While there is considerable evidence that organizations perform better when they adopt voluntary quality standards, insurers continue to ignore these standards when setting terms and conditions for policyholders, according to a new white paper from the Association of Insurance and Risk Managers in Industry and Commerce.
Entitled “Standards: Supporting Risk Management and Adding Business Value,” the white paper focuses on the value that standards and accredited conformity assessment can play in the management of risk.
The white paper states that “standards assure customers and other stakeholders of consistent quality in products, services, processes, systems, and people. They are based on the practical experience of sector professionals, and are a means by which organizations can demonstrate assurance about the quality of their risk management.”
Building on this theme, the paper goes on to discuss how risk management benefits from the rigour of the terminology of international risk management standard ISO 31000 and the associated ISO Guide 73, adding that standards are intended to work together.
“This is why the risk management standard and related management system standards are so important to ensure effective enterprise governance and the operation of organizations,” the paper states.
“Some standards that relate closely to risk management—quality, health and safety, environment, business continuity and information management—are measurable and auditable and can therefore form the basis of certifiable schemes.”
While it isn’t compulsory for organizations to achieve third-party certification, becoming certified communicates best practice to stakeholders and supply chains. And since becoming certified reflects the organization’s attitude and exposure to risks, it may also reduce insurance premiums.
With the insurance sector continually striving to improve its management of risk – standards, product certification, testing, and inspection standards provide insurers reliable evidence of aspects of the quality of the risks that they are asked to underwrite. Combined with the insurers’ own due diligence, compliance with such standards can reduce premiums or increase the capacity that insurers are prepared to offer.
The paper describes accreditation as robust international recognition that is an independent declaration of an organization’s competence. The term covers the validity and suitability of its methods, the appropriateness of its equipment and facilities, and ongoing assurance.
“Accredited certification, inspection, testing or measurement services based on standards to support brokers and underwriters in their management and assessment of risk, as well as giving consumers the assurance that the product or service delivered meets a certain level of quality and satisfies the legal requirement.”
The white paper includes case studies that demonstrate how insurers are using accredited services to evaluate risk and therefore provide discounted premiums or improved terms and conditions.
The white paper builds on a previous study by the Centre for Economics and Business Research, which underlined the economic and practical value of standards. UKAS and the Independent International Organisation for Certification contributed to the white paper on how the wider quality infrastructure—namely accreditation and the conformity assessment community—play a supporting role in the management of risk for the insurance sector. This work forms part of ISO’s engagement strategy to raise awareness of the quality infrastructure tools in the insurance sector, and follows a workshop with leading insurers and the publication of an ISO briefing paper.
Click here to view the white paper in full.