Sell our profession or lose relevance says DVS’ Mahnke

He also criticised the insurance industry for failing to meet the new risk landscape and delivering on innovation but urged insurance risk managers to play a more active role in helping the industry develop new and relevant solutions. In an interview with CRE Mr Mahnke said it is crucial that insurance risk managers explain to their chief financial officer or other colleagues in the financial department the advantages of using industrial insurance as a vehicle for financing risks. Nowadays insurance risk managers and insurance buyers are under considerable pressure. Many companies are trying to save costs and reduce expenses in the insurance department, or even move the responsibility for insurance to the general purchasing department.hideThis is a mistake, stressed Mr Mahnke. “Insurance is not a commodity like a pencil, it is part of a company’s risk financing system,” he said. “We help to insure risks on the balance sheet and thus make a significant contribution to risk management.” Insurance risk managers need to explain the crucial role they play in analysing the value of insurance for their companies, he continued. “What are the costs of insurance? What are the benefits? And what other possibilities are there apart from traditional insurance products? A company could be carrying important parts of its risk portfolio itself and could use captive structures and/or alternative risk transfer. “It is also important which role the insurance risk managers play in their companies. If we want to play a significant role that goes beyond the mere purchase of insurance, we have to be able to understand which risks are on the balance sheet, where insurance is possible and how to use the instruments at hand sensibly,” added the DVS chairman. Some companies are experimenting with alternative ways of transferring risks, such as through cat bonds, directly to the capital market. Mr Mahnke welcomes this development but does not think that it will replace traditional insurance. “The additional capacities that are available on the market will not make insurance dispensable since it is an established financial instrument and is reasonably cheap,” he said. “But alternative risk transfer is an interesting additional tool that should be understood by insurance risk management.” In addition to balance sheet protection there are other areas where the expertise of the insurance department is needed and should be better explained, believes Mr Mahnke. “In many companies communication between human resources and the insurance department is still in its infancy,” he said. However, the HR department needs insurance expertise to be able to offer employee benefits in the form of complementary insurance. “Thus it makes sense that insurance risk managers deal with this area too,” said Mr Mahnke. According to Mr Mahnke it is crucial that insurance risk managers make the most of every opportunity to offer their expertise. “The role of the insurance risk manager in a company is a consequence of how he or she uses these possibilities,” he explained. “If I do a good job I will gain the reputation needed to survive in the long run. If I fail, my future will depend on luck—and this is a situation that a person who deals with risks does not like very much.” Mr Mahnke also criticised insurers, particularly when it comes to liability insurance. “Insurers are too concerned with rules that are not applied any more today or only to a limited extent,” he said. “They overlook the fact that the economic reality for many companies in terms of risks is different from what it used to be.” For example, insurers tend to avoid covering entrepreneurial risks at all costs despite the fact these are the very risks that their clients need help with, he said. “Entrepreneurial activities involve risks and insurers should, of course after carefully analysing and debating the risk with the client, grant cover. Once you can reasonably quantify a risk there is possibility for insurance,” argued the DVS chairman. He noted that companies that have traditionally produced and supplied goods are increasingly offering other services. “Thus their risk portfolios change, and traditional insurance concepts may no longer suffice,” said Mr Mahnke. “The insurance market has to deal with these challenges more intelligently and more actively.” For years German insurance risk managers have been arguing that insurers should be more innovative. However, Mr Mahnke stressed that insurance risk managers must help in this process by defining their needs more clearly. “Innovation does not come from one side of the market alone and thus I am opposed to pointing a finger at insurers and brokers,” he said. In his view, insurance risk managers are also responsible for a lack of innovation because they do not identify areas where innovation is needed. “It is time to get things into proportion,” said Mr Mahnke. “Everyone has to ask themselves: What can we contribute to the evolution of the market? If we do not do that and only work with existing insurance products, we will certainly decline in importance.In addition, we will not be able to explain our actions as insurance risk managers and why industrial insurance is so important.” Mr Mahnke succeeded Hans-Jürgen Allerdissen of German railway company Deutsche Bahn at DVS in May 2014. He has since announced his intention to improve DVS’ lobbying efforts. “When you talk about lobbying, everybody automatically thinks of lobbying insurers or politicians,” he said. “From my point of view, lobbying your own company is equally important for insurance risk managers. How you explain what you are doing and the value of your work and industrial insurance to people who have no expertise in this field is vital,” he concluded.

Sell our profession or lose relevance says DVS’ Mahnke

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