This article was produced in partnership with The Davies Group.

Lisa Carter (pictured), associate vice president of Canadian operations at Davies, AFIRM, sat down with Nicole Panteloukos of the insurance business to discuss critical aspects of proactive risk management, covering topics such as identifying loss exposures, leveraging technology for data analytics, and the role of inspections In risk mitigation, recurring loss trends, and the importance of standard loss control measures.

Insurance Business: What is insurance-related loss control?

Carter: Loss control is a technique we use to evaluate and reduce exposure losses on property, such as buildings or residences. The approach to risk control must be aligned with the exposure to loss, which is why it is formally referred to as risk management.

Determine loss exposures

IB: How are loss exposures determined?

Carter: This is a great question, and there is no simple one-size-fits-all answer. Loss exposures are analyzed by frequency and severity. Over the past several years, much focus has been placed on catastrophic losses, or CAT losses, due to increases in wildfires, hurricanes, and floods across North America. It almost seems like every time you turn on the news, some weather event is wreaking havoc on the property.

When CAT losses occur, the focus usually shifts to minimizing the loss. Insurers may take different approaches to mitigate their exposure to VAT losses. For example, we may recommend that companies with large exposures split their activities across multiple locations to avoid an overall loss from a single event. At Davis, we train our consultants to identify risks and exposures that can be reduced or eliminated by implementing risk management controls. Sometimes, it’s as simple as changing the process or improving housekeeping to reduce the frequency of loss.

Enhancing underwriting decisions

IB: How does loss control help companies make better underwriting decisions?

Carter: In our business, an experienced loss control consultant acts as the eyes and ears of the insurance company. They visit properties and provide insurance companies with insights into building structures, conditions, maintenance, safety practices, security systems, and fire suppression equipment. This helps identify risks that the underwriter may not be aware of through the insurance application alone.

International Baccalaureate: How do insurance companies leverage technology and data analytics to proactively identify and assess risks?

Surter: Technology has revolutionized our ability to extract data and apply analytics to predict future frequency and severity of loss. The ability to transfer information via API connections is critical to business growth, allowing data to be transferred quickly and at scale. However, new markets such as cyber insurance and ride-sharing programs pose challenges due to insufficient data for analysis. The market is constantly changing, and it is important to stay on top of these changes.

Impact of catastrophic events

IB: What types of properties or businesses should a company examine to reduce risk?

Carter: Another great question. In an ideal world, insurance companies would inspect all properties they underwrite, whether for property or liability insurance. In fact, insurance companies classify and triage risks based on factors such as occupancy, complexity, size, classification and loss history, and then set standards for what should be screened internally and what should be outsourced due to limited resources.

IB: How have the wildfires, hurricanes and floods of recent years affected underwriting?

Carter: These catastrophic losses have put additional pressure on underwriting departments to follow company guidelines and capacity levels. The impact on insurance and reinsurance companies will be significant, necessitating careful management of the increased risks.

Educate believers and loss trends

IB: How can risk management companies or departments make recommendations to educate insureds?

Carter: Risk management companies identify areas for improvement in survey documents submitted to insurance companies. They educate believers by discussing these improvements to the site, and explaining the reasons behind the recommendations. For example, explaining why automatic extinguishing systems need annual inspections ensures that underwriters understand the necessity of proper operation in the event of a fire.

IB: What kinds of trends do you see with recurring losses?

Carter: Over my 20 years in the loss control industry, I’ve seen common problems like missing handrails, restricted access to electrical panels, uneven walkways, and uninspected fire systems. Although the nature of losses has not changed much, it is crucial to educate insureds about mitigating these risks. Some companies offer special discounts on installing protective measures such as backflow valves or monitored alarm systems.

IB: What standard loss control measures are most important?

Carter: While some risk factors, such as location in a high-crime area or remote fire protection, cannot be changed, installing alarm systems and maintaining fire extinguishers can mitigate controllable exposures. Insurance companies should never neglect loss control, as all risks have exposures. At Davies, we provide comprehensive risk management and coverage services, from full accounting and engineering consulting for complex risks to tools such as our self-assessment application for risks with smaller premiums.