Copyright © 2001 National Underwriter.  All Rights Reserved

"RMs Have Choices For Data Control" June 11, 2001

By E.E. Mazier

One of the main challenges facing risk managers today is the gathering of information, "whether it's claims data, data about their exposures or data about their coverages and policies," one leading risk management information system expert contends.

"Getting all that data in one place and being able to relate it, analyze it, provide reports and make decisions based on it account for a significant amount of a risk manager's time," observed Paul Bildsoe, vice president of business development for Risk Laboratories LLC, a provider of risk management technological solutions headquartered in Marietta, Ga.

RMIS computer software solutions available to control all that data involve either an Internet platform or a non-Web platform, noted Richard Betterley, president of Betterley Risk Consultants Inc. of Sterling, Mass.

While stressing that he is "confident in the security of Internet transactions with the right company," Mr. Betterley said he has encountered a number of risk managers who balk at putting claims information on the Web. This reluctance is due to concerns about privacy and about plaintiffs' attorneys somehow gaining access to the information, he explained.

In contrast, Brian Merkley, a consultant in the Dallas office of the risk-management consulting firm Tillinghast-Towers-Perrin, reported that his company's clients are interested in "Web-enabled" RMIS.

Mr. Merkley noted that most of those clients "interface with third-party administrators and have remote users who need to access the system in a relatively easy fashion."

Nevertheless, Mr. Merkley sees a difference between systems that are on the Internet and those that seem Web-based because the client "gets around" by using a browser.

Fortunately, Internet-based software is not the only way for risk managers to control data, Mr. Betterley observed. He indicated that there are four main sources of RMIS:

• Independent RMIS vendors.

• Insurance brokers.

Mr. Betterley noted, for example, that Marsh Inc. offers its clients a RMIS called "STARS" that has "been around forever" and that is well-supported by Marsh.

However, he pointed out that there is a split view on these systems. "Some risk managers are aghast at the idea of getting everything from the broker because then they know they can't leave, [while] others say it's all integrated, that's great, Marsh is wonderful and if we have a problem we'll fix it," he noted.

• Insurance carriers.

Declaring that many of these systems have been "really good," Mr. Betterley stated that "one of the things I always liked about getting the system from a carrier was that, set up properly, you could effectively get real-time access to your data--when the adjuster puts notes into the system, you can read them shortly thereafter."

However, he believes that these systems have failed to evolve because carriers that invested heavily in them often encountered resistance from their insureds.

• The user itself.

This involves "build-it-yourself" systems, such as those assembled by a company's own information technology staff. Mr. Betterley said these systems are increasingly rare.

Mr. Merkley revealed that the RMIS implementations undertaken by Tillinghast "have not involved systems developed by brokers."

Instead, he said that the firm has dealt with independent vendors such as Risk Laboratories, Corporate Systems Inc. (Amarillo, Texas), Envision Technology Solutions (Salt Lake City, Utah), and Valley Oak Systems, Inc. (Alamo, Calif.).

Mr. Betterley pointed out that there have been "some ownership changes in RMIS providers" in recent years.

He stated that this can be a positive development, such as when the new owner is a larger, more stable enterprise committed to continuing the support and development of a risk management information system. But other times a new owner may decide that it is not cost-effective to continue providing the system, Mr. Betterley said.

"You don't want your client's vendor to all of the sudden be taken over in the middle of an implementation because it's so disruptive," Mr. Merkley noted.

Losing a risk management information system can mean "enormous heartache and headache for risk managers today," Mr. Betterley observed.

As explained by Mr. Merkley, "When…you put in a new system or you're upgrading, converting old data, there's quite a bit of work and coordination that has to happen between the client and the vendor to make it all happen…on time."

But Mr. Betterley reminds his clients that "there are a lot of systems out there that do just fine" and that the clients may actually end up with better systems.

Mr. Merkley acknowledged that a risk consultant advising a client on an RMIS vendor must know the marketplace and "what changes are being made to the system, how stable the vendor is, whether it has the financial wherewithal to staff the project appropriately," he said.

In short, the consultant must "make sure that the resources will be there for the client," he stated.

Consequently, he said, ''most of the vendors that we help our clients select have been around for a while…and tend to be more stable." Although some of these vendors "may be kind of small, they're very good at what they do, either in customizing their systems, at implementation, at data mapping, etc.," Mr. Merkley observed.

To help its clients select the appropriate RMIS and vendor, Tillinghast conducts a "needs assessment" with the client, Mr. Merkley noted. He said this helps Tillinghast devise specifications based on "functionality, hardware, software,…[the] kind of environment…[the client is] in" and other factors.

Speaking in general terms as to how to select a risk management information system, Mr. Merkley said that "when you look at these implementations, the [commonly mentioned] model is a pyramid, with price at one point, functionality at another and timing in terms of the speed of getting it implemented at the other point." He added that "it's always a balance among those three to get it right."

More specifically, Mr. Merkley said that, as to functionality, most of Tillinghast's clients look for an RMIS that can interface with other systems, such as payroll and other types of human-resources software. In addition, an RMIS typically must interface with one or more third-party administrators, he noted.

Moreover, since many Tillinghast clients are large corporate or government entities that are self-insured, many of them handle their claims management in-house, Mr. Merkley said. "For that reason, we see systems that are fairly involved because they need to do the claims management as well as the kind of traditional RMIS where you're doing reporting," he noted.

Additionally, a user company frequently has managers "who need to do reporting, and they can be from a number of departments and different functions," Mr. Merkley said. He added that "most of our clients like the ability to do ad hoc reporting," as well as "to have a secure remote access."

Finally, ease of use is "a must," said Mr. Merkley.

In terms of the cost of an RMIS, Mr. Betterley observed that "risk managers sometimes have…trouble…getting a budget to put up a system." Therefore, if there is a way to "bury the system cost into either your premium or your broker fee, then maybe you can get a system that you otherwise could not get," he said.

"These are sort of the political things that I think consultants sometimes forget. We know what the best system is but your boss won't let you buy it because you can’t get a line budget item for it," Mr. Betterley observed.

According to Mr. Merkley, having an RMIS does not necessarily eliminate the need for an information technology staff. He said that Tillinghast often finds that its clients already have an IT staff that is "fairly fully engaged already in the upkeep of the corporate LAN--their corporate Intranet." As a result, the IT staff is typically "very involved" in an RMIS implementation as well as the needs assessment, he said.

On the other hand, "one of the things we're seeing more clients interested in is an [application service provider] model," Mr. Merkley added. He explained that ASPs "take away from our clients the risk of trying to keep the software, the hardware and all the rest upgraded …[because] it's all housed at the vendor." Consequently, "to some extent, that would eliminate the need for tech people" on the clients' staff, he stated.

Two of the latest RMIS products are "Riskmaster.net" by Computer Science Corp. of Austin, Texas and "RiskConsole" by Risk Laboratories.

Ron Peterson, marketing manager for CSC, explained that Riskmaster is a browser-type application. "The architecture is open, so that our database can be used in conjunction with other databases," he said.

Mr. Peterson said that it is important to have such an "open system" because "the trend right now is in terms of partnering and sharing data with your other businesses and other people in the claims process."

Another trend identified by Mr. Peterson as driving open-data architecture is the spate of mergers and acquisitions. "You have different companies coming together with different databases, and they need to bring that data together," he observed.

Mr. Peterson conceded that "most people are maintaining their own data." But he said that the pressure of keeping up with the data and the high cost of maintaining an IT department, the hardware, and the software is causing some organizations to find ways to shift those responsibilities elsewhere so they can focus on just using the data.

Accordingly, CSC not only licenses its Windows-based software for use over the Internet, it also can host an organization's data from different sources on the Riskmaster.net server, keeping, updating and "cleaning" the data, Mr. Peterson revealed.

Mr. Peterson also explained that, unlike an APS application, a user of Riskmaster can own the software. Another feature of Riskmaster is that it is a modular system. "We have lots of different modules we just add on, and they do lots of different things, from 1099 tax forms to workers' compensation to bill review," Mr. Peterson stated.

He indicated that more than 400 organizations currently use Riskmaster.net. He divided those users--many of which are self-insured--into three general groups: (1) large Fortune 500 companies with a minimum 1,000 to 2,000 employees and $1 billion in revenue, (2) large hospitals and chains of hospitals and healthcare organizations and (3) TPAs. He also said that many city and county governments and agencies use Riskmaster.net.

At the recent Risk and Insurance Management Society conference in Atlanta, Risk Laboratories introduced "RiskConsole," which the company is touting as "the new generation of RMIS solutions."

RiskConsole is "a highly flexible" Internet-based product that places a comprehensive RMIS "within the financial reach of any organization that wants to manage its own risk," said George Netherton, chairman and co-founder of Risk Laboratories.

RiskConsole could eliminate the need for internal corporate IT support, Mr. Netherton stated.

Bob Morrell, chief technology officer and co-founder of Risk Laboratories, added that his company is leading the way to "flexible risk management information systems built on HTML from the ground up."

In laymen's terms, Mr. Morrell explained that the RiskConsole application is as simple as using a browser to look at a Web site. In short, RiskConsole "requires absolutely no installation," he said.

According to Mr. Netherton, "going from a client-server environment into a Web-based environment…[will drive] the cost down for everybody, which is where this industry eventually has to go."

Mr. Bildsoe specified how RiskConsole works. Usually in consultation with the risk manager, Risk Laboratories determines what kind of reports the client needs, what data sources the client has, and how frequently the client needs the data to be uploaded into the system.

"We do any customer configuration or custom report writing for the client and then we…give…[the client] user identifications," determining "who gets to see what information across the organization," he said.

Risk Laboratories contacts the vendor, carrier or TPA as frequently as the client requires, and that third party in turns provides Risk Laboratories with an electronic file of the pertinent data for conversion and processing, Mr. Bildsoe continued.

Then "all the risk manager needs to do is to log on and look at the reports," added Mr. Morrell.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, June 11, 2001. Copyright © 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.