The Dot Com RIMS Conference
May 2000
Evidence at this year's RIMS Conference reveals
a technological sea change sweeping the risk management services industry.
by
Jack P. Gibson
IRMI
At some point during each year's RIMS Conference, I step away from the minutia
of the products and services being promoted in the exhibit hall and the detailed
information being discussed in the sessions and try to look for larger industry
trends. In the early 1980s, we evidenced dramatic expense reduction efforts
by the brokers and insurers as the insane opulence of the hospitality suites
peaked in Atlanta (1980) and was pared back in later years to more reasonable
levels.
During the hard market of 1985 and 1986, we witnessed risk managers broking
each other to promote alternative risk finance vehicles. I'll never forget hearing
blatant sales pitches in the educational sessions, which, if they had been delivered
by anyone but a risk manager, would have earned catcalls from the audience.
Those sessions and the private meetings that took place at those conferences
gave birth to the alternative market that is so pervasive today.
The 1990s evidenced broadening risk management perspectives. The number of
exhibitors grew as accounting firms, third- party administrators, and risk control
service providers entered the picture. These firms now outnumber the insurers
and brokers in the hall.
Of course, the 1980s and 1990s saw the technology age begin. This was first
evidenced when Corporate Systems and Risk Sciences Group—the two dominant players
in mainframe risk management information systems in the early 1980s—suddenly
faced many new competitors deploying systems on personal computers. Then most
other service providers began to offer some type of PC- based product or service.
It is only fitting that this year's RIMS Conference, held April 30 through
May 5 in San Francisco, be dubbed the "Dot Com RIMS Conference." I did not have
to step back very far to see the technological sea change that has swept the
risk management services industry. The Internet revolution was pervasive throughout
the exhibit hall, the press conferences, and the educational sessions. Dot com
start-ups and traditional insurance and risk management service companies alike
were introducing their application service provider (ASP) solutions right and
left.
Get used to that term: ASP. Essentially it refers to the delivery of a software
solution over the Internet via a browser, which eliminates the need to purchase
the software and install it on a computer. You will be hearing this term often
in the years to come.
Are Customers Demanding Internet Service Delivery?
The answer to this question is a clear and unequivocal "yes." Liberty Mutual's
fifth annual Risk Management Survey, which the insurer released at the RIMS
Conference, provides some of the best evidence of Internet usage among risk
managers.
According to the survey, 98 percent of risk managers said they have used
the Internet in the past year for their job. Four out of five risk managers
also said they spend more than 5 hours a week online. Eighty-three percent of
risk managers cited using the Internet to gather risk management information,
up 9 percent from 1999. Seventy-five percent said they obtain regulatory information
using the Internet, up 17 percent from 1999, and 73 percent of respondents research
product and service information over the Internet, up 16 percent from 1999.
Sixty-five percent of risk managers also said they research safety information
on the Internet.
Of those respondents who renewed their insurance programs recently, 16 percent
said they used the Internet as part of the renewal process. Going forward, 27
percent of risk managers said they will use the Internet as part of the renewal
process.
According to the survey results, more than twice as many risk managers receive
certificates online today versus last year. In addition to receiving certificates
over the Internet, 56 percent of the respondents said they can review claim
status online.
In terms of information transfer with their insurers or third-party administrators,
half of the risk managers said they receive loss information online. Thirty-eight
percent of risk managers reported that they receive notification of reserve
changes over the Internet, while 32 percent of respondents said they use the
the Internet for filing claims. The survey results show that risk mangers from
companies with 5,000 employees or more use the Internet for information transfer
to a greater extent than risk mangers from smaller companies.
Half of the respondents said they would like to file claims online in the
future. Also, two out of three risk managers would like to receive certificates
of insurance electronically.
Dot Com Marketplaces
Probably the most revolutionary dot com start-ups exhibiting in San Francisco
were two trading hubs: dotRisk Limited and Global Risk Exchange.
The dotRisk site comprises three complementary platforms: ResolveRisk, ResolveClaims,
and TheClaimsExchange.
The goal of the ResolveRisk platform is to provide a faster and more efficient
way to buy and sell business insurance. It is intended to facilitate real-time,
principal-to-principal transactions at a fraction of the cost of transacting
business via traditional intermediaries.
The ResolveClaims platform provides an Internet meeting place where business
insurers and policyholders can review and resolve claims. It is a clearinghouse
for insurers, reinsurers, and policyholders that allows business insurance claims
to be submitted, processed, and resolved 24 hours a day, 7 days a week.
TheClaimsExchange is an Internet-based trading floor for buyers and sellers
of insurance and legal claims. Its objective is to provide an efficient, liquid,
inexpensive, and highly accessible auction marketplace for the purchase and
sale of virtually any type of claim—by claimants, insurance policyholders, insurance
companies, reinsurers, investment bankers, and other financial intermediaries.
Global Risk Exchange
is a property-casualty commercial insurance exchange offering large corporations
direct access to insurance markets. CFOs, treasurers, and risk managers will
be able to interact directly with insurers through an independent, unbiased
trading platform, which is specifically designed to handle complex corporate
risk transactions.
In its beta test period, Global Risk Exchange will offer umbrella and excess
liability coverage, but it intends to expand its offerings quickly to include
other major coverages and vertical market programs in selected industries. The
company will offer access only to brand-name insurers with excellent financial
ratings. Through an integrated suite of Internet-based services/applications,
Global Risk Exchange expects to slash the expense base of the current model
dramatically.
The company will have two complementary offerings: (1) an online market for
competitive bidding and direct access to insurance companies and (2) The RiskAssistant,
an online risk management application that simplifies and streamlines the administration
of insurance programs.
Frankly, I'm skeptical that the Internet, being an impersonal communication
system, will become a substitute for the traditional face-to-face information
exchange and negotiation inherent in commercial lines insurance placements.
In other words, I don't think it will be the death knell of intermediaries.
On the other hand, it is likely to become an efficient forum for presenting
underwriting information and proposals. It will be interesting to watch the
evolution of these new companies in the months and years to come.
ASP Claims Settlement Services
Perhaps the second most revolutionary Internet service being promoted in
San Francisco was online claims settlement. I was impressed with these services,
as they seem to offer an extremely efficient way to settle claims quickly when
liability is not in question. Three services were on display:
Cybersettle,
ClaimSettle,
and
clickNsettle.
While there are some subtle differences in their approaches, they use similar
models. Either the insured's representative (attorney or adjuster) or the claimant's
attorney can enter a request to use the system to settle the claim. The other
side may accept or choose to use the traditional process.
If the parties agree to use the system, each side enters its settlement offer/demand,
but neither side is notified of the other's amount. The system compares the
offer and demand to each other. If they are within a designated range of each
other, the claim is instantly settled at the midpoint. For example, if a demand
is for $30,000, an offer is for $25,000, and the agreed range is $5,000, the
claim would automatically settle for $27,500. If the demand and offer are not
within the specified range of each other, the claim does not settle, and the
parties can conduct another round.
The exhibitors told me that their systems are gaining acceptance with both
attorneys and insurers. In the near future, I think these or similar systems
will become a primary conduit for settling relatively small claims where liability
is clear.
ASP Insurance Certificate Administration
Requesting and issuing insurance certificates and monitoring compliance with
contract insurance provisions is an administrative headache for risk managers,
agents, brokers, and insurers. A number of companies have offered PC software
systems for managing these functions, and migration to the Internet is natural.
While many of the systems focus on requesting and tracking certificates once
received, one RIMS exhibitor, CertificatesNow.com, focuses on the issuer. This
ASP system allows agents and brokers to process, forward, and store certificates
of insurance without having to touch a single piece of paper. Agents or brokers
can even give their clients restricted access to insureds to issue their own
certificates. Certificates can be transmitted to the receiving party via e-mail,
fax, or regular mail. According to the company, industry estimates put the current
cost to issue a certificate using the traditional methodology at $3 to $7, and
its service costs less than $1.
Training
Another natural use of the Internet that was quite visible at RIMS is online
training. Several companies displayed innovative training programs dealing with
such important issues as harassment in the workplace, risk control, and safety.
These programs offer various interactive training modules with online quizzes
to ensure that the employee comprehends the material. Not only can these services
be effective teaching mediums, but they also can provide essential documentation
for defending liability claims or regulatory actions. One of the companies with
a broad range of training materials is netSyndicate.
Traditional Companies Offer ASP Solutions
Of course, the traditional "brick and mortar" companies also were rolling
out ASP solutions at RIMS. For example,
Corporate Systems
was a pioneer of risk management information systems, starting with a mainframe
system in 1968. The company's products evolved with the advent of the PC and
are doing so again with the Internet revolution. A good example is the company's
new electronic medical bill processing system for workers compensation and automobile
liability medical bills.
Corporate System's new service, eBillPro, leverages the Internet to electronically
link the medical providers' billing process to the medical bill adjudication
and payment process. Designed to benefit both the provider and the carrier,
eBillPro should greatly reduce processing and cycle time by eliminating mail
delays and numerous manual processes. The company says that eBillPro enables
the complete electronic processing of workers' compensation and auto bodily
injury medical bill because it also enables the electronic transmission and
processing of all associated attachments, such as doctors' reports, which are
critical to the adjudication of these invoices.
Omega Insurance Services provides another example of a traditional service
organization's innovative use of the Internet. Omega provides investigation
and video surveillance of workers compensation claimants. The firm uses sophisticated,
state-of-the-art technology in all aspects of investigation, from initial data
gathering through final reporting. A client can assign cases and view status
reports, final reports, and even photos and videos of claimants 24 hours a day
on Omega's web site.
Information Services
Then, of course, pure information services are another natural for the Internet.
Like IRMI, most of the traditional publishers of risk management and insurance
periodicals and reference services are moving onto the Web in some form or fashion.
In addition, there are some pure Internet companies with information sites,
the best examples being erisks.com,
captive.com,
and VerticalNet's
propertyandcasualty.com.
It Truly Is a Sea Change
This is only a sampling of the ASP solutions I saw in the exhibit hall at
RIMS. While only 12 of the nearly 500 exhibitors advertised themselves as dot
coms, the vast majority of the exhibitors I spoke with were offering or developing
some type of ASP solution in connection with their products and services. I
suspect this is only the beginning.
Opinions expressed in Expert Commentary articles are those of the author and are
not necessarily held by the author’s employer or IRMI. This article does not purport
to provide legal, accounting, or other professional advice or opinion. If such advice
is needed, consult with your attorney, accountant, or other qualified adviser.