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How Cincinnati's Teresa Cracas Runs a Model Risk Organization

Published
  • November 02 2015, 6:30am EST

More than anything else, risk is at the core of the insurance business, and Teresa Cracas has made a career out of standing up to it.

For insurers, success in risk management has a key metric — combined ratio, which was below 93% for Cincinnati Insurance in the second quarter of this year, according to the company’s SEC filings. Cracas credits her success to her hard work behind the scenes, as well as that of her team members and peers in the business.

“The owners of the risk are out in the organization,” she says. “I have to make sure that those owners are putting more of their attention at the right risk, and we’re looking at the enterprise level. Eventually, it all finds its way to our office.”

Risk management is a fascinating area of insurance because working in it allows leaders to get a holistic view of the enterprise and understand how the entire value chain works, Cracas continues.

“You have to think about lots of different things from lots of different perspectives, using internal and external data, and a healthy dose of paranoia to realize what could go wrong,” she says. “It forces you to look at your company in a way that very few people do.”

Cracas has been a champion of the power of predictive analytics not just in risk, but across the enterprise. One of her first hires after ascending to the chief risk officer role was a head of predictive analytics. Rather than analytics initiatives being undertaken by individual business users in a vaccuum, the company now has a team of 10 who work on nothing else, Cracas says — a crucial practice area for a successful 21st-century insurer.

“We have models coming out of our group devoted to risk – catastrophe and capital allocation models, for example. But we also have underwriting and pricing models” out of the same team, she says.

“There’s a great balance of development of these models — it’s great to be ahead of where you need to be, but not so much so that the business isn’t ready for it,” she continues. “The absolute worst thing you can do to a brilliant modeller is have them build one and wait for implementation.”

That’s where the personal side of the business comes in, Cracas explains. While some insurance employees have feared that analytic intitiatives portend disruption for their careers, Cracas says that analytics are simply a new, if important, tool in the insurance arsenal.

“Analytics don’t tell the entire story. It’s very important to make sure you understand what a model can and can’t tell you and to what level of granularity you can trust it,” she says. “That is a very particular nswer based on the company, line of business, and other factors.”

That’s one of the reasons that talent development is a key concern for Cracas, who is sought after often as a mentor in Cincinnati’s mentoring program.

“I am working mostly with high-potential folks, not yet at the executive level, that are looking for someone to act as a sounding board from time to time or just share information,” she says. “The mentorship is sometimes informal, not always a woman — we like to engage with people with whom we have something in common.”

In order to attract the best and brightest to the insurance industry, Cracas says the industry must do a better job explaining its “noble purpose” — a concept which appealed to her early in her career.

“We help people put their lives together when something awful happens. I have met tremendous, caring, compassionate people at my company and lots of different companies,” she says. “The human side of insurance – underwriters, adjusters, those folks – there aren’t many finer people in our country.

(This article appears courtesy of our sister publication, Health Data Management)

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