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Markov chains as a tool for risk assessment of insurance companies arising during the transfer of functions to outsourcing


Kozminyh O.V.
(about the author)

Kozminyh Olga Valerevna – (Far Eastern Federal University)

Published in:
Russian Journal of Entrepreneurship
– Volume 18, Number 17 (September 2017)

JEL classification: C50, D81, G22

Keywords: insurance companies, intermediaries, Markov chains, outsourcing, risk assessment


Citation:
Kozminyh O.V. (2017). Markov chains as a tool for risk assessment of insurance companies arising during the transfer of functions to outsourcing. Russian Journal of Entrepreneurship, 18(17), 2491-2504. doi: 10.18334/rp.18.17.38258


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Abstract:

Today, despite a large number of qualitative and quantitative methods of risk assessment, Russian insurers have a big group of risks, the management of which they do not given proper attention. The insurer by transferring his functions to outsourcing to other intermediaries wants to increase the efficiency of his professional activities. However, the practice of Russian and foreign insurance markets demonstrates that intermediaries who take over the functions of the insurer generate additional risks for him. In this article we suggest to use Markov chain method for risk assessment arising during the transfer of insurance company’s functions to outsourcing. We think that this method can visually demonstrate whether the insurer should transfer his functions to intermediary to outsourcing or implement them independently. The use of the Markov chain method for internal risk management of insurance companies will reduce the number of insurance fraud in Russia and will lead to quality improvement of services provided by insurers.








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