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WITH SPRING FINALLY here -- at least according to
the calendar -- many of us are looking forward to the upcoming
national Risk & Insurance Management Society conference in
Orlando. That means finalizing last-minute travel plans, arranging
meetings and finishing up last-minute responsibilities. Some, like me,
need to finish speeches and handouts and coordinate last-minute
speaker changes.
For many, attending this mecca of risk management
and employee benefits will mark several firsts. As for me, because of
my new job it will be the first time that I will spend time in an
exhibit hall booth rather than visiting them.
Indeed, this conference is, in many ways, a
paradox. Changes are so apparent in the type of services and systems
being offered. And yet, there are many constant themes: cost control;
market-related problems; and increasingly sophisticated technology and
users.
It is within this dual context that I wish to
address some of these seemingly conflicting themes as they pertain to
the risk management information system industry. Whether they are
looking to either obtain or upgrade a system, end-users should
consider these observations before attempting to run the gauntlet
otherwise known as the Exhibition Hall.
During the last two months, I had the opportunity
to speak at a regional RIMS conference and a national gathering of
technical and marketing professionals from Marsh & McLennan Cos.
Inc. on the topic of RMIS. One of the great benefits of participating
in these events is that you rub shoulders with industry experts with
many different perspectives.
My new job has reinforced this by exposing me to
major issues important to chief executive officers and chief financial
officers, the typical contacts of a Big Six accounting firm's audit
partners. Here are some observations on what seems to be the RMIS'
direction over the next several years. These ideas probably will be
reinforced in Orlando.
Constants
For the next several years, I believe that the
following themes will continue:
- Cost Justified Systems. Any purchase or re-engineering of an
existing system will be cost justified in the eyes of senior
management. Gone are the days where expensive mainframe/timeshare
systems were accepted as part of the insurance solution. Even
personal computer-local area network systems must pass financial
muster these days.
For most of the available commercial
RMIS, it is not a problem in showing a payback as long as careful
needs assessment is made beforehand. In past columns I have shown
how paybacks are demonstrated by quantitative methods -- like bill
review, loss prevention and reserve analysis, and subjective methods
like increased efficiency. Nevertheless, the system must be a wise
investment.
- User-friendly systems. There is much demand today for RMIS that
are adaptable to any level of computer-literate person. Graphical
user interface, otherwise known as GUI and pronounced ''Gooey,'' is
not just a fad. It is here to stay, as Apple and Microsoft Windows
sales demonstrate.
And, this is really good for the risk
manager. It means that senior and line management have access to
these systems and data. Communication with them, as well as with
other department personnel, is greatly enhanced.
- Flexible systems. This is a major feature alwaysin demand. The
greater involvement of chief financial officers combined with staff
reductions in risk management departments is putting great pressure
on the RMIS vendors.
The dual goals for these systems
appear to be the replacement of the missing staff and an advanced
analytical/reporting package able to handle the rushed and complex
demands of the chief financial officer/treasurer. Added to this is
the increasingly sophisticated service demands placed on them by
risk managers and other customers.
- Service. We have been told that this is the age of service, that
the next great obstacle facing American industry is effectively
servicing their clientele.
But both the insurance and
RMIS industries are falling short of expectations in the service
area. Many personal computer vendors, because of low profit margins
and expanding client lists, are scrambling to provide minimal
services to this increasingly demanding client base.
The
mainframe/timeshare vendors are faced with obsolete architecture,
high fixed costs, shrinking profit margins and the same demanding
clientele. Superior technological advancements breed higher
expectations of flawless systems. And so, the RMIS vendor is caught
betwixt and between, as it were.
Success, however, can be
measured in how well the vendors navigate these difficult waters --
for failure surely means low profits and possible bankruptcy.
- Integration. That technology will continue to evolve is a given.
But, what is sure to be a focus at RIMS and beyond is the drive to
integrate software, hardware, telecommunications software, business
lines, etc. The drive to produce a 24-hour coverage capability will
certainly continue, especially under the present administration.
Providing a systems solution is a major goal of most RMIS
vendors. So too is the drive to create and proliferate the so-called
open systems, which can easily and effectively blend different
hardware platforms and software applications.
Changes
The RIMS conference will also show that there will
be a series of changes, such as:
- Vendor profiles. Increasingly, we will see incursions of new
types of system providers. Facility managers like Perot Systems
Corp. and Electronic Data Systems Corp. have already begun a
presence. It will continue to get stronger.
So will the
presence of giant health care organizations such as U.S. Healthcare
Inc. and Preferred Health Care Ltd. The former has tremendous
experience in running the data processing responsibilities of a
variety of organizations; the latter has great experience with
health claims, preferred provider organizations and health
maintenance organizations.
Because RMIS vendors are
mostly centering their marketing attention on the workers
compensation market, they are vulnerable to these incursions. While
I agree that effectively managing a workers comp claims program
poses different challenges than a group health program, both
exposures are driven by the same component -- employee injury.
And, finally, we note the return of a familiar player in this
industry: the broker. Many brokers departed from offering full RMIS
services in the mid-1980s due to increasing costs, customer
dissatisfaction and greater competition from the growing personal
computer vendor contingent.
Today, however, brokers like
Rollins Hudig Hall Inc., Johnson & Higgins, Alexander &
Alexander Services Inc. and Arthur J. Gallagher & Co. believe
that offering RMIS capabilities are crucial in keeping continued
contact with their clientele. It also helps them through the down
market cycle as they can charge for additional services rendered.
Marsh & McLennan, though not offering any formal system,
has mobilized a national task force of marketing and technical
personnel aimed at providing their clients with the best possible
system solutions.
- Technology. This could go in either category. However, I decided
to place it under change because of the risk it poses to developer
and buyer alike.
Changes are so quick that one faces a
risk of investing in the wrong technology. What happens if a buyer
invests hundreds of thousands of dollars with a vendor who is using
a software basis that is due to be de-emphasized? Granted, source
code arrangements can and should be made. But, finding personnel
willing and able to continue with the obsolete program may not be as
easy as one would hope.
I've seen this happen with
clients utilizing ''home grown'' systems with an obscure software
language that was neither compatible with some of the more popular
spreadsheet and data base languages nor had many avowed experts.
The client had to start all over again and build another
system when the one expert left.
- Product service demand. This, too, is in flux. Today it is most
certainly workers comp that controls the RMIS environment.
But who is to say that the natural disasters that have struck
the United States over the last several months will not finally turn
the market and place more emphasis on general liability and property
exposures?
With shrinking staffs, risk managers need to
depend on their brokers and RMIS vendor for analysis.
As
a result, the claims orientation of RMIS vendors may need to change
to a greater emphasis on risk financing. Some of the vendors, such
as Risk Sciences Group Inc. and American Technical Services Inc.,
already have well-defined modules in this area.
- Regulatory legal changes. For sure, the next several years will
be replete with many changes. The Clinton administration is sure to
cause many of these if health care reform is as sweeping as some
predict.
Amendments to tort laws, continued workers comp
reform and the push for 24-hour coverage will all put tremendous
strain on risk and benefit managers to be flexible in monitoring and
managing the results of such changes.
The RMIS and the
vendor must be just as flexible.
So, when you are walking the aisles at Orlando
contemplating changes in the way your risk management department
operates, consider turning to an RMIS for help. Only be sure that you
invest in the right one and have the right technical backup to effect
necessary changes in this dynamic time.
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