Insurance and Risk Management

Maybe I hit a nerve recently. Over on Specialty Insurace Blog, Bob Sargent follows up on my post about Insurance and Prevention with this:

We use the term risk management rather than prevention, and find that insurers insist on risk management.  In professional liability this is the core of the underwriting process.  For example, professional liability underwriters expect their professional insureds to have robust internal procedures and systems, and underwriters of D&O expect insureds to follow the internal control directives embodied in Sarbanes-Oxley.

Sargent provides a concrete example of an employment practices liability application, and sums up the general situation:

Rather than insurance being a replacement for risk management, our experience is that insurance drives risk management.

Also, AIG has told me that their Internet business continuity insurance requires an assessment to see if the customer has traditional Internet security before selling them the insurance. Sargent's summation applies in every case of Internet-related insurance I've seen so far.

-jsq

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