Interview: Risk management AIG-style

International insurance group AIG has a reputation for dynamic reactions and solutions to market forces and direction. The e-commerce space and its huge influence on global business is no exception. e-mmerce talks to Gretchen Hayes President of AIG eBusiness Risk Solutions in New York about how AIG is meeting the challenges of e-business.

Tell us about the various e-commerce initiatives within the AIG group.

AIG is keenly aware of the transforming power of the internet. AIG eBusiness Risk Solutions is a division within AIG that was established a year ago to help clients manage the risks inherent in doing business online. We have several new products in the market and expect to expand our product offering this year.

The AIG netAdvantage Product Suite addresses the range of risks inherent in establishing a web presence and most importantly the website security risks when conducting business online. AIG Tradecredit.com provides real-time online credit decisioning and offers a non-traditional cost-effective approach to managing accounts receivables. Through Avantrust our new joint venture company with Dun & Bradstreet we are the first to offer an integrated solution suite for the B2B market combining insurance solutions technology and business information.

Finally we have introduced a number of new products for the B2C market notably a personal internet coverage (PIC) that provides coverage for the expenses associated with online identity theft.

Who are your customers for these and what services do you offer?

Our customers are established brick and mortar companies as well as start-ups that are beginning to conduct some of their business online. The insurance solutions offered through AIG eBusiness Risk Solutions address the key impediment to doing business online – trust: trust that online trading partners are who they say they are will pay for goods ordered and that the trading network is secure for the transmission of confidential customer and payment information. Of course our customers are also the insurance brokers that represent these companies.

What has been the hardest part of getting e-commerce business off the ground?

Simply getting the organisation staffed and operating fast enough to meet market demand has been the most challenging and exciting part of the business so far. However since AIG has deep underwriting expertise and talent as well as a strong commitment to e-commerce we were fortunate to find most of the resources we needed within the group.

What if anything has surprised you here?

Before AIG eBusiness Risk Solutions was launched I was not fully aware of how strong the market need for these products would be. Fortunately AIG’s extensive global resources superior financial strength and our disciplined approach to risk assessment provides us with a unique opportunity to meet this demand. Also AIG is in a strong position to partner with the leading companies in the areas of technology payments financing and global information to put together a complete solution to facilitate the completion of transactions online. AIG’s joint venture with Dun & Bradstreet Avantrust is a good example of this.

What regulatory and legal barriers still exist in your online business?

The legal and regulatory environment governing e-commerce is still in the formative stage particularly in many overseas jurisdictions. The challenge therefore is keeping up with the evolving legal and regulatory environment.

Who are your strategic partners in this business?

Of course we have formed a series of strategic alliances that complement the product offerings.

For example we have entered into a number of alliances with leading internet security firms such as Unisys to support the AIG netAdvantage Product Suite. Through these relationships our customers are provided access to a free network security assessment that is based on ISO/BS7799 standards. This assists them in identifying network vulnerabilities.

For AIGTradeCredit.com we have aligned ourselves with financial institutions inspection companies specialist brokers trade associations and exchanges to name a few.

Avantrust our new joint venture company is the result of a strong alliance with the Dun & Bradstreet Corporation. Avantrust is on the cutting edge of the developing end-to-end solutions for the B2B market to facilitate online transactions.

How do you work with banks?

We are working closely with several banks in two major areas. First in the payments space. We want to integrate online payments solutions into our TradeCredit.com offering and into the end-to-end solutions developed by Avantrust. Second as financial partners AIG does not itself finance trade transactions. Yet AIG insurance can facilitate trade finance and yield better cost of funding to the sellers. We are working with a number of global banking partners to develop funding options based on AIG insurance.

Should banks feel threatened by your ventures?

Definitely not. The banks are our partners to provide co-ordinated financial solutions to their customers.

What about other insurers and ECAs?

As our business develops globally we expect to work co-operatively with other credit insurers and export credit agencies (ECAs) to share risks through reinsurance or other vehicles.

How different might eBusiness Risk Solutions look in a year or two and why would this be?

The mission of AIG eBusiness Risk Solutions is to analyse the risks inherent in doing business online and to develop solution sets incorporating risk management information best-in-class technology and insurance products and solutions. As the economy and technology is ever changing so our job must respond indeed anticipate those changes and the needs of our customers to respond to these new risks.

The Insurance Information Institute recently estimated that insurers can expect to see more than US$2.5 billion in e-commerce liability premium by 2005. We expect to play a major role in that growth. Our existing product lines such as AIG netAdvantage and TradeCredit.com will grow exponentially during this period and beyond.

Moreover new product development will play a key role in the future growth of the company. Already we are developing products for consumer and merchant-oriented internet credit card risk and personal identity theft. (The US Treasury recently said that identity thefts reported by financial institutions including banks increased by over 100% in the last year.) Future offerings may include public key infrastructure authentication insurance.

In addition our technology partnerships already strong will increase as solutions combining insurance and technology products become necessary components to an overall risk management solution.

In summary the future of our company looks bright not just in the next couple of years where exponential growth is expected but for decades to come. As the economy changes as risk changes AIG eBusiness Risk Solutions will continue to anticipate those changes and provide risk management solutions.

Originally published in e-mmerce