David Hanson is a Senior Vice President and Risk Management Information Services/Systems ( RMIS) Practice Leader at Willis of New York, Inc. Willis is the third largest insurance broker in the world. In this interview, Hanson discusses the role of Risk Management Information Services/Systems (RMIS) in the risk management/insurance industry and their affect on safety and loss prevention.
The views expressed by Mr. Hanson are his own, and they may not reflect those of the Willis organization.
Definition Use and Applicability
Risk Management Information Services/Systems (RMIS) is an insurance term that applies primarily to “casualty” claims/loss data systems. Casualty coverages include Auto Liability, Auto Physical Damage, Workers' Compensation, General Liability and Products Liability. Insurance carriers originally developed RMIS products to provide their insureds and brokers with basic policy and claim information via electronic access, and most recently, via the Internet. This information is essential for managing individual claims, identifying trends, marketing an insurance program, loss forecasting, actuarial studies and internal loss data communication within a client organization.
In the context of the acronym RMIS, the word “risk” pertains to an insured or self-insured organization. This is important because prior to the advent of RMIS, insurance company loss information reporting typically organized loss data around insurance policy numbers. The historical focus on insurance policies detracted from a clear, coherent and consolidated picture of a single customer's loss experience. The advent of RMIS in the 1980s was a breakthrough step in the insurance industry's evolution toward persistent and focused understanding of their end-customer needs.
What is the difference between a claims management system and RMIS?
Insurance carrier and Third-Party Administer (TPA) claim adjusters traditionally use claims management systems to collect and manage claim information and to administer claims. Some client organizations, however, may choose to manage certain types of claims or those within a loss retention layer and thus use this type of system as well.
Typically, the claims management system provides the primary data to RMIS products. RMIS products in turn provide an externally accessed view into the client's claims data. RMIS products are commonly available directly from larger insurance carriers and TPAs, but the most advanced systems are often offered by independent RMIS vendors. Independent RMIS vendor systems are most desirable when a client organization needs to consolidate claims data from multiple current insurance programs and/or past programs with current program information.
What are the most common types of RMIS, and how are they used?
Most major insurance companies and TPAs offer at least one external RMIS product. Their insured clients and any brokers involved receive direct access to the client organizations' casualty claim data that they generate. Most commonly, RMIS products allow individual claim detail look-up, basic trend report production, policy summaries and ad hoc queries. The resulting information can then be shared throughout the client's organization, usually for insurance program cost allocation, loss prevention and effective claim management at the local level. More advanced products allow multiple claim data sources to be consolidated into one “Master RMIS,” which is essential for most large client organizations with complex insurance programs.
The primary users of RMIS are risk/insurance departments of insured organizations and any insurance broker involved. Interestingly, it is much less common for the insured's safety department and vehicle operations department to have access to RMIS despite similar interest in the data. In fact, safety and vehicle operations of larger organizations typically maintain their own separate database systems of “accidents/incidents,” many of which will correlate to RMIS claim data.
Insurance companies normally use a different version of externally provided RMIS for internal use, such as by underwriting and loss control personnel. Occasionally, there could be timing or other differences that could cause data discrepancies between the internal system and externally provided RMIS.
Insurance brokers have a similar need for access to their insured client's claim data. Brokers are normally added as an additional user to the RMIS product provided to their clients by the insurance carrier and TPAs. The information available from RMIS is critical to the broker for interfacing effectively with their counterparts in the insurance carrier and TPAs. Additionally, effectively presented RMIS information that shows trends and analysis is essential to successfully marketing their clients' insurance programs.
How can the RMIS that are available today assist risk managers and safety professionals in better protecting an organization from the adverse effects of fortuitous loss?
Since the insurance community relies on past losses as a predictor of future losses, so should risk managers and safety professionals. Trends can be identified that would allow loss prevention measures to be implemented to prevent the occurrence of similar losses in the future. Additionally, once a loss-producing event occurs, the resulting claim(s) can be more effectively managed with RMIS products and can possibly reduce the ultimate payout.
Depending on the quality of data in a RMIS product, specific “causal factors” can be identified that can be used to support specific loss prevention remedies. Causal factor trends effectively presented in a RMIS product can be most helpful to safety practitioners to prevent future occurrences. The justification for the expenditures of an organization's resources on these loss prevention remedies can then be weighed against actual claim loss values provided by RMIS reports.
What advantages does an Internet-based system have over other conventional or legacy systems?
An Internet-based system conceptually provides ultimate access to an organization's claim data. An Internet-based system also allows authorized RMIS users virtual access from anywhere or at any time as long as equipment with Internet access and a browser is available. Internet-accessible systems are slightly less convenient since the user must have computer equipment that is pre-loaded with access software and certificates.
One must keep in mind, however, that the data accessed is only as current as the data updates within the RMIS product. For carrier and TPA RMIS products, their generated claim data may vary from “real time” to 24 hours old. For independent RMIS vendors, their data is more static and are typically valued at the end of the prior month. (Daily updates from independent RMIS vendors are available but are much more costly).
Vendors and Markets
Who is the typical buyer of RMIS—an organization, a broker or a third-party administrator? Do organizations build their own systems? In other words, please describe a legacy system.
Any organization that needs commercial insurance products from insurance companies and TPAs is the most common purchaser of traditional RMIS products. However, RMIS is bundled with their contracted services. The brokerage community is typically a user rather than a direct purchaser of RMIS although some insurance carriers, and TPAs may charge the broker involved a “users'/access fee.”
Smaller insurance carriers and TPA organizations may purchase a RMIS product from an independent RMIS vendor rather than attempt to build their own to offer to clients. Under this arrangement, the insurance carrier or TPA may continue to use their own “legacy” claims management system, which will supply the data to the RMIS product.
Most of the major insurance companies and TPAs have built their own RMIS products, and a few have directly combined them with their internal claims management system. Such dual-purpose systems can be advantageous since the claim adjuster, the insured organization and the broker can all look at the same claim record in the same screen view and in near “real time.”
A legacy system refers to the fact that RMIS tend to evolve over time. New technology rarely replaces the previous system infrastructure completely. Whether you receive RMIS services from a carrier, TPA, independent vendor or in-house information technology department, you may have a combination of technologies at work simultaneously. The older, more obsolete technologies are referred to as “legacy.”
How do the various vendors of RMIS differ? For example, are vendors systems compatible if an organization changes insurance carriers or third-party administrators, and can the old data be easily downloaded into the new system?
Major differences among RMIS vendors include:
RMIS system compatibility varies among carriers and TPAs. However, quality independent RMIS vendors by design can take almost any claim data source and convert or map the data to their particular system's file structure. A few major insurance carriers offer similar consolidation services, i.e., combining the insured client's current claim data with another carrier's or TPA's data for the same insured client. The other data sources can be for current separate insurance programs or from expired insurance programs. Usually, this type of consolidation service is performed to accommodate their major policyholder organizations. Major TPAs, however, more commonly offer such data consolidation services.
How much does a RMIS cost? Does higher cost always mean better performance in terms of efficiency, quality and analytical capability?
The cost of a typical independent RMIS product varies from $30,000 to $75,000 for the first year, and ongoing annual charges are slightly less. Insurance company RMIS product lines typically average around $5,000 for the first user, but they often offer less expensive light-weight versions for claim look-up only. More costly full-featured products are sometimes available with more advanced reporting systems. The products are usually priced on a per-user basis on a sliding scale for a larger number of users. Insured clients' brokers are given access at no cost or occasionally for a flat annual fee for multiple insured clients with a particular broker.
TPAs commonly include one or two RMIS access IDs within their claims management pricing to encourage both the client's broker and the client to use their claim look-up product. Normally, beyond the first two access IDs, the pricing follows the same per-user range of the insurance companies.
The cost drivers of RMIS include:
Clearly, higher cost systems do not always correlate to better performance in terms of both usefulness and speed. While most carrier and TPA RMIS systems are similarly priced, the independent RMIS vendors' price range varies significantly, as previously mentioned. A few of the lower-cost systems are in fact much faster in response time, which means more efficient use of application server technology. Some of the more costly systems are more pleasing to look at, but they often have no advantage in functionality.
What drives the RMIS market—the technology or the demands of risk managers? Do buyers purchase RMIS for what it can do, or do they purchase it based on what risk managers and safety professionals really need? Are the bells and whistles really necessary?
Most of the insured client installations with which I am familiar have been purchased by risk/insurance managers. As a result, those systems are more focused on satisfying the basic RMIS needs of risk/insurance mangers. The “bells and whistles” offered by the more advanced RMIS products help to sell the product, but they are primarily used by only the most demanding client organizations.
Once again, the explanation for what client organizations look for in a system is different by carrier/TPA RMIS products versus those offered by independent/Master RMIS vendors. In RMIS products from their carrier or TPA, at this point in time, insured clients should expect the following:
In addition to the above, Master RMIS offer:
I believe that most organizations will come to expect all of the bells and whistles of today. But since RMIS products will likely continue to evolve, there will always be new RMIS features on the market. Perhaps only the more progressive client organizations will see the value and use the newest features.
From your vantage point as a broker, but not as a RMIS vendor, how do you believe the recent industry consolidation will affect the market?
The most significant recent industry consolidation involves the acquisition of two of the better-known “independent RMIS vendors” by the two largest insurance brokers, Marsh and Aon. In 2004, Marsh acquired Corporate Systems, and Aon acquired RiskLabs. However, carrier and TPA RMIS products, in most instances, will probably not be directly affected by this consolidation. A few carriers and TPAs dealt directly with Corporate Systems, and they may now question the “independence” angle under the new Marsh ownership.
For those client organizations that insist upon contracting for RMIS from a truly independent RMIS provider, there are fewer choices now. Additionally, clients may see the insurance brokers that push their own RMIS product as less objective when it comes to assisting them in securing a RMIS product.
Truly independent RMIS vendors may also be reluctant to demonstrate their more proprietary product features to brokers who have their own RMIS product. Independent RMIS providers may also worry about getting a “fair shake” when it comes to being the lowest bidder.
Applications in Safety and Loss Prevention
What are the key features of RMIS, and how are they most useful to safety professionals who work in the risk management and insurance field?
The key features of RMIS, beyond those that have already been described, include the following, which are most useful to safety professionals:
What can safety professionals accomplish by using RMIS?
A client's safety staff can take advantage of their organization's RMIS and accomplish the following:
What drives the complexity of RMIS? How can a modern RMIS installation accommodate multiple claim data sources as well as a need for high-level analysis combined with a need to drill down to root cause?
The use of current technology and the ability to take in numerous and varied data sources drive the complexity of a RMIS product. RMIS products can most effectively address this complexity by:
Master RMIS vendors are expected to be able to handle multiple data sources that are mostly of the same type and are usually claim data. These vendors also commonly take in supporting data directly from client systems and from RMIS product users, including safety personnel. This type of data include:
All of this data must be made available for reports in a “relational database” so that it is accessible and useful in developing meaningful reports. With all of the aforementioned data, causal trends can be identified in groups of accident/incidents. When properly used, interactive RMIS reports can support conclusions revealed by the data, including both “proximal” and many “root causes.” Interactive reports include those that allow various data-filtering techniques and drill-down from broad to specific groups of data.
Loss runs were usually late and frequently wrong. Since there have been quantum improvements in technology over time, has data quality improved?
Certainly, online access to loss run data has improved data quality, primarily for those client organizations and their brokers who make the corrections themselves. In my view, online location code corrections within the carrier and TPA RMIS products have been the primary improvement.
Additionally, carrier and TPA RMIS products, which allow electronic data uploads from clients' human resources data systems, also have substantially improved accuracy, such as in assigning groups of claims to the proper locations. This accuracy is critical for the common risk management task of proper loss allocation and/or insurance premiums among the client organizations' business units.
Unfortunately, on the carrier's and TPA's side, the data credibility within individual claim records continues to focus almost solely on the financial and status aspects of a claim. My observation is that the larger carrier and TPAs continue to rely on the initial data input clerk for the safety critical accident/incident causal descriptors. Furthermore, once entered, most descriptive data fields are rarely changed.
The most frustrating ongoing problem with data quality from carrier and TPA RMIS products for the insured clients' safety personnel is probably the emphasis on “claim counts” rather than on “occurrence counts.” This event-counting problem is most evident in Automobile Liability and General Liability coverages where there may be multiple claimants for individual events.
When multiple claimants from a single event report their individual claim weeks or more apart or by different methods (such as through an attorney letter to the insured client instead of directly to the carrier or TPA), they can inadvertently be set up as separate occurrence records. Carriers and TPAs use various methods to link claimants to a common event such as by adding a “suffix to the claim number” (01, 02, 03, etc.) or a separate “occurrence number.”
Lastly, many carrier and TPA RMIS products are designed for assigning accident/incident occurrences to a single line of coverage. However, on the insured client side, it would be most helpful to roll an accident/occurrence across multiple lines of coverage and non-insured/self-insured/retained exposures. An example would include an automobile accident that involves liability to a third party, the injury to the client organization's employee(s) and the self-insured's physical damage to the company vehicle. A safety professional at the insured organization might like an easy way to report against the total value of such an accident to help justify increased defensive driver training.
The Future of RMIS
What do you believe is the future of RMIS in view of risk managers' expanding role into enterprise risk management?
RMIS will continue to increase in value to the organizations, risk managers and their brokers who use these systems to support their clients. Client organizations and brokers, however, will increasingly expect the carrier and TPA to improve data quality and to find ways to hold them more accountable, for example, with performance standards.
Client organizations will find more effective and efficient ways to become more directly involved in data input entered into their carrier and TPA RMIS. Options may include:
Can the technology really keep up with risk managers' demands as they expand their role throughout their enterprise?
Technology will likely keep up with most risk managers' demands. The major problem I see is the willingness of RMIS providers to continually make the investment in technology. Perhaps it will be more logical to expect that independent RMIS vendors, at least the successful ones, keep up their investment in technology since RMIS is their main business.
If risk managers are successful in partnering with other departments that can benefit from expanded RMIS, they will likely expand their role throughout their enterprise. A good example is integrated disability. Traditionally, the human resources department controls employee disability insurance while the risk manager controls workers' compensation. Integrated disability involves tracking both types of absences, which in many cases, can overlap or run from one coverage to the other.
As the marketplace levels out, can it support risk managers' increased need and their expanding role?
I believe that more risk managers will recognize the benefit of programs that allow them to retain more of their expected losses and therefore use RMIS products more effectively. Such loss-sensitive programs require increased information needs. Risk managers in turn will be more willing to invest in a RMIS product that they directly control and that provides useful information to multiple departments within their organization.
The remaining independent RMIS vendors need to demonstrate to the marketplace that they recognize:
David Hanson is a Senior Vice President and Risk Management Information Services/Systems ( RMIS) Practice Leader at Willis of New York, Inc. His primary responsibilities involve providing Risk Management Information Services/Systems (RMIS) support for internal and external clients. He provides direct risk control services to a limited number of casualty clients as well.
Hanson has over 28 years of experience in the field of safety/risk control. Before joining the Willis team in 1982, he was a Senior Account Engineer for another major New York City insurance broker. In that position, he provided loss control services to their larger clients, and he co-developed a computerized loss information system.
The industries in which Hanson has consulted span a variety of Fortune 500 companies and government agencies. He is experienced in the development of risk control programs, including safety training, pollution control and computerized loss information systems. He also has extensive experience in machine safeguarding, fleet safety, ergonomics and industrial hygiene.
Hanson is a professional member of the American Society of Safety Engineers (ASSE), the American Industrial Hygiene Association (AIHA) and the Chartered Property Casualty Underwriters (CPCU) Society. He is a Certified Safety Professional (CSP), a Certified Industrial Ergonomist (CIE), an Associate in Risk Management (ARM), a Chartered Property and Casualty Underwriter (CPCU), an Associate in Claims (AIC) and an Associate in Automation Management (AAM).
Hanson holds a bachelor of science degree in physical sciences with a minor in geology from Oklahoma State University and a master degree in occupational safety and health from New York University.