Insurers cite misinformation as top risk in 2024

Global insurers cited misinformation as the top risk in 2024, toppling extreme weather from the place it held in a similar survey 10 years ago.

The top risks named by insurers in 2024, according to the World Economics Forum Global Risk Report, and discussed during a recent Baker Tilly webinar, included:

1. Misinformation
2. Extreme weather
3. Societal polarization
4. Cyber security
5. Armed conflict
6. Lack of economic opportunity
7. Inflation
8. Industry regulation

Misinformation ranked fifth in the same survey conducted 10 years earlier.

Insurers need to look inside their own houses for emerging risks, said John Romano, a principal in Baker Tilly’s financial services risk advisory practice.

Three emerging risks for insurers, he said, are:

• Talent succession. Challenges in attracting, retaining and developing skilled employees can affect operational efficiency.
• Compliance and governance. Weakness in corporate governance structures can lead to poor oversight and decision making.
• Strategic and data management. Internal missteps in setting or executing the company’s strategic direction can have significant consequences.

Data governance is at the core of many risks faced by insurers, Romano said. “Your data is not just an asset; it’s the foundation of what you do. It drives underwriting, claims, and the customer experience.”

Adoption of artificial intelligence is moving quickly in the insurance sector, he said. “Insurance companies are at the stage of exploring, piloting and using some aspects of AI but maybe they’re not calling it that.”

Romano urged insurers to develop an AI governance framework to ensure the organization can manage growth, comply with regulations and maintain continuous monitoring throughout the development, implementation, and use of AI.

That framework should include:

1. A corporate-wide strategy must enable AI development, implementation, and scale in a controlled fashion.
2. Insurers must define AI policies and procedures, and create a framework to facilitate consistent, cross-functional development and deployment of AI.
3. Insurers must set up a centralized center of excellence for AI knowledge and must monitor AI performance and security.

Romano called for insurers to focus on third-party risk management for 2025. Key third-party risks include data security breaches and regulatory compliance failures.

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at susan.rupe@innfeedback.com.