e-insurance risk management

Hazards like calamities, whether natural or man-made, inevitably happen. Since our comprehension is limited in predicting the exact timing of these events, more and more people have invested in the intangible benefits of "protection." Yet before end-users buy into protection’s concept, insurers play an important role when they are injected into the picture to better assess the human race’s needs, especially in quantifying how far their present hard-earned money can cover unexpected events.

In reality, we can never rid ourselves of risks and feel one hundred percent protected. The best that we could do is minimize risks to feel a bit "safer," and share these perceived risks to a third party that can act as co-manager. While there is no absolute guarantee that insurance can prevent losses, what it does is to spread the risk over a certain pool. Essentially, each person can contribute to a common fund, out of which one may be reimbursed for losses that might be incurred. As a result, each individual within the fund pays for protection against indicated risks, or what is often termed as "premium." Insurance contracts are often deemed "aleatory," as this depends on a contingent event but not a "contract of chance." It is also conditioned on consensual and voluntary parties, subject to pre-defined events that are to be indemnified. Properly identifying events would help avoid potential "frictions," keeping the relationship between an insurer and its clients intact.

To best protect consumers’ interests, industry regulators have called for a higher capitalization requirement, although industry members proposed that the required capitalization hike be proportional to risks that an insurance firm is exposed to. Dubbed "risk-based capitalization," this scheme would make it viable for insurers to adjust to necessary reforms, while keeping industry regulations attuned to specific markets being served. Affordability to end-users is thus considered and coverage can be dispersed to a wider base, than allowing the industry to concentrate only on a select few who could shoulder the added compliance or other risk-premium costs.

Within the non-life insurance category, for example, insurers with greater exposure to investment-tied projects must be balanced with direct investment opportunities within these capital-intensive industries, and help support the administration’s capital expenditure program. Any incremental charges tied to facilitating infrastructure-related undertakings, for example, would not be cumbersome for proponents, allowing them to optimize returns that can be re-channeled to other productive undertakings. Another example is the relatively slower year-on-year demand within the automotive market. Here, required insurance capitalization requirements should be synchronized with policies that would help promote growth than stifle demand.

While cognizant of the need to operate within regulatory guidelines and earn end-users’ trust, several insurers are further challenged in providing value-for-money to end-users’ pockets. Customers’ maximum use of benefits imbedded in their insurance policies is at the core of the insurance brokers’ aim, especially when aligned to those that have ventured within the e-commerce category. Insurance is relationship-intensive, thus minimizing the painstaking clerical routine for clients who need to be assured that they have a partner who could be there when the worse situations arrive. Since efficiently managed services are provided via client profile checks as well as notification procedures for claims, for example, a more captive market can be relied upon where businesses can be multiplied. Technology provides avenues for simplification of tasks among fund managers, as they are kept up-to-date on client profiles and matching cash requirements based on returns.

While customers and insurers are aware of ongoing consolidation within financial players to support increased capitalization, prudent planning, industry dialogue and realistic mapping of time guidelines may be necessary to allow customers to select key partners in risk management. Swiftness in service must not be compromised, especially when an enterprise grows in size.

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JP Enriquez is the operations manager of 2InsureAll.com. For queries, e-mail him at [email protected].