RMIS-Web Risk & Insurance RMIS Article

"Risky Desktops"

by EILEEN OSWALD

July 1997

As the risk manager's role has evolved, so has the need for risk management information systems that can do more loss analysis, decision support and cost allocation -- right from the desktop.

As an insurance professional, you're under increasing pressure to demonstrate that what you do benefits the company's bottom line. Fortunately, advances in technology give risk managers the tools to perform their job more effectively and, at the same time, the ability to provide management with reports that show the cost savings and other benefits that can be gained from a well-designed risk management and insurance program.

In the past, of course, risk managers were viewed primarily as insurance buyers. Now, with insurance premiums at an all time low, risk managers have broader responsibilities. They need to focus on controlling the total cost of their company's risk by implementing risk management programs that reduce the frequency and severity of claims.

Meanwhile, downsizings and reorganizations frequently place risk managers under pressure to work more efficiently with fewer staff members and smaller budgets.

These pressures, combined with an abundance of technologies, have created a new responsibility for the risk manager: selecting a risk management information system that fully meets a company's specific needs. One of the reasons companies have transferred this responsibility from the information systems department to the risk management department is the advent of personal computers and the development of Windows, which allow risk managers to maintain risk management information systems from their desktop (Indeed, according to a recent cost-of-risk survey, 75 percent of risk managers use a personal computer, while only 23 percent rely on a mainframe.)

Purchasing a new risk management system is a major investment for any company. But a risk manager can conduct a return-on-investment analysis to show management the savings that can be realized by using a highly powered risk management information system.

The aforementioned cost-of-risk survey also provides insight into how risk managers use technology on a day-to-day basis. The primary use of information systems by risk managers is claims management (86.9 percent) followed by loss analysis and forecasting (56.1 percent). It is likely that technological advancements and the increasingly complex needs of risk managers will change this distribution, expanding the use of systems for more complicated purposes, such as decision support and cost allocation.

There are a number of risk management information systems (RMIS) on the market, each designed for specific lines of insurance and with different functions. For example, RiskEnvision is a Windows-based RMIS from Near North Risk Technologies, designed by corporate risk managers for risk managers in all business settings.

It consists of workers' compensation, general liability and automobile liability modules (a property liability module is currently in development). For all these lines of insurance, RiskEnvision is designed to streamline the workflow and management of incident and claim data, policy information and litigation issues.

Indeed, risk management information systems can help risk management departments operate more efficiently by streamlining administrative tasks. Systems can help ensure consistent, time-saving data entry through the use of drop-down boxes and checklists as well as user-defined order entry.

They can also simplify claim data entry with drop-down menus containing specific claim data fields. Additionally, there is the capability of generating state-required workers' compensation forms, including state-specific first reports of injury and OSHA 200 reports, and a diary system that risk managers can use to improve time management by tracking tasks on a weekly, monthly or claim-specific basis.

Move to Paperless

Risk management information systems can support a company's move toward a paperless environment. Letters and other documents can either be stored in the system or as attachments. For example, RiskEnvision has the capability to store policy and procedure manuals that reside in other applications and formats. In addition, scanning functions allow for storage of insurance policies and other documents, reducing paper and improving accessibility.

One of the most valuable functions of a risk management information system is its ability to provide decision support to the risk manager, enabling risk managers to conduct their own loss reports, including exposures and an analysis of the frequency and severity of claims.

Financial reports, such as loss development patterns, aggregate impairment calculations, reserving adjustments, loss stratifications and fee schedule savings can also be produced. These reports can assist risk managers with decision-making related to insurance coverage, workers' compensation programs and legal issues.

Measured Performance

Another key function of a system is its ability to help measure risk management program performance. Measuring the effectiveness of a risk management program begins and ends with benchmarking, or comparing information to the industry standard. For example, risk management information systems can provide risk managers with the ability to effectively implement expense controls.

The right RMIS can help risk managers track how much is being spent on areas such as insurance, workers' comp, attorneys, and managed care contracts. Benchmarking can be instrumental in pinpointing areas where there are potential cost savings.

This same information can be used for a cost of risk allocation, enabling risk managers to recognize problem centers within the organization. For example, tracking incidents helps risk managers identify the source of claims. By tracking incidents, risk managers also can allocate charges back to departments for the costs they incur.

The highly detailed data entry screens of new RMIS products can help risk managers pinpoint the source of claims to the exact location, shift and employee, allowing the risk manager to recognize incident trends. Tracking and trending are instrumental in the development of loss control programs that reduce the likelihood of future incidents.

Eileen Oswald is chief operating officer of Near North Risk Technologies of Chicago, a member of the Near North National Group.