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Entire contents Copyright © 1999 Business Insurance

"Column: RMIS Vendors Seek to Carve Out Niches"

Business Insurance, April 5, 1999

by David Tweedy

The global capitalistic system is a fascinating mechanism to watch. During recent months, we've seen the stock market plummet and reverse itself. Financial markets overseas teeter-totter. We've seen the largest proposed merger in history, that of Exxon Corp. and Mobil Corp. We're witnessing an apparent attempt by the U.S. Department of Justice to do some unpleasant things to Microsoft Corp. And Y2K looms in less than a year.

That same dynamism and uncertainty is mirrored to some degree in the insurance industry-mergers, consolidations, the advent of new technologies, natural disasters.

Yet, for providers of risk management information systems, things are seemingly less volatile. It seems to be a mature marketplace with few new major entries providing full-scale system solutions.

But underneath the surface of complacency, there are rumblings. For example, technological advancement is a given. Continued development in areas such as browser-based technology, database duplication and improvements in expert systems all contribute to a more dynamic environment. Also, there is the potential expansion of risk management as an industry itself.

The expansion of risk management beyond its traditional boundaries, espoused by many industry mavens, such as retired Microsoft risk manager Scott K. Lange, will have an impact upon the industry. Integrated 24-hour systems are becoming more common. Finally, many industry leaders in brokerage houses, third-party administrators and insurers are convinced that fully embracing well-designed automated tools is the key to success and growth.

Yet there are few new major entries, due to the extremely high dollar investment required to put a comprehensive claims management/risk management system into the market.

Therefore, in a mature yet potentially explosive marketplace, how do outsiders enter?

By exploiting chinks in the industry's armor.

These outsiders become specialty or niche vendors; their focus is on improving or augmenting one or a few key aspects of the risk management process, pre- and/or post-loss.

Vendors of comprehensive systems, on the other hand, concentrate on providing their core specialty capabilities, typically some type of claims adjudication and analysis software with increasingly user-friendly software. Because today's system architectures are more compatible with other applications (i.e., ``plug and play''), vendors are able to market more easily their smaller, niche- oriented applications.

So it is with many provider/vendors in the RMIS industry today. A large percentage-at least one-third-of those on the annual Business Insurance list of RMIS providers can be defined as niche players. So can larger firms with demonstrated success in other markets-such as health care or benefits-that also desire to carve out their own niche in a new functional area.

Here are several niche firms that serve as examples of this notion:

* Certificates Management Solutions, Near North National Group, Chicago (www.nnng.com). Focus area: certificates of insurance and bonds tracking and issuance.

The mission of CMS, which is part of Near North National Group of Chicago, is to provide risk managers with an in-depth, comprehensive tracking and issuance tool, in both Web-enabled and desktop versions, for certificates of insurance (and bonds).

There are several certificates-tracking systems for a variety of technical platforms with varying degrees of functionality. Yet CMS is unique in two ways: First, it is extremely detailed and technically robust-combining scanning, browsing and database technologies-while maintaining ease of use. Second, CMS is a specialized division within a large insurance brokerage firm and has single focus: providing a technical tool to a mundane-yet critical-task of a risk management department.

* Industrial Health Strategies Inc., Providence, R.I. (www.industrialhealth.com). Focus area: claims profiling and job site work assessment.

IHS is a workers compensation consulting firm specializing in disability management. It has developed an expert system called ACES (Accelerated Case/Claim Evaluation System), which automatically profiles claims for potential ``delayed recovery'' by analyzing more than 100 claim variables. Claims are ranked in order of potential significance, from 1 to 3, with 3s-the high-risk claims-typically being the ones targeted for ultimate adverse development. Once identified, such cases can be given early attention.

On the other side, ACES identifies claims that do not show a tendency to adversely develop, allowing adjusters and case managers to confidently expedite such claims. Combined with a comprehensive claims management/adjudication system, ACES could assist claim professionals and risk managers to gain an early focus on the right things. It's already in place at Beacon Mutual Insurance Co. in Warwick, R.I., the state's largest workers comp insurer, with favorable results.

* MiddleFork Technologies Inc., Chicago (www.middleforktech.com). Focus area: interactive/expert medical system for claims and case management professionals.

MFT is a new software firm that is launching a series of interactive expert medical systems aimed at providing desktop training for claims and case management professionals. The software series is called ``Essential Medicine for Insurance-Related Claims.'' The first module centers on herniated discs. The basic premise is that claims professionals frequently are in need of medical expertise in order to understand injuries, disabilities, procedures and the like. Typically, they would rely on staff or expert physicians who would come by on a regular basis to discuss cases and the medical issues that help adjusters understand the medical implications of disability.

Based on my experience as a former adjuster, it would have been great to have a radiologist, neurosurgeon, orthopedic surgeon or other health specialist at my beck and call to answer specific questions. Enter ``Essential Medicine.'' The goal of the system is to supplement/supplant the role of the expert medical adviser who teaches these critical items to adjusters. As part of a comprehensive claims adjudication system, this type of product can aid in reducing claim operating expenses and improving the ultimate reserving process.

* OCI, Cheyenne, Wyo., part of UNUM Corp. (www.ociwyo.com). Focus area: custom construction of enterprise-specific data warehouses for comprehensive risk management analysis.

OCI is yet another example of a larger company that specializes in the group benefits area entering the property/casualty arena with a niche product. OCI provides a total-cost-of-risk figure by integrating data from group medical, disability and property/casualty information into one source. Essentially, the firm designs unique data warehouses for each client and uses the Internet as a report and analysis delivery vehicle. It does not matter what the data source or provider is; OCI combines all the data into one data warehouse and builds a custom reporting package for each client.

* Software Technologies Corp., Monrovia, Calif. (www.stc.com). Focus area: database integration, consolidation and conversion technology.

This firm provides data and systems integration for companies with diverse systems and databases. Although the company already has successfully built a solid client base in the group health benefit insurance arena, it is beginning to enter the property/casualty side. Its tool, called ``DataGate,'' integrates data of disparate sources and types. With so many different data layouts, cost- efficient and accurate data conversion is perhaps the biggest challenge in the RMIS industry. STC seeks to provide that silver bullet for effective data conversion. Time will tell whether it succeeds in this difficult environment.

* Walker, West, Wong & Associates, Boston (www.walkerwestwong.com). Focus area: Internet-based risk management information system using existing client software and systems.

WWW is a small but full-service injury care management consulting organization specializing primarily in workers comp and other property/casualty exposures. In a somewhat similar fashion to OCI, WWW seeks to use, not replace, a client's existing vendors and systems. It does so by installing Internet-based products called WebDimensions/RMIS and RapidReports, developed in partnership with AXIM Systems of Medford, Mass.

RapidReports performs the critical generation of early first reports of accidents via the Internet/intranet, and WebDimensions/RMIS does analysis and report generation by extracting critical case and injury management information from RMIS systems-as well as adjuster notes/logs-through the Internet/intranet.

This is just a sample. Many new firms or product-services such as these come to my attention each year. The list grows all the time.

The large, comprehensive systems cannot do it all. They either lack the funds, market incentive, or expertise to develop all of the niche players' functionality. Yet, with the integration of systems becoming more commonplace, infusion of these types of software programs is much easier. I therefore see a lot of synergistic and partnership arrangements taking place over the next few years.

What does this mean to the vendor? Plenty. Niche players improve the state of the RMIS industry. Through technology, increased scrutiny is brought to bear on a particular issue. In some cases, the additional cost of the software can be more than justified by the savings the program generates through improved efficiency.

Obviously these niche systems are beneficial to the ultimate end user-the risk manager. You should evaluate your RMIS provider to see whether it provides these or other types of niche software capabilities, especially if they are critical to your own needs.

Talk with your provider to see how it can adapt some of these capabilities, or whether it can establish a strategic relationship to do so.

David A. Tweedy is principal of Tweedy Risk Consulting in Barrington, R.I. Mr. Tweedy's column on risk management information systems appears quarterly.