First line of defence riskbased decision making in a South African non-life insurer

Abstract

The non-life insurance industry engages in calculated risks, guided by risk-based decision decisionmaking process, to fulfil policyholder obligations and ensure long-term sustainability. Despite the extensive literature on risk-based decision making (RBDM) in sectors such as manufacturing, engineering, and environmental management, there is a noticeable scarcity of studies exploring these principles within the first line of defence in the non-life insurance industry, especially in the South African context. Recognising this gap, there is a clear need for additional insights to enhance the inclusion of risk in decision making for short-term insurers. The objective of this study was to examine how first line of defence managers integrate risk into decision making within this South African non-life insurance company. The study's threefold research objectives aimed to explore how the first line of defence managers incorporate risk into decision making, identify challenges in integrating risks into decisions crucial to organisational objectives, and propose improvements for including risk in such decisions. Qualitative data, collected through semi-structured interviews with the representatives from all three lines of defence, highlighted a consensus on the importance of integrating risk into decision making. Various strategies were identified for keeping risk at the forefront, tailored to the nature of the decision at hand. However, challenges arising from the volatile and uncertain environment significantly influenced the integration of risk considerations into decision-making process. Despite time-related study limitations, this study serves as a foundational exploration into risk integration within the non-life insurance industry, particularly by the first line of defence, even in general RBDM. It paves the way for future research and suggests possibilities for extending the study to encompass various financial services sectors, including life insurance. Furthermore, it proposes delving deeper into challenges faced by the first line of defence when incorporating risk into decision-making process.