They may make use of a cloud-based third-party point-of-sale system. Five different nations may supply their materials. They can be using an online store to offer personalized cookies to customers in different states. Additionally, they most likely use a SaaS platform you have never heard of to handle payroll and benefits.
There are additional levels of risk associated with each of these physical and digital links; these exposures are no longer linear but rather web-like. Tangled. Interdependent. Usually undetectable until something breaks.
We are surrounded by a web of danger.
According to the Accenture Pulse of Change Index, since 2019, the rate of disruption has increased by 183%. What was once controllable now seems like a never-ending balancing act. According to almost 90% of insurers in our most recent Risk Survey, complex, interrelated risks are arising more quickly than in the past. These are not merely theoretical issues; sectoral, operational, financial, and compliance risks are actively leaking into one another, creating uncontrollable ripple effects that cannot be contained within silos.
Indeed, according to 84% of insurers, risks that came from entirely different industries are now having an impact on their own business models. Nowadays, one risk hardly ever moves alone—it changes, multiplies, and sometimes mutates into an existential menace.
When Risk Insurance Turns Into Its Own Risk
Let us risk cyberspace. or occurrences involving natural catastrophes (NatCat). Although they are still unsure if the math will hold, insurers are growing more cautious about excessive exposure in these sectors and are reducing coverage or raising premiums. Consider the consequences of a catastrophic outage at one of the main cloud providers. The ripple effect could eclipse even the most destructive hurricane.
Insurance companies play a risky triple role:
They take on risk as underwriters.
They are exposed to industries affected by the same events since they are investors.
They are susceptible to their own operational interruptions because they are businesses.
Consider something as basic as a port fire. A direct property claim might follow. However, there may also be a deluge of indirect losses, such as clients with delayed supply chains, businesses the insurer has invested in, and even internal operational lags brought on by interrupted supplies. Several pressure points, one spark.
Why Risk Management Is Still a Work in Progress for Insurers
Most insurers are playing catch-up even though they are aware of all of this. This is the reason:
The data is not in its proper location. More than 70% of insurers acknowledge that they have not kept up with changes in their risk capabilities. Most risk data still lives in clunky PDFs or is locked behind manual endorsements—impossible to mine at scale. Due in great part to the fact that existing data is not cloud-ready, cloud adoption is still limited.
The availability of insights is restricted. Even when data is available, it’s not usable. Decision-makers are acting blindly, data silos still exist, and technologies are out of date. Merely 17% of insurance executives claim to have effectively addressed silo issues.
There is a talent gap. Modern risk analysis is like attempting to operate a Formula 1 automobile with a horse-drawn cart crew due to a lack of expertise and outdated systems. The largest challenges cited by more than one in five insurers are obsolete technology and a lack of experience.
The Positive Aspects: Up-and-Coming Risk Champions
However, there is good news. In this area, a tiny percentage of insurers—roughly 14.5%—are becoming leaders. They can react to risk signals incredibly quickly and have embraced generative AI to parse vast volumes of data. These businesses are not just identifying dangers, but also responding to them more quickly and accurately than their rivals.
Our Fuel the Future of Insurance with Technology research states that predictive analytics and technological modernization will be the main drivers of profitable growth. What about the actual KPI? the removal of technical debt. Generative AI has the potential to radically transform the risk management function if it can assist insurers in eliminating old inefficiencies.
Culture Continues to Fall Short
But having the right tech and insights is only part of the story. How well-integrated is your risk awareness throughout the company? That is the key question. Most insurers say awareness is growing—but not fast enough. According to three-quarters of those surveyed, risk teams have difficulty encouraging a proactive risk mindset in all departments. Furthermore, just 36% of respondents are genuinely happy with the way risk is included into regular business activities.
Without teaching a business to recognize risk, it is impossible to enable it to manage it. This entails coordinating renewal policies, updating exposure assumptions on a regular basis, and making sure claims experts and front-line underwriters have access to up-to-date, useful information.
Transitioning from Risk Reaction to Risk Resilience
Risk functions are being dragged in a dozen different areas, including executive education, talent development, and technology investment. Even while 78% of insurers say they want to shift their risk teams to focus on innovation and value generation, the majority claim they are just too busy to do so. Almost three-quarters (73%) acknowledge that their teams are not sufficiently integrated with the larger company to enable it.
This separation is a strategic weakness in addition to being an operational hassle.
In the past, rear view mirrors have been used by insurance companies. Forecasting and rate-setting were based on historical occurrences and claims. However, in a world where cyber dangers, global dependencies, and climate volatility have transformed the landscape, traditional models are inapplicable.
To keep up, insurers need to evolve into data-centric, forward-looking decision-makers. Data from telematics, IoT devices, third-party sources, and consumer interactions all have enormous unrealized potential, according to our Transforming Claims and Underwriting with AI research. The infrastructure is lacking—a strong data lake architecture that dismantles departmental silos, quickly ingests data, and supports departmental predictive insights.
Where We Proceed From Here
In order to safeguard itself as well as policyholders, the insurance sector is being urged to rethink its risk function. Insurers may successfully manage the complex web of interconnected risks and even use them to their advantage if they have the appropriate resources, expertise, and data strategy.
But without doing anything? The web gets tighter. The blind areas get bigger. Furthermore, risk is still something we seek out rather than something we take charge of.
