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Entire contents Copyright © 1999 Business Insurance "Insurers rising to the RMIS challenge; Stand-alone vendors
may find insurers tough competition"
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They're back.....After years of passive inactivity, the service providers (mostly insurers, some brokers and third-party administrators), have begun to make significant investments in providing state-of-the-art risk management information systems. They seek to challenge the independent and stand-alone vendors that have dominated the RMIS landscape for the last decade in offering unbundled systems. Such systems will be user friendly; utilize powerful database engines (from Oracle Corp., Microsoft Corp., SyBase Inc.); operate in a client/server environment; and be equipped with their owner's most valued commodity-data. How is this possible? Insurers long have been accused of myopia, bureaucratic delay and inaccurate loss runs. Much of this is true and their systems have mirrored these weaknesses. I know that this statement will bring cries of protest from insurers, brokers and third-party administrators who have been providing ``RMIS'' for several years. Yet the truth is that these systems have been mostly superficial, non-user friendly, and utilized old and frequently errant data. They tended to be reactive rather than proactive. True decision support capabilities valuable to risk management professionals were lacking. And such continues to be the case for much of the service provider industry. Why is the situation different now? After all, don't insurers shoot themselves in the feet when asked to do something truly innovative? Not this time, I think. One has only to look at the success of the large-deductible programs and preferred provider organizations, of which insurers were the primary architects. Several reasons present themselves as to why service providers, and especially insurers, are seriously returning to the RMIS industry at this time: Available dollars and name recognition There are few new entrants into the RMIS industry due to high entry costs in technology, staffing and marketing. The only ones with a chance to make a desired impact are those offering unique technical or functional capabilities, having significant financial resources or having a very low price. Insurers and major brokers, however, have a pre-existing market recognition. Now, this can be both good and bad-but that's another topic. The point is that the major service providers are well poised for a significant re-entry. Many of them have much more financial resources to devote to a RMIS than the small vendor which, in the 1980s, started as small entrepreneurs. Data Insurers have more than financial resources. More than any other organization (except large TPAs) they possess a very valuable asset that few of the other competitors have: raw data. Even the independents like Corporate Systems Ltd. and large broker-based systems must rely on insurers to supply the claims data. Insurers have always had this resource; they've just not been able to utilize it to the fullest. With sophisticated systems brandishing powerful relational databases, this data can be useful in benchmarking and best practices studies. Informational control This is the information age. Those service providers which have recognized that, and those organizations which best control and manage information, are those that will profit the most. Insurers and TPAs that effectively leverage their vast storehouses of data (claims, exposure, engineering, safety, premium, etc.) will have great control over the flow of information to their clients. Other organizations are interested in their data from benchmarking perspectives. Win back market share Insurers took a beating in the 1980s. Self insurance, TPAs, risk retention groups, and self-insured groups were the rage and insurers lost significant market share. Now, with a continued soft cycle, a lessening of the workers compensation crisis and the advent of the successful fronting and large deductible programs (quasi self-insurance) insurers look for another way to improve their market share. Brokers, too, are looking for ways to augment their revenues in the face of shrinking commissions. TPAs want to hold on to what they have. RMIS is that area offering a potential strategic advantage as it directly ties to the client's basic needs. Risk managers are in need of sophisticated systems. The new entrants face some challenges: High investment The RMIS industry is mature with few newcomers each year. Out of 50 acknowledged vendors in the annual Business Insurance survey, about 12 are currently the key players in terms of system functionality and technology. None of the top vendors, in my opinion, have been insurer-based systems. It takes a real commitment to research and development to combine both technology and insurance-industry related advances into system functionality. Independents like Pyramid Services Inc., Risk Services Group Inc., Dorn Technology Group Inc., Corporate Systems Ltd. and Anistics have made those investments over the years and provide systems reflective of consumer demand. Poor image Insurer-based systems in the past have been reactive, simplistic and fraught with data problems. The insurers have reputations of being bureaucratic and unimaginative. Image, therefore, is a definite barrier to overcome. Brokers and TPAs have less baggage here. However, the fact that most insurers and brokers left the RMIS industry during the 1980s during the severe market conditions remain in the minds of most buyers. Data accuracy/integrity This is a universal problem shared by all vendors alike. However, it is one of the most critical to solve. It is a fact that there is no standard way of collecting claims data; each insurer, broker, TPA and self-administered company seem to do things differently, causing tremendous problems when converting from one service provider to another. Sophisticated buyers A common theme I have echoed over the past few years is that risk managers are much more sophisticated, in systems, than they were 10 years ago. They have specific demands, expectations and requirements. Insurers which really want to get back into this market must take this fact into consideration. Stiff competition Wresting control from the independent and stand-alone vendors will not be a cake walk. They have amassed significant experience during their reign and will continue to offer major competition. Besides, if the major insurers and brokers all decide to re-enter the market, they will be competing against themselves, as well. A walk through the Risk & Insurance Management Society Inc. exhibition hall in San Francisco last spring gave inklings of this move. Insurers like Liberty Mutual Insurance Co. (RiskTrac) and American International Group Inc. (IntelliRisk) displayed Windows-based products with greater functionality and user-friendliness. In addition, CIGNA Corp.'s ESIS subsidiary is committed to a substantial rewrite of its CRIS and CRIS Advanced Function systems. Its objective is to provide a client-based, unbundled RMIS which is more user friendly, functional, and based on state-of-the-art technology. Its initial client system, RiskView, was on display in San Francisco and is a hint of the newer, ultimate system in the planning stages. They are also providing one of the most advanced safety-related software packages available today, called SafetyView, which was developed in a joint venture with a private software developer. ESIS plans a careful phase-in process with a pilot program, prototyping and ultimate phase-ins from 1996 through 1997. Brokers have not been complacent either. Sedgwick Group P.L.C. is revising its series of systems-JIMI and INFORM-to provide more client-oriented and functional capabilities. Anistics has upgraded its systems, too, to the OMEGA series in a similar move. What does this all mean? It's great news for the consumer. More options and stiff competition means better products, innovative technology, and reasonable pricing structures. To those who are cynical about whether the insurers and brokers are truly committing themselves to this investment, I believe it's legitimate. The insurance world has changed forever, but one thing has become clear: information control and management is one of the best ways to attract and keep happy clients. Providing solid information systems is a key strategy to achieve this end and ensure a better opportunity for profits. Copyright© 1995 Business Insurance |