Employee retention, data security among top risks for insurance organizations

Computer data security, corporate governance and regulation were among the major risks cited by insurance executives surveyed by Ernst & Young.

Ernst & Young Thursday released a report, titled “Business Pulse: Exploring dual perspectives on the top 10 risks and opportunities in 2013 and beyond,” which was based on a survey of 65 firms.

Respondents were asked whether individual risks and opportunities identified in the report “were important for their organization both now and in two years’ time.” They were asked to rate each risk and opportunity between 1 (not important) and 10 (extremely important).

“Macroeconomic trends” was the top ranked risk now and it ranked second in two years’ time. Regulation ranked second now and was identified as the top risk in two years’ time.

“There are two notable new additions to the top 10 risks this year,” according to the report. “One is the twin challenge of cyber risk and data security, which has moved beyond the aim of simply keeping data secure to encompass new issues such as systems security and data collection.” Cyber-risk and data security ranked sixth now and third in two years’ time.

The other risk that is new to the top 10 this year is acquisition and retention of talent. It ranked seventh now and fifth in two years’ time.

“Outside the C suite, there is a need for the insurance industry to look at retention strategies for skilled and experienced professionals,” according to the report.

“Many may have had their job security tested by the wave of redundancies triggered by the financial crisis. Consequently, they may look outside the organization for jobs at competitors or in alternative industries.”

Meanwhile, “corporate governance failures” ranked fifth now and seventh in two years’ time.

Ernst & Young noted that many of the executives surveyed view the risk of corporate governance failures as “less of a concern than they may have a few years ago.” However, the report added there has been a “rise in shareholder activism and increased emphasis on executive compensation and the role of the board” since the financial crisis.

“The traditional view of the board is primarily as a source of outside advice to senior management in developing and implementing corporate strategy – a view that management has generally endorsed,” Ernst & Young noted in the report.

“However, this is being superseded by a vision of the board as an important check on the aspirations and expectations of senior management – intended to ensure that the shareholders’ interests are paramount.”

Other risks that made the top ten included the Eurozone debt crisis, reputational risk, impact of tax and accounting changes, operational risk and availability and cost of capital.

The top three opportunities were: “Improved distribution and product development” (which ranked first now and third in two years’ time); “Promoting fair outcomes for customers” (which ranked second both now and in two years’ time; and “Shifting sales to accommodate changing customer needs,” which ranked third now and was the top opportunity identified in two years’ time.