Turning Risk Into Profit Through Strategic Loss Prevention
Originally published by Predict & Prevent
Pete Miller, CEO of The Institutes, and Rose Hall, founder and CEO of RH Business Ventures LLC, discuss the industry’s shift toward a more proactive “predict and prevent” approach to risk. Drawing on her experience in risk engineering and innovation, Rose explores how expanding risks, new technologies, data, and changing business models are reshaping the roles of insurers, brokers, and corporate risk managers. The conversation covers why technology alone isn’t enough, how trust and data sharing influence adoption, where strategic risk retention can create value, and why the carriers that stand out will increasingly operate as broader risk advisors rather than insurance providers alone.
Listen to the Full Episode
Below you’ll find some of my thoughts from the conversation we got into on Predict & Prevent, and you can listen to the full episode above.
The Risks Worth Taking
For a long time, risk management has centered on a fairly familiar question: How much risk can we get rid of?
What do we transfer to an insurance company?
What can we contractually transfer to someone else?
What are we stuck retaining?
But the risk landscape is getting bigger. Climate, geopolitical pressures, AI, the data center boom and emerging risks we haven't even fully defined yet are making that traditional exercise a lot more complicated. There’s simply more risk to divide up, and the insurance market can't absorb all of it.
That creates another question I think is far more interesting: What risks are you really good at taking?
Because there can be real business value in understanding the risks you’re equipped to manage, putting the right loss prevention measures around them and deliberately retaining more of them.
The Risk Pie is Getting Bigger
I tend to think about risk as a pie. You have the risk you retain, the risk you transfer to an insurer and the risk you contractually transfer to other parties. The pie still needs to be divided among those buckets, but today, the pie itself is a whole lot bigger.
That matters because insurers can't endlessly expand their appetite as risks become larger and harder to predict. Corporations can't transfer everything, and simply holding whatever is left on the balance sheet isn't much of a strategy.
This is where a predict and prevent approach becomes valuable. If we can reduce the overall size of the risk through better loss prevention, we change the conversation about where that risk needs to go in the first place. For sophisticated risk managers, that can mean looking at a risk and saying, "We're good at this, we know how to manage it, maybe we don't need to give all of it away."
Sometimes the Risk is Where the Profit is
When I was a risk engineer, I worked with a contractor that regularly took over troubled projects. These were projects with schedule, delivery, and subcontractor problems, plus all the other things that would make most contractors run in the opposite direction. From a traditional underwriting perspective, you could look at that business model and see a whole lot of risk. But they were really, really good at those projects.
Turning around troubled projects was their specialty. They understood the risks, knew how to manage them and charged appropriately for taking them on. Risk that looked unattractive to another contractor created an opportunity for them.
That's what I mean when I talk about risk as a hidden engine of profit. The goal shouldn't always be to get rid of as much risk as possible. Transferring risk costs money, and there are risks the insurance market won't take anyway.
The more useful question is: What risks are we unusually good at managing?
Those may be the risks worth retaining and investing in. The ones you don't understand particularly well may be exactly what you want to insure, and that requires knowing your business extremely well.
Loss Prevention Changes the Equation
Strategically retaining risk only works if you can manage it, that's why loss prevention is such an important part of this conversation. Predict and prevent gives insurers, brokers and corporations an opportunity to reduce the risk itself instead of focusing exclusively on what happens after a loss.
Technology can certainly help us do that. I've spent a lot of my career working at the intersection of technology, insurance and risk management, but technology isn't synonymous with innovation. Innovation can be a new technology. It can also be a different process, a new insurance product or an entirely different business model.
To me, innovation means doing something differently than we've done before and creating new value where it didn't exist. That's an important distinction because putting another piece of technology into an old process doesn't necessarily solve the problem.
Loss Prevention Technology has to Work in the Real World
I learned this firsthand working with construction technology. Construction sites are constantly changing: the people get switched up, materials change, the plan changes, conditions change. Technology that works beautifully in a static environment doesn't automatically translate to a job site.
I've seen loss prevention technology purchased for a project and sitting in a box on the project manager's desk while the exact loss it was supposed to prevent happened on the job. The technology existed, and the company bought it. Everyone could technically say the project had access to it and it didn't prevent anything.
The best loss prevention technology fits into the way people already work. If a project manager has to add another complicated process, remember another dashboard or significantly change the way the job operates, adoption becomes harder.
The value you get from the technology has to be greater than the burden of using it. The more invisible we can make loss prevention technology within an existing workflow, the better chance it has of being used consistently enough to reduce risk.
Trust Comes Before Data
There's another lesson from my time working in insurance that I think matters even more now as companies look at AI, connected technology and increasingly sophisticated uses of data. You can have enormous amounts of data and still not have the trust required to do anything useful with it.
Years ago, we were exploring how combining insurer data with client data could create better insights into risk. On paper, the logic was pretty straightforward. Insurers have enormous amounts of claims and risk data, their clients have their own operational data, put those pools together and maybe we can understand risk better.
The problem was that clients weren't necessarily comfortable handing over their data to their insurer. And I understood why. If you aren't entirely sure what's in your own data, do you want your insurance company to be the first one to find out?
The breakthrough came when the relationship became more collaborative. Instead of beginning with "Give us your data," the conversation became, "Come with us while we figure out how we can use data and technology to manage this risk better."
Eventually, the response moved from "Absolutely not" to "What kind of data do you need?"
That's a very different conversation, and technology didn't create that shift - trust did.
Innovation has to Go Deeper than the Technology
I see innovation and technology conflated all the time, especially now with AI. There's a temptation to take an existing business model, add new technology to it and call the result innovation. But if the underlying model isn't equipped for the risks we're facing, making the existing process faster or more technologically sophisticated only gets us so far.
You don't get to the light bulb by making a better candle. The problem you're solving is light. Once you define the problem that way, you're free to consider the candle, the light bulb, the gas lamp or something entirely different.
Risk management needs that same kind of thinking. The problem we're solving is how to manage risk. Insurance is one tool for doing that, loss prevention is another, and strategic risk retention is another. Technology can support all of them.
If insurers and businesses want to respond to a fundamentally different risk environment, we have to be willing to rethink the model itself rather than endlessly iterate on the one we already have.
Where Insurance Goes from Here
This creates an interesting challenge for the insurance industry. If we're successful at preventing losses and helping businesses manage risk better, some risks may become less significant or more manageable. That changes the value an insurer needs to provide.
I see an opportunity for the industry to become much more holistic in the way it helps clients understand risk. Insurers and brokers have something individual companies don't: a cross section of the market. They see how organizations of different sizes and shapes are responding to emerging risks and they can see patterns that an individual company can't see from inside its own four walls.
That perspective has tremendous value.
The future I would love to see is one where the conversation starts with understanding the client's risks, determining where those risks belong and helping the organization manage them well. Insurance can then become one of the outcomes of that advice, because ultimately, managing risk isn't about getting the number as close to zero as possible, it's about understanding which risks you should prevent, which you should transfer and which ones you may be uniquely positioned to take.
