How Real-Time Adaptability Can Help Insurance Companies Mitigate Risks

Insurance companies and products have been through losses across the globe over the past decades. While there is actuarial science, an evolved methodology to ensure the profitability of insurance products, there are several unforeseen factors that come into play leading to losses on insurance products.

Let us evaluate all the factors that force an insurance product to be more adaptable and react quickly to mitigate the risks of financial losses.

Natural Calamities

In case of an earthquake, forest fire, etc. a large number of claims are made in that region. An adaptable system detects such calamities and sends alerts to actuaries to make the recommended changes in the model to mitigate the risks arising.

Governance factors

Changes in government policies, tax regimes, criminal laws, etc. increase the risk factors of various insurance products. When an insurance product reveals risks due to these policy changes, the automated systems evaluate the products at risk for necessary corrections.

War & Terrorism

War and terrorism significantly affect insurance products. War in a region can trigger mass losses both in terms of property losses and human casualties. In such circumstances, insurance products face high risks and require essential adjustments to address such severe circumstances effectively.

Social Factors

Social factors, including mass migration, exodus, and homeless population, significantly influence the probability of an event of risk. Emergency measures taken to address these challenges often pose a risk to insurance products. These events frequently result in losses for multiple insurance products due to the complex situations they create.

Economic Factors

Economic factors such as recession, inflation, etc., play a significant role in disrupting the socio-economic stability of the target market of an insurance product. Amid these situations, the crime rates and other risk factors escalate, amplifying the potential for financial losses and consequently raising the risk of a loss on an insurance product.

These factors contribute to sudden changes in the environmental conditions of the target audience of an insurance service provider.

In the event of any risk arising due to any of the above-given factors, an adaptable system sends an alert and shows the severity of the risk and its forecasted impact on various products. Actuaries can look at various products on the dashboard, evaluate the recommendations of the system, and make changes in the models to accommodate such risks.