An expertsystem as a tool for risk management

Date of publication: June 15, 1990


The expert system RISCUE is developed to assist insurance managers to take decisions about the optimal risk strategy. RISCUE consists of a number of computer programs, combined with data on risk variables which are specific for the company or insurance company for which RISCUE has been developed. Assessment of the risk variables is always, by definition, a subjective estimate based upon personal expertise, know-how, experience and above all intuition. However, on both the operational and policy-making levels of any organisation, there is often a lot of know-how, experience and expertise available with regard to the risk factors. The problem is that this expert know-how is often not only spread throughout the entire organisation, but also lies ’hidden’, e.g., is latent in the minds of the managers. Qualitative methods of research can be used to obtain this information. A specific procedure is developed to have a group of experts, (from the companies’ management) estimate the probabilities of a damage (e.g. a catastrophy) in a particular period of time. This paper discusses the procedure followed to estimate the probabilities, which are later on inserted in the model as input variables. In the paper is also explained why and how some basic principles of the Delphi methodology are necessary to obtain the best results. Important side effects of the applied qualitative methods were also: a heightened risk consciousness on all management levels a more thorough risk analysis of the company, which is of strategic value for the company itself as well for the insurance companies. A simplified demonstration model will be used to illustrate the way of thinking.

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