How insurers steer loss control systems in the modern era 

By Onome Amuge

Loss control, as defined by experts in the insurance industry, is a risk management technique that seeks to reduce the possibility that a loss will occur and reduce the severity of those that do occur.

In recent years, the insurance risk management industry, buoyed by technology advancements, has undergone far reaching developments in addressing loss control. The evolution of insurance risk management concerning loss control was recently brought to fore by Risk Control Technologies.

The global leader in the provision of risk control and safety software solutions in the insurance industry hosted a webinar with a panel of industry experts with the theme,  “Insurance risk management: Past, present & future”. The panel discussed current key trends of loss control, and what companies are doing to capitalise  and effectively manage their loss control systems.

Karlyn Carnahan, head of North American insurance at leading research and advisory firm Celent, in her opening presentation, highlighted some current key trends in loss control.

Carnahan defined loss control as a proactive risk management technique that aims to reduce the likelihood that a loss will occur and reduce the severity of the losses that do occur.

According to the insurance strategist, new paradigms have been emerging that are set to shape the future of the insurance industry in a significant way.

Carnahan observed that the insurance products themselves are fundamentally changing. She added that insurance companies are now taking a much broader view to the products they provide, offering value-added services before a loss occurs, such as detection devices and wearables in a bid to prevent losses.

She also pointed out that another way in which products are changing, is that they are much more data driven.

“Today we are using data to build expertise. This also means that gathering the data, and ensuring the data is more accurate, is a much more critical function in an insurance company.

“This has also meant there has been a shift in how the insurance customer is rated. Instead of rating them on who they are, companies are now rating them on how they behave. A prime example of this is auto insurance, instead using gender and age metrics, companies have shifted to leveraging driving behaviours,” she noted.

Carnahan also emphasised that product differentiation is gaining more importance by the day in terms of providing a product that is unique to the industry and to the type of risk it refers to.

Another development Carnahan observed is that there is a greater reliance on partnerships in the industries, shifting away from a “build your own” attitude. This use of partners in the world of loss control, she explained, provides a wider variety of services but it also means there are more people to involve and hence collaboration is more important.

According to her, companies are looking to differentiate themselves through making digital transformation a priority and providing better customer experience which is a more sustainable way for companies to differentiate, compared to competing on price.

On his part, David Da Costa, chief executive officer at solutions-oriented smart technology company,  RCT, noted that one key point to be made about loss control is that it is a major opportunity for companies to differentiate themselves and provide a better customer experience.

“Outside of loss control, you are typically only interacting with a customer during a claim, which isn’t always a positive experience. So, loss control is an opportunity to have staff with soft skills that can assist in that manner,” he explained.

Da Costa further noted that with companies who exclusively outsource their loss control, they may get all of the technical capabilities, but if the third party is not representing the brand per se there is a question over whether they are missing out on those soft skills.

Da Costa recalled that loss control used to be associated with a physical survey or inspection. He, however, observed that it has presently become more consultative with a wider range of touch points.

“When I think of loss control today, it is a more robust function. It is not just about physical inspections or visits, it is about how you can prevent as much risk as possible alongside improving customer experience and retention.

“At RCT we like to think of it as a predict and prevent strategy. We want to help customers identify the riskiest accounts and figure out the best way to mitigate that risk. Whether that is through a physical survey, or other touch points,” he added.

According to Da Costa, traditional clients have begun leveraging technology to support loss control systems predominantly due to the process efficiency benefits such as process automation, which to a large extent, reduces manual processes and errors.

The RCT CEO further noted that with technology evolution, companies are now looking to understand the data and targeting the right customers, as well as eliminating manual processes.

Another important trend in the loss control space, according to Da Costa, is that companies are now looking to integrate a more connected loss control system, that is not a separate entity.

Christine Sullivan, senior vice president, global risk solutions at property and casualty insurance company Sompo International, said the role of loss control has grown exponentially over the years.

According to Sullivan, companies have to be able to quantify what the potential losses might be and what that potentially looks like and afterwards, try to develop solutions to control and mitigate those losses.

Sullivan said that for Sompo International, they initially were looking to improve workflows when implementing loss control technology. Now, she said the company has turned its attention to customer service gains.