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Risk managers will be the
likely winners as competition heats up among risk management
information system vendors to win new customers.
System
improvements being touted include increased use of "point and
click'' programs compatible with Microsoft Corp.'s Windows system, and
more streamlined client-server technology that allows greater
flexibility in manipulating data from personal computers.
The
enhancement race also is reopening debate over who provides better
RMIS products and services: standalone system vendors or insurance
companies.
The standalone vendors say they will continue to
outpace many insurers when it comes to offering flexibility and custom
products. Insurers counter that they have more immediate access to
data, which benefits users of their systems.
The good news
is that all RMIS providers say they are being driven to deliver the
products and service that clients demand. They expect the competition
to also exert downward pressure on price, though not everyone agrees
that has happened yet.
"I think with the advent of some
of our larger competitors, carriers and TPAs who are just beginning to
get their Windows products out, or are in the (development) stage, it
is becoming more competitive. There is no question about it,'' said
Richard Downey, assistant vp and manager of customer information
services for Liberty Mutual Insurance Co. in Portsmouth, N.H.
Liberty
Mutual's RISKTRAC has used Windows and client-server technology for
about three years, Mr. Downey said. "We're seeing more and more
competition,'' he said. "The insurance buyer is a price-sensitive
buyer, as are all users of risk management information services. So it
is getting competitive from a price perspective, and I think over time
when you are comparing features to features, we will see more and more
competition.''
Skeptical observers say many insurers are
likely to go only so far in developing their systems, choosing to
remain with their core business of underwriting insurance. They say
some insurers are merely improving their products right now to cement
client relations. But others say that improved technology and customer
demand have made insurer data a more valued commodity.
"Maybe
five years ago it was not clear to carriers how important information
was in our industry,'' said Lee Topham, national sales and marketing
director for Anistics, a unit of Alexander & Alexander Services
Inc. in New York. "But it certainly is clear now, and I don't see
how they could ever lose sight of that.''
"What we are
seeing out there is a small revolution,'' explained Larry Keough,
director of information products/services in Philadelphia for ESIS, a
risk management information unit of CIGNA Corp. The revolution is
being led by risk managers who are more sophisticated and information
savvy than in the past, he said.
They read personal computer
magazines and watch television advertisements about point-and-click
technology and data manipulation, then they ask when their RMIS
systems will incorporate those capabilities, Mr. Keough said. ``They
are starting to push the marketplace to meet the demand, which is:
`Give me better tools to handle my data, regardless if it's claims or
other (risk management information).' ''
Mary Stoik Dymond,
the director of risk management at ACX Technologies in Golden, Colo.,
says Travelers Corp.'s CARMA system serves her company well for
retrieving information about workers compensation claims and loss
runs. But, she added, her system would be easier to use if it
incorporated Windows software commonly available for many personal
computer programs.
Travelers is listening to such requests.
About six months ago, the insurer released a Windows version of CARMA,
said Mike Strietelmeier, Traveler's director of risk management
information services in Hartford. So far, Windows versions have been
installed for about 45 customers, and Travelers is moving to convert
its remaining clients. However, unlike many standalone vendors and
some other insurers, Travelers does not plan to move to client-server
technology, Mr. Strietelmeier said.
Client-server technology
advocates say it allows them to provide lower-cost service and gives
clients more control of their own data, making it easier to create the
custom programs they demand. ``Prices for that architecture are a lot
less,'' Mr. Strietelmeier said. ``Where many vendors and carriers have
chosen to go with that architecture, they compete very well with
Travelers.
Travelers has decided not to pursue that kind of
architecture because we think our customers are more in the business
of risk management and don't want to get involved in managing hardware
and software. So prices in general are coming down, mainly because of
that architecture.'' But he doesn't think independents have all the
advantages. And, like other insurers, Travelers has a unit that
specializes in customizing systems for clients.
"The
independent vendors are really pushing their products, but there are
several places we differentiate ourselves,'' he said. "We are a
complete risk management product, and we are an insurance carrier. We
can offer the business expertise that the independent vendors normally
do not have available to them, whether it's an actuary or a claims
adjuster or a claims management specialist. All those experts are
available to us to help us service our customers.''
"The
real disadvantage the niche market players have is they don't have
real-time information,'' agreed Liberty Mutual's Mr. Downey. "They
are dependent on the big TPA or the insurance carriers to provide them
with information as to what is going on with a particular claim. They
have to come to us to get it. They may have some slick application
that will produce some nice reports, but they don't have the data, and
the real key is having the data to provide up-to-date, timely
information in an effective way.''
Independent vendors are
not feeling threatened by renewed competition from insurers in the
RMIS market, nor have they noticed pressure on their pricing. They
regard themselves as able to meet special needs, and question whether
some of the large insurers will ever be able to compete in their niche
markets.
"Insurers have a lot of limitations in that
area,'' said R.J. Mallette, vp of research and operations for Risk
Technologies Inc. in Mansfield, Texas. "Big organizations try to
typically keep things pretty consistent and make it very controllable.
But then you lose a lot of flexibility. I see them coming out with
some better products, but as far as providing true customer services?
It could happen. But it's never happened before.''
Traditionally,
many insurers have been in the RMIS business mainly to protect their
market share and control clients, said Alan B. Cantor, president of
Cantor & Co., the Beverly Hills, Calif., maker of Riskmap Risk
Financing and other risk management programs. Quality improvements to
insurer systems have been reactive rather than proactive, he said.
"It's understandable because that is not their main
business,'' Mr. Cantor said. "Now that is not to say they are
going to aggressively achieve some penetration. But as the consumer
becomes more educated, then the insurers are going to have to compete
more on quality just like the rest of us.''
While increased
competition may eliminate some players, ESIS' Mr. Keough said there
are potential advantages for both insurers and specialty niche
companies. He cited CIGNA, which plans to aggressively pursue RMIS
development, in part by teaming up with independent vendors.
Risk
managers say they will always search the marketplace for the products
that best fit their needs, regardless of whether they are produced by
insurers or independent vendors. "We're always looking to see
what is out there; what is better than what we have,'' said a Seattle
risk manager whose company recently decided to stay with Liberty
Mutual's RISKTRAC partly because her company is also insured by that
company.
Large insurers provide consistency and stability,
said Jeffrey Pettegrew, vp of risk management and insurance for
Western Staff Services in Walnut Creek, Calif. But one insurer's
system that he relies on does not provide all the features his
industry requires for tracking certificates of insurance.
For
that he turned to an independent software developer. While benefiting
from both worlds, Mr. Pettegrew has advice when hiring independents: "You
have to make sure you're with one who is going to be around.''
Other
observers say control of data can be a crucial factor in negotiations
with insurers. "If you decide to change carriers, what happens if
you have your whole RMIS with them and for whatever reason you decide
its better for you to be with another carrier?'' asked Ms. Stoik
Dymond.
"Do you lose support for that system? Is there
a pricing penalty (to continue receiving their support). I see some
downsides there unless (insurers) can divorce that unit in their
company from the underwriting and the claims people and truly have a
stand-alone service.''
As for products, both insurers and
stand-alone companies say the race is ultimately to develop systems
that will integrate all risk management functions. "What we are
building is really a risk management workstation,'' Anistics' Mr.
Topham said. "You have to give them all the information they need
in one place.'' |
