multiple generations. The sins of the past endure throughout industries large and small, including the insurance industry. The sins exempt no one, while they are a chance for everyone to repair the breach: to learn from the past and earn the trust of African-Americans.

The history of racial discrimination is too long to summarize in a column and too indescribable, except to say healing starts when hearing begins; when insurers take the time to listen to African-Americans; when listening translates into action — by and for African-Americans — so communication can flourish and insurers can succeed.

That insurers have a duty to listen, that African-Americans also have a right to a hearing, that the two intersect is reason to proceed with the hard work of reconciliation. Hard though it may be, and difficult though it will be to hear of hardships borne by innocents, insurers cannot overcome the sins of the past unless they understand how innocents continue to bear the burdens of other people’s sins.

According to Dennis Ross of StoryConnex.com:

“Very little is monolithic in the African-American community, with one exception. The memories of abuse by insurance agents who barged into the homes of elderly grandmothers to sell policies nearly by force. Today, while homes receive a knock, ZIP codes signal higher interest rates and premiums. Insurers must not only diversify their agent base but create and market plans that reward those living in areas they once punished.” 

Ross speaks of what he knows, not because he opposes insurers, but because he supports those insurers with a commitment to diversity and respect. He invites the insurance industry to lead by example, so other industries may act without delay.

Ross speaks of the need to speak truth not only to power but through the empowerment of African-Americans. He also speaks to a need — an inchoate sense among the decent and just — to do better; to expect better; to receive (and reciprocate) acts of betterment.

Insurers should follow Ross’s advice, so the industry may communicate with greater respect toward African-Americans. The diversity of communication, from marketing to advertising to recruiting to hiring, can change a relationship for the better.

See also: State of Diversity, Inclusion in Insurance

For insurers and African-Americans to come together is a chance to right the wrongs of the past. Together, the two can work to undo attempts to erase the past. Together, the two can bring some modicum of justice to the past. Together, the two can improve the present and work to make the future better than the present.

Insurers must lead with acts, not intentions.

Insurers must show that what is necessary is also doable.

Insurers must pursue excellence, so unity may thrive where diversity lives; so the lives of African-Americans may advance in harmony with liberty and justice; so all Americans may live in freedom.

Honoring these goals will bring honor to insurers.

I don't know about you, but if I never hear another client, or prospective client, say they “just want an apples-to-apples comparison,” it will be too soon! 

As insurance agents, we don’t just hate that expression, we also know it's a terrible idea for our clients. They ask for the comparison simply because insurance is complex, and they want to simplify information so they can make a decision and get on with their business. Unfortunately, many in the agent community have cooperated with this poor risk management strategy, which serves neither the client nor the agency, whether for personal or commercial lines. It reduces insurance and risk transfer to a commodity, which it is not and never will be, and results in inadequate or inappropriate coverage that rears its ugly head when a claim arises. 

In the future, agents who cooperate with apples-to-apples quoting will struggle. To understand why, we need only look at how technology is changing the rules of doing business.

Technology-Driven Winners

Technology, driven largely by artificial intelligence, will make it possible for customers to be better-educated, not only on their risks but on the various risk transfer mechanisms available to them. Smart systems will allow both consumer and commercial insurance purchasers to match their needs with available policy coverage in new and unprecedented ways. Also, relentless pressure for improved bottom lines fostered by competition in the marketplace will put an ever-increasing spotlight on the cost of insurance, forcing businesses to make more informed decisions. All of this means that agents must up their game from a technological perspective to prosper. Fortunately, technology will help in at least two ways. 

First, the improving technical tools available to agents will make it easier for them to select specific policy coverage and language for unique client needs. And improving integration between agency management systems and carrier technology will allow better product selection. Within a few years, this integration will increasingly be done automatically, freeing agents' time. Additionally, as insurance companies continue to learn how to analyze the massive data they are collecting, their pricing methodologies will change. It will become easier for them, and their agency partners, to propose bespoke coverage with tailored pricing for smaller and smaller risks.

Second, a technology that can make a profound difference in moving agents away from commoditized selling is virtual transportation systems. Think Zoom, Microsoft Teams and other widely adopted platforms. Dan Sullivan of the Strategic Coach points out that Zoom is really a transportation technology in that it allows you to transport yourself over endless distance, and enables face-to-face communication with virtually no time or expense. 

But Zoom and similar products are merely the Model T version. Within five years, there will be widespread adoption of augmented reality systems that allow full, 360-degree, three-dimensional, almost physical communication between people at any distance. Agents will be able to market much more broadly than ever before. Agents will be able to fine tune and narrow the niche or target markets in which they work. This will result in increased collaboration among agents, clients and insurance companies as all three seek to fine tune not only coverage, but pricing, as well. 

Agents who adopt these technologies and master them will win. They will write the most profitable business and experience the highest growth rates while leaving other agencies using old technology and outdated mindsets to increasingly fight over the less profitable scraps of business. While this future, which is coming rapidly, is exciting, it is also potentially frightening because busy agents often aren't sure what to do to prepare. 

See also: 2021: The Great Reset in Insurance

Preparing for Change

The first thing to do to be ready for this impending future is simple: Master your agency management system (AMS) so that data is uniform and complete. Most agencies, according to all major AMS companies, use only a fraction of the software capabilities already at their disposal. Worse, agency employees are not consistent in how they enter, preserve and manipulate data. This data is the raw material for the customized coverage and pricing model of the future. But if it is not accurate, complete and consistent, that future will be much harder to achieve. So, agents should start now by learning how to maximize the capability that is already present in their AMS and working on data collection and discipline. 

A second cultural objective to consider is implementing and enforcing consistent, careful annual coverage reviews with both prospects and clients. While this is standard practice in many agencies, it is often overlooked or involves only a cursory review of changes in business exposure or coverage needs. In the future, when clients know more about their own risks and coverage options, this won't be adequate. Agents should begin now to increase their thoroughness. 

Third, understand, use and maximize your current carrier’s technology tools. Hartford Insurance Senior Vice President Matthew Kirk said in a recent podcast that using the tools that carriers already provide is one of the biggest opportunities for both agents and companies to reduce costs, increase speed and deliver appropriate solutions. By having serious conversations with carriers about capabilities, agencies can find another way to prepare for a future in which technology increasingly dominates competitiveness.

Finally, agencies should consider adding tools now from those that already exist. For example, many agencies find that tools like Risk Match allow them to do a better and faster job of matching client risk to carrier appetite. And tools like ModMaster allow agents to help their clients understand what drives their workers’ compensation costs and allows for agent/client conversations to move past price — to collaboration on risk reduction and cost elimination. There are many other similar tools in the market now that may be of use to agencies and their specific situation. The key is to become aware of these tools and add them to your arsenal as soon as possible. 

Taking these steps, which appear deceptively simple, will prepare agencies for a future in which the client/agent conversation shifts from fruit comparisons to one that is more like the tailor and his clients while preparing a bespoke suit.

The third quarter of 2020 saw an unprecedented level of global funding into insurtech businesses, as $2.5 billion was raised by firms across 104 deals. Compared with the prior quarter, funding increased by 63% and deals by 41%.

With everyone working from home, never has the true value of technology been more real and manifest in our industry. Six mega-rounds of $100 million or more accounted for more than two-thirds of total funding, including Bright Health, Ki, Next Insurance, Waterdrop, Hippo and PolicyBazaar. Early-stage deal share grew to 57%, up 15 points to pre-COVID-19 levels, bolstered specifically by property & casualty startups. 

With the huge amount of capital being deployed, and the rate at which it is being deployed, one can quite easily see this quarter as clear validation of investors (industry and non-industry) being prepared to put their money where their mouths are as it relates to the pursuit of digital operations – both for pure investment returns and also for securing digital capabilities. 

What is particularly interesting is that a handful of well-established insurtechs have raised an enormous amount of capital (for example, Bright Health raised a seismic $500 million), and brand new entrants with very limited track records have also been successful in raising capital – 73% of those insurtechs that raised seed capital this quarter were raising any form of capital for the very first time.

There is no shortage of capital to support nascent businesses in the less expensive, earlier rounds and certainly no shortage of capital to support well-established insurtechs that are demonstrating their ability to deliver and that are in need of later-stage capital to support scale-up/growth mode. What we are also seeing, however, are the clearest examples of a (relative) drying up of Series B and C funding. Insurtechs struggled to secure funding in the $20 million to $50 million range, relative to the number of insurtechs looking to raise this amount of money. 

This is a very natural evolution of any burgeoning space that requires investment – the novelty and promise of a new firm meets the reality of commercial success criteria. With so many fantastic insurtechs in our midst, investors can be pickier and hold the knowledge that the winners will be relatively few. Similarly, with so much clear reliance on technology, "less risky" bets are been fiercely sought. 

This particular phenomenon is a version of the barbell strategy (a reluctance to support the intermediate growth of insurtechs with additional investment). While we try not to overinterpret any particular quarter and ascribe a theory as to why something might be happening in the short term, this particular issue is something we have been observing for a while – for want of a better description, we are seeing clear evidence of a widening funding gap.

As a result of these investment evolutions, relatively well-known but not particularly well-established insurtechs across the board could be about to face their toughest moment to date. With global markets preparing for one of the largest forecasted recessions in a generation, most insurers and reinsurers will look either to accelerate, conclude or temporarily slow down their ancillary technological endeavors to focus on ensuring that their core business functions are able to operate in this new digital and remote environment. 

Consequently, (re)insurers' appetite to support well-established insurtechs will be much greater than that of insurtechs that still have things to prove. Traditional investors, the principal drivers of the earliest stages of investment, are pushing extremely hard to make sure that they make the most of the digital revolution that our industry is undergoing at scale. This is creating an investment no man’s land in-between. 

The toughest challenge that less well-established insurtechs will face pertaining to this expected slowdown of investment (and most likely partnership) activity is its duration. While this gap is undoubtedly a natural feature of investing, it is also a symptom of the current COVID-19-induced recession. This impending recession could be with us for a good while. Incumbent technology strategies will be clear: surviving this brave new world. The impact of an economic slowdown, coupled with a surge in remote operations, presents less-established insurtechs with a cruel irony: Never has the true value of technology been more real and manifest in our industry, and yet the lifeblood of budding insurtechs that rely on Series B and Series C rounds to scale is, relatively speaking, drying up.

For very well-established insurtechs, the situation could be quite different. The current climate presents a great opportunity to continue to support the incumbent landscape. Those insurtechs that originate remote risks can arguably write more business as their traditional competitors catch up. We are seeing a big push toward digitalization, and well-known insurtechs can play a big role in this process.

See also: The Next Wave of Insurtech

We also expect to observe in-house technological initiatives ramping up as technology and technologists become increasingly pervasive and synonymous with our industry, as (re)insurers grapple with the challenges of remote environments. As such, we will most likely see a growth of organic projects – this could well squeeze certain insurtechs that have, until now, enjoyed a lack of competition in certain areas. We also anticipate that (re)insurers and end consumers will continue to be increasingly better-informed and better-experienced with regard to judging successful engagements with technology.

Arguably, we are on the brink of a very healthy milestone, and this next step should be celebrated by those insurtechs that have a clear digital strategy and those that have been successful in building solutions for our industry. If nothing else, there will be greater scrutiny on what is out there and how technology can be leveraged most effectively. For both incumbents and established insurtechs alike, we expect that the more successful initiatives will be those that can react quickly to the changing environment and those that show a true appreciation for the direction in which our industry is headed.

Policies for a pandemic should begin with a review of existing policies for small businesses. To ensure COVID-19 does not further weaken the economy, insurers should work to increase the flow of goods and services; to infuse businesses with the lifeblood necessary to recover from a plague; and to remove the pox on houses of civic trust and commercial value.

Insurers have a monetary reason to do these things, which is also moral and just, because insurers cannot write new policies or revise current policies if most policyholders go bankrupt. Who, after all, will buy something with nothing? What business will pay premiums when it cannot meet payroll? How will insurers sell policies to business owners if no one stays in business?

According to Sean Andrade of Andrade Gonzalez LLP:

“Insurers should help to keep businesses open, the country employed and goods and services flowing by honoring their policy obligations. If necessary, the federal government should backstop insurers with guarantees of bailouts for coverage of COVID-19-related losses.”

This suggestion is straightforward — and right — because it speaks to the urgency of the present danger. And, yes, if the federal government must intervene, let it do so for the health of the economy. 

“Even with communicable disease exclusions in policies, this should not be the end of the road for businesses that have faced direct losses as a result of the COVID-19 pandemic and the resultant state, county and local health and safety orders,” Andrade says. 

If advocacy of this sort advances a cause of national importance, if the cause is not only important but also indispensable to finding a cure, if the cure for small businesses is economic relief, then the actions of insurers and the government must be fast and certain.

This plan will save small businesses, yes, but it will rescue insurers, too. It will spare insurers from losses too large to endure and too impossible to ignore. It will make insurers beneficiaries in their own right, while delivering benefits to the industrious among a multitude of industries.

See also: AI and Discrimination in Insurance

By these standards alone, insurers have a plan worthy of adoption. Whether alone or with help from the government, insurers have a plan to weather this pandemic.

Without these standards, insurers face hard times while businesses face the worst hard time: a time of foreclosure by banks or forced closure by cities and towns; a time of despair among workers and depression among citizens without work; a time of fear and a fight for survival throughout the land.

Now is the time to prevent this economic end time, to change time by avoiding it altogether. 

Now is the time for insurers to change their policies — to update their policies — to guarantee the time does not come when there will be no time for rescue or recovery.

Now is the time for insurers to do what is necessary, intelligent and wise. Time will neither slow nor stop for insurers to delay a change in policy, but time will record — and history will note — that insurers did what was right.

While many businesses attempt some form of risk management, few have a flawless approach. And because of the dynamic nature of changing markets and other variables, risk management programs need to be regularly updated or they, themselves, become at risk. Risk calculations based on gravity and likelihood are relatively simple, but simplistic frameworks can’t prepare an organization for surprises down the road.

All organizations should undertake an ERM (enterprise risk management) strategy, projecting into their long-term future where risks might arise, but risk management is complicated, and many organizations are making mistakes. Here are five that can cost your business.

1) Reinventing the Wheel

Many organizations try to create their own risk management framework rather than drawing from the wealth of experience already out there. Yes, your business is uniquely positioned, but a strong risk management framework will take contextual variables into account. By attempting to implement your own risk management framework you’re rejecting experience and expertise developed by professionals, leaving yourself exposed to gaps in your framework that allow risk to creep in.

COSO (Committee of Sponsoring Organizations of the Treadway Commission) and AICPA (American Institute of Certified Public Accounts) have both published industry standard ERM frameworks from which your business can draw. Don’t reinvent the wheel when approaching risk management.

2) Ignoring IT Red Flags

Whilst IT departments are not best placed to lead ERM processes, the insight of your IT department is invaluable when building a risk management strategy, so IT professionals should be viewed as equal partners rather than subordinate teams. This configuration empowers your IT department to contribute valuably to the process of risk management.

“IT is uniquely placed to identify metrics and offer data and analysis that could easily be overlooked from other perspectives,” says Ethan McLaughlin, a risk management expert at State of Writing and Boomessays. “If your organization is conducting a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis, IT departments are an important place to start examining where risks may be present.”

3) Considering Identified Risks “Managed”

While risks need to be identified before they can be managed and mitigated, too many organizations stop after the first step. By listing potential risks to your organization you have done nothing to reduce their likelihood, and if you aren’t putting robust procedures in place then your strategy is nothing more than a sop.

What’s more, a large proportion of ERM is identifying strategic advantages possessed by your organization. Leveraging these advantages is as important as mitigating risks, and by capitalizing strategically on your position you can place yourself ahead of competitors.

See also: How Risk Management Differs From Insurance

4) Letting Expectations Get Out of Control

ERM does not provide a crystal ball, and sometimes situations unfold in genuinely unpredictable ways. For example, in 2020, risk management frameworks are scrambling to adapt to a radically changed economy in the face of a global pandemic. Judging ERM based solely on its accuracy misses the point.

Don’t let expectations get out of hand, as otherwise faith can be lost in risk management as a whole when the unexpected does occur. This will leave your business vulnerable to any number of things in the future.

5) Keeping Risk Management in-House

We all know that blindspots can appear when we’re too close to an issue, but many organizations consider risk management something that can be handled by internal auditors. In fact, an objective approach is essential, and an external eye can identify risk in seemingly innocuous procedures, something that those with a high degree of familiarity might have overlooked.

“Of course, details are essential in risk management so the in-house team should work closely with external auditors,” says Martin Franklin, a writer at Liahelp and OXessays. "This provides checks and balances that reduce risk and protect your organization in the long run.”

Wrapping Up

Risk management is an essential process that protects organizations from foreseeable fluctuations in future events. Key to the success of risk management are an established ERM, and working closely across departments while introducing an external eye. Putting a positive spin on circumstances is human nature -- and provides a platform for success. Risk management enables this perspective to drive success, rather than leaving you open to catastrophic failure.