Dr. Helene Prigge and Tim P. Jungblut
Global Reinsurance, London, 06/2001
Shorter product cycles and development times, ongoing globalisation, social change and new legislation are characteristics of our age that, taken together, are generating ever more complex risks.
This is a trend that is also having a direct effect on insurance and reinsurance underwriting. In order to evaluate and assess risks properly, the underwriter must take an increasing number of parameters into account. This is why the support provided by risk management is becoming more important all the time.
Particularly in the emerging markets of Central and Eastern Europe or in China recent developments have been rapid and permeated all areas of society. Over the last 10 years there have been dynamic changes in the insurance landscape of Central and Eastern Europe. The abolition of state monopolies and the introduction of new legislation have paved the way for increasing privatisation of the markets.
This has heightened the need to amass the knowledge required to assess complex risks.
Environmental risks, for instance, pose a special challenge. As companies race forward in search of short-term economic success, environmental protection is often forced to take a back seat.
Quite apart from the new risks that have arisen, there is the problem of existing pollution; this is often a legacy of the planned economy and, at the moment, its full impact cannot be assessed. Hardly any preventive risk management is in place, and there is a tendency to simply insure risks rather than contain them.
This is why it makes sense to have environmental risks analysed by a risk manager or technician. But risk managers aren't always at hand when needed; or perhaps it isn't economically viable to call upon their services.
What is needed is a fast, low-cost alternative method of risk assessment.
This is where risk management tools that unite the core knowledge of experienced risk managers can provide the underwriter with effective support.
It was against this backdrop that AssTech Risk Management Service GmbH, a member of the Bayerische Rück Group domiciled in Munich, began to develop risk management tools (RM tools) for the national and international markets eight years ago.
For AssTech it was, and still is, important to describe risks via a holistic approach and to develop risk assessments that are easy for laypersons to understand. This requires not only seeing beyond one's own nose, but also co-operating in an interdisciplinary team, which is why AssTech employs not just engineers, chemists, biologists, geologists, IT experts and doctors, but also sociologists and lawyers.
For what types of risk is it expedient to use RM tools?
Those that display a high level of complexity owing to
Experience has shown that RM tools can be successfully employed to
Information systems for environmental liability insurance are a key type of RM tool.
The first product in AssTech GmbH's tool series was UIS, a system for recording, analysing and rating environmental risks that is tailored to the German market. The Environmental Impairment Liability Act (UHG), which came into effect in Germany on 1 January 1991, requires more attention to be placed on technical aspects in the capture and rating of environmental risks. The appendices to the Act, for instance, list more than 100 different types of technical facility to which the Act pertains.
Some years later, as the debate on environmental issues intensified in many countries and pertinent national and international laws and regulations were introduced, AssTech developed an analogous system for international use:
ELIAS - Environmental Liability Information and Assessment System
Like UIS, ELIAS was designed with flexibility in mind: it can be used by underwriters, technicians and risk managers alike, on site by field staff or in the back office. ELIAS is primarily aimed at medium-sized industrial enterprises and covers those branches of industry that are of environmental relevance. While ELIAS can also provide useful support for large-scale risks, too, it cannot replace an on-site inspection by a risk manager or technician.
Complex risks with high loss potentials are, by their very nature, difficult to process in a standardised manner. This is why both ELIAS and UIS ask only those questions that are relevant to the type of business being analysed. For instance, when analysing a production plant for car batteries different information is required than for a carpenter's shop or printer's. Depending on the answers given to previous questions, ELIAS selects the next question to be asked. This results in a customised questionnaire for every type of risk. The user gets a rapid and efficient run-down - and thus a comprehensive overview - of all the information of relevance to the risk. In this way, despite the complexity of the subject, it is possible to minimise the processing time for a risk and keep costs at commercially viable levels.
The ELIAS system includes an electronic library and other integrated help functions that provide the user with an array of additional information - e.g. on environmentally relevant or hazardous substances, industrial methods and techniques, relevant legislation, proposals for wordings, etc. - which can prove very useful when preparing meetings with clients or carrying out a risk assessment. What is more, warnings are automatically displayed when aspects aggravating the risk are encountered.
After the user has worked through the questionnaire, the information gathered is automatically used to rate the risk. But it is still also possible to take into account particular wishes of the client (policyholder) regarding the cover. The premiums can be calculated directly on the basis of market- and customer-specific needs.
Thanks to its platform, ELIAS is highly versatile, making it possible to accommodate clients' needs easily. Customised solutions are possible for:
What is more, the system can be adapted relatively quickly to take account of new legislation, market developments or technological breakthroughs.
The latest in our line of environmental tools is EnviroCheck. It consists of excerpts from ELIAS brought together in the form of industry-specific questionnaires designed to capture environmental risks.
Clients of Bayerische Rück and AssTech as well as other interested parties can access the EnviroCheck questionnaires via the Internet. This direct mode of access allows the users to call up quickly, efficiently and cheaply the information they require to underwrite their risks. The questionnaires are in English so that they can be accessed by as large a group of users as possible.
There are currently questionnaires for about 40 different types of business. To facilitate navigation and use, these businesses are allocated to various branches of industry: wood, paper, metal and paints industry, printing shops and energy production. After selecting the appropriate industry (see Figure 1: Selecting a type of business), you can call up the type of business direct.
Figure 1: Selecting a type of business
After entering their name, company and e-mail address, users can download the selected questionnaire in PDF file format.
The questionnaire itself is structured as follows:
The first page is for entering data on the company in question as well as general information; the next explains how to use the questionnaire so as to achieve the best possible result (see Figure 2: How to complete the questionnaire).
Figure 2: How to complete the questionnaire
The following page provides information on the type of business to be analysed and is designed to assist the user in assessing the risk. After that, the questionnaire itself begins (see Figure 3: Information on type of business).
Figure 3: Information on type of business
The questionnaire asks concrete questions and provides a brief number of multiple choice answers from which the user can select one or more options (Figure 4: Question-and-answer blocks).
Figure 4: Question-and-answer blocks
Bei jeder dieser Antwortmöglichkeiten kann "ja", "nein" oder "keine Information vorhanden" eingegeben werden. Der Fragebogen ist sehr übersichtlich gestaltet. Frageblöcke wurden mit optischen Mitteln kenntlich gemacht.
With each multiple choice answer the user can choose between "Yes", "No" or "No info". To facilitate processing, the questionnaire is clearly structured and the question blocks are highlighted.
If the user answers a header question with "No", he/she can skip the following indented questions on that topic. This also helps speed up the analysis.
The EnviroCheck questionnaires were recently awarded second prize in the 9th Form Competition 2000 organised by the Federal Association of the German Printing Trade and Media in Wiesbaden.
The next phase of the EnviroCheck project will see the number of questionnaires increased and the interactive features of the program enhanced.
You can obtain further information on AssTech and its risk management services online at:
www.asstech.com
Dr Helene Prigge is Managing Director of AssTech, Assekuranz und Technik Risk Management Service GmbH
Dr Tim P. Jungblut is Senior Consultant at AssTech, Assekuranz und Technik Risk Management Service GmbH.
AssTech belongs to the Swiss Re Group with domicile in Unterföhring.
AssTech
Assekuranz und Technik
Risk Management Service GmbH
Dieselstraße 11
85774 Unterföhring bei München
Germany