Global Risk Solutions

Can we review risk and insurance responses across the risk landscape, as they are encountered by organisations operating in specific business sectors, rather than by insurers' lines or classes of business?

Insurance is often viewed as a low priority on the corporate agenda, as an insurance response is considered secondary to being able to continue to provide service, wherein lies the ultimate brand value. Unfortunately many insurance products do not provide sufficient cover for the critical exposures identified on the corporate risk matrix.

Many companies buy insurance correctly but quite grudgingly, often purely to comply with good governance, and would certainly not favour a big increase in insurance expenditure.

Advances in the way Communication, Technology and Media (CTM) companies do business have, in many areas, outstripped development in insurance products. Hence the use of insurance is often seen as a non-strategic purchase and its use is likely to diminish if products are not developed to meet new needs.

Rather than start again with a blank sheet of paper, is it not possible to redesign and amend current insurance products?  In particular is there a real opportunity to develop Material Damage/Business Interruption (MD/BI) wordings in particular the definition of assets, into Non-Damage/Business Interruption (ND/BI)? Although if this is to be achieved then the insurers' traditional surveyors' model has to be updated and made fit for the new exposures being covered.

Supplier risks are fundamental to the model and the development of suitable suppliers' extensions is critical. The insurance market must make better efforts to assess and provide coverage for this element.

Insurers are conservative in their approach and can sometimes lack real industry expertise. However, the unique advantage that Insurers have is holding large quantities of data on legal cases and claims settlements. They are perhaps missing the opportunity to provide clients with additional services such as outsourced due diligence capability, providing valuable legal and claims data and offering expert claims services.

Systems resilience is a massive issue and cyber insurance products need to be properly developed, providing much higher limits and shorter waiting periods if they are to be attractive.

It is essential that the insurance market listens to the needs articulated by the buyers. This is a topic that will be addressed in our upcoming Emerging Risks event where we'll be joined by a number of insurers to discuss and debate these issues further. To find out more about this event, please visit:

See: http://www.jltgroup.com/risk-and-insurance/events/emerging-risks-event-october-2011

We considered whether the insurance market has kept up to date with the technological changes in the business model of the CTM sectors and whether they have updated or developed the products needed to address the evolving risks and exposures.

If not, are we able to identify and articulate areas of concern not currently addressed by existing insurance policies or extensions to them?

Ponder this: Has the insurance market kept up to date with technological changes in the business model of the Communication, Technology and Media (CTM) sectors (or, for that matter, any sector) and have they updated or developed the products needed to address the evolving risks and exposures? 

Identifying the risks

Traditional risks in their original form are understood and under control. However, what constitutes these risks is evolving and often traditional risks have turned into virtual risks. Ownership of assets is fluid while JVs and shared platforms add to the complex ownership structure of assets.

Outsourcing is a major potential risk issue. Control of assets and data is effectively lost to third parties leading to a more vulnerable supply chain.  When everything is outsourced, the revenue remains in the 'brand', usually a service, but the brand becomes harder to protect.  Despite the potential exposures, insurance and risk management functions often have little or no input in the outsourcing decision making process, so risk issues, including the terms and conditions of the contract, can be subordinate to commercial drivers.  Insurers rarely require full disclosure of these arrangements (as much is not actually covered by their policies) and sometimes seem to struggle to offer the relevant support or advice to their clients in respect of outsourcing risks. 

Compliance issues are increasingly burdensome: time, resource and the financial and reputational potential consequences of non-compliance.  Rather than understanding the risk, many companies adopt a one dimensional 'tick box' mentality to demonstrate compliance, which may not actually deal with underlying risk. 

Theft and infringement of Intellectual Property is a clear issue but the risks are not as high up the risk agenda as might be expected. However, e-Crime and Fraud is a major issue for many companies but hard to quantify due to its very nature. The need to hold customer information cannot be avoided and so this is an area where risks are generating a lot of interest and debate.

Social Networking concerns are a new risk phenomenon, both hard to control and to combat. Using this medium a small number of individuals can cause adverse media and brand damage disproportion to their actual representation. A reputation that took years to build, can be damaged by one guy with a video camera and a posting on YouTube. Conversely, even if brands find some credible way to communicate with consumers on a social media site, they will be trusted the least.

Data protection and privacy remains an area of concern.

Resilience of systems/hardware is a prime concern to many companies, downtime losing business and impacting income.  The whole premise of companies such as Google is that if they are sufficiently fast and reliable then people will choose them and advertising revenue will flow automatically.

These are some of the topics that we will be discussing at our next Emerging Risks event, where we will be joined by a number of insurers to debate these issues further with us. Further details of this event can be found here:

Emerging Risks Event - Are Insurers Responding to Meet New Coverage Needs?

I want, I want, I want....

Buyers now demand fully integrated systems and mobile devices, 100% uptime and real time delivery of personalised and relevant information.  The pace of change is exhilarating but it brings a host of new risks and blurs the old boundaries and definitions we have all been familiar with.
It seems that communications, technology and media companies are becoming a single business model and may be facing something of an identity crisis. 

In the 'old days' media was where you held your information, communication was how you sent it and technology was the tool you used to send it. Businesses and consumers bought products and services from a number of diverse suppliers. We had to lug around a heavy laptop, a PDA and a mobile phone if we wanted to keep up with what was happening.

Fast forward to today and both consumers and commercial businesses are only satisfied with products and services that deliver real time information, integrate seamlessly across applications and provide mobile working with devices the size of a playing card. Products and services must be delivered immediately, securely and provide 24/7 system uptime. 

As well as the technical challenges of meeting such demanding requirements it is now critical for the industry to capture detailed information about customer preferences, usage patterns and geographical locations in order to deliver tailored services.  The industry has therefore become responsible for a level of customer information not previously gathered or recorded. Which only goes to show that the old adage 'less is more' still holds true. Whilst the buyer enjoys getting products and services in one small integrated package the industry has to identify and manage increasingly complex risks. This was one of the findings of research we have recently undertaken, which also considered how the insurance market was responding to the changing needs of the industry.  The findings of our research can be found in our White Paper - Identity Crisis in the Air: Emerging Risk Challenges in the Communications, Technology and Media Sectors.

We are really interested to hear your views on this subject so please share them by posting a response to this blog below or e-mail me here.

Related Items:

JLT White Paper - Identity Crisis in the Air: Emerging Risk Challenges in the Communications, Technology and Media Sectors

JLT Event - Emerging Risks Seminar for the Communications, Technology and Media Sectors