Who watches the watchmen?

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Conformity assessment and accreditation and its relationship with insurance.

The insurance and conformity assessment sectors work hand in hand to mitigate risk. Put simply, conformity assessors develop the tools that help the insured improve their management of risk. In turn, this allows insurers to more accurately assess an insured’s approach to risk management and build a more accurate risk profile. Similar to a knife and fork, both do a perfectly adequate job by themselves but are far more effective used together.

Standards form the cornerstone of economies across the world, by defining how products, processes and people interact with each other. Whilst various interpretations can be applied to the term ‘standard’, in its broadest sense it is an agreed way of producing an item, delivering a service or managing a process. By creating a basis for shared expectations, recognised standards help enhance market confidence in products and services, simultaneously reducing risk and increasing consumer protection.

Demonstrating competence

An organisation saying it complies with a particular standard is one thing, but for standards to be truly effective, the organisation must be able to prove its compliance. Third party conformity assessment offers an unbiased assessment of whether a product, service or system meets the designated standard. Every industry sector relies on conformity assessment (certification, inspection, testing and measurement) to promote health and safety and improve the quality control of products, processes and systems. Most conformity assessment is conducted by third party organisations, so it follows that these organisations should also be assessed for competence if their findings are to be relied upon.Acting as the watchmen’s watchmen, accreditation is a robust independent declaration of a conformity assessment organisation’s competence, the validity and suitability of its methods, the appropriateness of its equipment and facilities and the on-going assurance through its internal quality control. In an increasingly global economy, it’s vital that there

Acting as the watchmen’s watchmen, accreditation is a robust independent declaration of a conformity assessment organisation’s competence, the validity and suitability of its methods, the appropriateness of its equipment and facilities and the on-going assurance through its internal quality control. In an increasingly global economy, it’s vital that there is compatibility and recognition of standards, conformity assessment and accreditation bodies across international borders. Thanks to a series of multi-lateral recognition agreements, an ‘accredited once, accepted everywhere’ approach is operated in more than 90 economies across the world (see graph, right).Together, standards, conformity assessment and accreditation form the pillars of a global quality infrastructure that can be applied to almost any industry sector and business situation. From food safety and product

Together, standards, conformity assessment and accreditation form the pillars of a global quality infrastructure that can be applied to almost any industry sector and business situation. From food safety and product testing, to construction and environmental impact, there are thousands of different standards and specific tests that are accredited. Whilst in some cases accreditation is a legal requirement, it is largely a voluntary process fast becoming the expected norm. So, what effect does this global system have on the insurance industry?

Managing insurance risk

Accredited standards, whether compulsory or voluntary, can help both brokers and underwriters manage risk. This is particularly useful when developing products for ‘riskier’ lines of business, as it is easier to quantify the individual client’s risk profile and develop more accurate pricing where the client is accredited. Howden was one of the first brokers in the UK to recognise the potential risk mitigation benefits of accredited voluntary standards when it launched LabSure, for UKAS accredited testing laboratories, in 2007. In short, accreditation helps provide tangible evidence that the laboratory is operating to industry-sector recognised quality standards, in turn lowering its risk profile.There are other examples from across the world

There are other examples from across the world where recognising the value of accredited standards has supported the management of risk, leading to reductions in both rates and claims whilst opening up potentially profitable lines of business. The Italian Workers’ Compensation Authority has seen a 40 per cent reduction in the severity and frequency of accidents since the roll out of the OHSAS 18001 occupational health and safety standard. Meanwhile, the Development 
Bank of Japan has been able to improve its risk portfolio by offering more attractive loan rates and discounted insurance premiums to companies that hold ISO 22301/22313 business continuity management accredited certification.

Meanwhile, the Development 
Bank of Japan has been able to improve its risk portfolio by offering more attractive loan rates and discounted insurance premiums to companies that hold ISO 22301/22313 business continuity management accredited certification. Returning to the UK, some insurers are now recognising BS10125 compliant vehicle body shops as ‘approved’, because they have demonstrated that their staff are competent and that repairs are carried out in accordance with manufacturers’ methods.

Returning to the UK, some insurers are now recognising BS10125 compliant vehicle body shops as ‘approved’, because they have demonstrated that their staff are competent and that repairs are carried out in accordance with manufacturers’ methods.Despite these encouraging first steps, the insurance industry is heavily regulated across the world, leading to a complex web of local, national and international rules and systems that must be navigated before a product can be developed. Taken together, these factors help explain why the insurance sector is still a relatively moderate user of accredited voluntary standards in comparison with other commercial sectors such as energy, food processing and shipping. However, the flip side of this coin is the large potential for increased adoption of accredited voluntary standards to help manage insurance risks, where the benefits outweigh the costs, without reducing competition 
where it is needed.

Despite these encouraging first steps, the insurance industry is heavily regulated across the world, leading to a complex web of local, national and international rules and systems that must be navigated before a product can be developed. Taken together, these factors help explain why the insurance sector is still a relatively moderate user of accredited voluntary standards in comparison with other commercial sectors such as energy, food processing and shipping. However, the flip side of this coin is the large potential for increased adoption of accredited voluntary standards to help manage insurance risks, where the benefits outweigh the costs, without reducing competition 
where it is needed.A

A joint-study by the British Standards Institute and Long Finance identified the greater role that accredited voluntary standards could play in raising safety levels, transparency and trust in the financial services sector. It confirmed insurance industry support for adopting this approach in the three key areas of product development, product information and processes.As outlined above, accredited standards can help insurers streamline the new product development process in areas previously considered too risky, 
by helping to manage emerging 
risks such as nanotechnology and cyber security. As part of the drive 
for greater transparency, the 
adoption of standard policy wording could pave the way for

As outlined above, accredited standards can help insurers streamline the new product development process in areas previously considered too risky, 
by helping to manage emerging 
risks such as nanotechnology and cyber security. As part of the drive 
for greater transparency, the 
adoption of standard policy wording could pave the way for development of a ‘fair insurance’ scheme. Similar to the already UKAS accredited Fairbanking scheme, this would provide clearer product information to consumers, improving their understanding, ability to compare 
and overall satisfaction.

Finally, the standardisation of insurance industry processes, from claims operation to risk modelling and scenario development, would also benefit the insurance industry, by harmonising and streamlining processes and improving the 
bottom line.

 

 

About the author

Jon Murthy

UKAS 01784 429000 Email