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Risk management service is to assess and quantify the likelihood of financial impact of events occurring in the customer’s world that require settlement by the insurer and the ability to spread the risk of these events. The work of risk management involves application of mathematical and statistical modelling in order to determine the apt premium cover and the value of insurance risk.
Risk management means providing any kind of insurance risk management services by the insurance broker to its clients. These services include services like risk advisory, risk assessment, risk minimization or risk mitigation for the benefit of its clients.
Regulation 27 of the Insurance Regulatory and Development Authority of India (Insurance Brokers) Regulations, 2018 (regulations) provides for different risk management services.
Analysis of risk, Audit and Review of services
An important risk management service includes risk inspection, valuation and reviewing of policy documents, suggesting improvements in relation to the business profile, operational aspects of the client’s business profile, operational aspects of client’s business and client’s claim history. Periodic interactions are done which helps service provider to understand any new development s that are taking place which require insurance coverage. For example whether the sum insured required enhancement or any inclusion of a new entity is required etc.
Service of broking and placement
One of the such services is helping a client in short listing of insurers and comparing the quote received from them. A rigorous exercise of negotiation and evaluation of the most value based coverage, the service provider helps the client in finalising the insurers. It is ensured that the policy has correct terms and conditions and whether requisite support is provided to enable hassle free claims.
Advisory regarding Lender’s insurance
Usually large projects have a major debt component. This forces the lenders to ensure that the project company has taken all the reasonable measures to protect the project’s income stream as well as capital assets. These measures include a comprehensive insurance programme which is not only prudent but economically feasible as well. In such situations, risk management services include reviewing and analysing the risks associated with the project and the borrowers’ insurance programme to determine if it meets the lender’s requirements or not.
Management of risk in today’s time is very difficult especially when the nature of risks have transformed to include global risks such as pandemic, cyber attacks, supply chain disruptions which can affect customers, suppliers and also the economies. But such risks are harder to identify, predict and manage. It is imperative that the risk management services address end-to-end lifecycle from indemnification, assessment, mitigation, loss recovery etc. it also requires helping to build resilience.