Business Insurance RMIS Review - December 2001

Spotlight -- Risk Management: New Technology & Online Solutions

"Business Reviews Its RMIS Wish List: Delivery of Good Data, Customization in Demand"

December 3, 2001

by Roberto Ceniceros

Risk managers facing a hardening insurance market say that, now more than ever, they need computer information systems that will help them hold down their costs.

These risk managers also want computer applications that are customized to meet their unique needs, and they are seeking true Web-based systems that facilitate the sharing of loss information and reports with managers in remote locations.

In the current market, risk managers are demanding the ability to pluck credible data from their information systems, said George Netherton, the chairman of Risk Laboratories in Marietta, Ga. Risk managers say they need good data to get their underwriters' attention and to convince the insurer that they should receive the best possible pricing.

If an underwriter senses that the data indicating a good loss history aren't credible, the argument grows more difficult, Mr. Netherton said.

High-quality data is a big plus in negotiations with underwriters, agreed Bill Buchan, executive director for risk finance, loss control and continuity planning at AT&T Broadband in Denver.

Mr. Buchan's company is a customer of Risk Laboratories, and he worked closely with that vendor to develop a system that allows him to calculate his insurance purchasing budget for 2002. He dubbed the system "CORA," short for "cost of risk allocation."

CORA, he said, will also help him allocate insurance and loss costs to AT&T Broadband managers in several markets, something he couldn't do in the past.

Mr. Buchan, along with Risk Laboratories, also developed a "Monte Carlo" simulation system that generates random results. With the Monte Carlo system, he can measure and review his casualty program in the same way that an insurer looking over its book of would.

Mr. Buchan said this system permits him to determine what would constitute fair rates for his insurance purchases and, consequently, what profit margins insurers have built into their quotes for his . That, he said, is a big help in negotiations.

"I can show up with sheets of paper they don't want to show me," he said.

Mr. Buchan said that after seeing his casualty costs skyrocket, he decided to use his risk management information system to independently review third-party administration fees and claims payments. Using data in those ways will help weather a hardening market, he said.

"We will probably be glad that we have done the work in the last 12 to 14 months," Mr. Buchan said. "We own the data now."

Currently, customers are also demanding systems that customize information and produce reports unique to their company's realm, said Tom Drake, chief information officer for Berkley Risk Administrators in Minneapolis. Customers, he said, are increasingly dissatisfied with "plain vanilla," off-the-shelf programs.

School risk managers, for example, now are not satisfied with loss codes that indicate only that an accident on their property resulted in a leg injury. They want codes that provide greater detail, such as the specific location on their property the accident occurred. If, for example, the accident happened on a certain piece of playground equipment, they want that information in their codes.

"That is where we are seeing this evolve," Mr. Drake said. "Into a much higher level of customization than it had before."

Just as they are seeking out more specific information about their own es, risk managers also want to benefit from the data that computer system vendors have collected from helping other risk managers in similar industries, Mr. Drake said. These risk managers want to be able to benchmark, and they do not want to recreate work already done by others.

John Lambdin, insurance manager and office administration manager for the insurance department of Weyerhaeuser Co. in Federal Way, Wash., is one of those demanding such information. Currently, Mr. Lambdin said, he is assessing his department's need for a new risk management information system. One goal of a new system, he said, would be to benefit from improvements that vendors have made in meeting other clients' needs.

"We want to find that middle road where we can benefit from all the learning the vendors have discovered from their customer base," Mr. Lambdin said. "But at the same time we want to tweak it so that we have some modules and customization for our processes that work better than what is available on the market."

Another top goal is to purchase a system that permits unit managers and plant managers to access their loss histories directly through the Internet.

"Rather than having them call us and generating a report, then e-mailing it to them, we are considering the new technology where (the manager) has a password and they can go in and see their loss history," Mr. Lambdin said.

Many risk managers now seek to remedy the problems inherent in disseminating loss information to facilities located throughout the nation or in other countries, said Ron Watts, vp-customer relations for Risk Technologies Inc. in Mansfield, Texas.

Risk managers no longer are content to retrieve data only through client/server system computers that vendors have loaded with files, he said.

"That is not true Web-based technology," Mr. Watts said. Customers now want to access their data at any time, from any place, directly through Internet service providers such as America Online.

"The big buzz going around the industry is Web access so you can have access to your claims no matter where you are," he said.