Investigation Into Enterprise Risk Management Practices in the Indian Insurance Sector

The paper investigates the prevailing Enterprise Risk Management (ERM) practices in the Indian insurance market. The paper makes a first attempt to understand embedded risk management practices within the Indian insurance market, helping policymakers, risk management professionals, regulators, and academicians to prepare for managing future risk better. Implementing enterprise risk management programs is becoming increasingly crucial for insurance companies due to increasing uncertainties resulting from complex economic, demographic, and socio-politico situations. Such uncertainties impact the various assumptions insurance companies use to price products and evaluate businesses. Enterprise risk management optimises the capital requirement of insurance companies, especially those following risk-based capital. The ERM implementation within the Indian insurance market started after the development of the 2016 corporate governance guidelines. To understand the ERM practices, primary data was collected from 252 professionals working within the Indian insurance industry between September 2022 to February 2023. Of the 252 participants, 53% were from the life insurance industry, 26% were from general insurance, 11% were from health insurance, and 10% were from others like brokers, consultants, etc. Different nature of ERM practices were observed. Some good risk management practices observed were documentation of the risk framework and policies, supervision by risk management committees of range of risk management initiatives, risk management processes implementation across the company etc. Some of the areas of improvement identified are lack of documentation of critical decisions to be taken within the risk management framework, setting down roles and responsibilities related to risk management within the job description, using risk appetite in decision making, lack of risk-reward behaviour etc.