A Comparison of European and Indian Insurance "Risk Function"

The subsequent discussion compares the key areas within the risk management function of insurance companies in Europe and India. These are the existence of skilled resources, issues related to data, whether the risk function is challenging the first line enough, whether the riskbased decision-making is working well......

- Sonjai Kumar, Dr Purnima Rao

Background

This article was inspired by McKinsey's report, "Elevating the risk function in insurance: Building a strategic advantage," published in November 2024. The article discussed the benchmarking survey they conducted during 2023-24. Some of the results discussed in this report are very similar to our results about the Indian risk function in the insurance sector. Our survey was conducted during 2022-23 for PhD research. This is the first such research conducted in the Indian insurance market. My thoughts are in two ways: one is to highlight similarities in issues found, and the second is that despite the earlier enterprise risk management (ERM) development in Europe, the challenges are similar, where ERM in the Indian insurance market is yet to mature.

The subsequent discussion compares the key areas within the risk management function of insurance companies in Europe and India. These are the existence of skilled resources, issues related to data, whether the risk function is challenging the first line enough, whether the risk-based decision-making is working well, how the relationship of the Chief Risk Officer (CRO) with other stakeholders, how CRO is communicating the risk results in key stakeholders, and the existence of CRO's veto power. Since these are the common areas we found covered in this article, for our PhD research, we have covered the entire COSO framework to understand the ERM practices within the Indian insurance industry.

Comparison Skilled Resources

McKinsey's report highlights talent scarcity, both in attracting and retaining talent. The report stated that companies have difficulty finding talent for data and technology roles, cyber risk, and nonlife underwriting.