2001: A RIMS Exhibit Hall Odyssey
May 2001
The 39th RIMS Annual Conference 7 Exhibition,
held April 29–May 3, hosted nearly 10,000 official delegates and exhibiters
in Atlanta. Learn about the important issues and trends in risk and insurance
along with what was new and what was passé in this year's Exhibit Hall.
by
Jack P. Gibson
IRMI
Nearly 10,000 "official" delegates and exhibitors, along with an untold number
of peripheral players, converged in Atlanta for the 39th RIMS Annual Conference
& Exhibition on April 29–May 3, 2001. Since it brings together the largest buyers
of insurance and risk services with their vendors and service providers, attending
this conference often reveals the pulse of the industry. My goal each year is
to try to ascertain and verify the important issues and trends in risk and insurance
to assure that IRMI is focused on them.
Unlike last year, which I dubbed the "Dot-Com
RIMS Conference," no single theme jumped out at me. Instead it was more
like a Robert Altman movie with numerous subplots. I spent most of my time in
the exhibit hall uncovering some of these subplots. With over 400 exhibiting
organizations represented by more than 4,000 exhibitors, the exhibit hall is,
well, overwhelming. However, you can learn much by talking with the many knowledgeable
people who are in the hall. Some of my findings are reported below.
The Market
As you might expect, the firming insurance market was one of the important
subplots. However, while everyone acknowledged that insurance rates and premiums
are going up, there was no sense of panic like we saw back in the 1980s' market
crash. Everyone seems to acknowledge that rates had been driven too low and
that the increases are appropriate. For the most part, it appears that insurers
are resisting any temptation to take advantage of the situation, and the increases
are perceived as reasonable.
Underwriters tended to express their hopes that their competitors will maintain
the discipline that has allowed all insurers to seek price increases in the
current market. There seems to be an underlying concern that someone else will
start discounting again to obtain market share and reverse the current trend.
In spite of this uneasiness, I also observed what appears to be considerable
resolve among some underwriters to maintain their course. This came through
loud and clear, for example, at a press conference held by Lloyd's. The underwriters
view Lloyd's as a market leader. They began firming rates in some lines, such
as directors and officers (D&O) liability, 2 years ago with U.S. insurers following
suit in the last 6 to 8 months. Based on my conversations with underwriters
from both U.S.- and internationally based insurers, I concluded that the firming
market will not change direction anytime soon.
Brokers told me they must now work harder on behalf of their clients, but
none complained about it. They see it as an opportunity to prove their worth.
A more difficult market will allow the more experienced, better-trained, better-organized,
and better-managed firms to prevail over their competitors.
The emergence of the regional broker was very evident in the exhibit hall
this year. If the consolidation of the large nationals in the last 5 years created
a vacuum, the regional brokers are positioning themselves to fill it. Exhibiting
this year were
ABD
Insurance & Financial Services, Inc.;
Acordia;
Hilb, Rogal
and Hamilton Company; Near North National Group; and Palmer & Cay.
Also exhibiting was the
Worldwide Broker
Network, a 50-member group of independent brokers from throughout Europe,
the United States, and the Pacific Basin. The network's members employ some
7,000 people worldwide and handle accounts totaling more than $7 billion in
total premiums. The network is designed to give its regional broker members
the capability to compete with the international brokers for multinational accounts.
A double-edged sword is hitting those brokers who are working on a fee basis
rather than commissions. While fees helped mitigate revenue declines when insurance
prices were falling, they also eliminate the windfall that can occur when premiums
rise dramatically. And while it is always difficult to tell clients that their
premiums are increasing, it is doubly difficult to propose a fee increase at
the same time. Thus, I suspect that while some brokers enjoy substantial revenue
gains in this market, others will not benefit nearly as much.
Risk managers are, of course, concerned about the hardening market, and this
was made clear in two surveys released during the conference. Rising risk costs―both
premiums and the cost of internal department operations―were identified by one
third of the risk professionals responding to Liberty Mutual's 6th Annual Risk
Management Survey as the most serious issue facing them today.
In a similar survey conducted by Munich-American RiskPartners, 75 percent
of the risk mangers and chief financial officers (CFOs) who responded stated
hardening market issues would be the biggest challenges facing them in the next
24 months. The top hardening market issues that were listed included:
- Changes in the cost of their programs
- Decreased coverage and changes in terms and conditions
- Reduced limits or capacity offered at renewal
- Increased deductibles and retentions mandated by insurers
While risk managers are concerned about it, they were not surprised by the
market change. The brokers and underwriters with whom I spoke believe that today's
risk managers are more sophisticated than many of their counterparts in the
mid 1980s and are better prepared for the firming market. They are ready to
assume more risk through higher deductibles, self-insurance, and alternative
market programs to control their costs, an observation supported by the Liberty
Mutual survey, in which 61.5 percent say they are likely to do so over the next
2 years. With 77 percent of respondents indicating they anticipate an increase
in their use of the alternative market in the next 2 years, the Munich-American
RiskPartners' survey further validates this conclusion.
Risk managers apparently believe the market will continue to firm over the
next year or so. Responding to the question in the Liberty Mutual Survey, "What
will the market look like in 2 years?", the overwhelming response was it is
expected to harden further (74.5 percent). About 17.5 percent expect it to stay
the same, while only 3.5 percent say it will be softer.
Technology Still at the Forefront
Technology has become a predominant theme of the RIMS conference exhibit
hall. Everyone―brokers, publishers, insurers, third-party administrators (TPAs),
safety consultants, niche service providers, and even RIMS itself―was showing
off their latest technological whiz-bang.
RIMS unveiled its new Web site,
RIMS.org. Among
other features, it offers a search engine that focuses only on sites that are
relevant to risk management and indexes those sites every 24 hours. The search
engine is available for anyone to use at
AskRIMS.org.
I was impressed with the results of the searches I tried using it.
An example of a niche service making innovative use of technology is
CAP Index, Inc.,
which provides CRIMECAST™ reports and maps. CAP's forecasting model combines
a neighborhood's social characteristics with known indicators of crime to produce
scores indicating a site's risk of crimes against persons or property. These
reports help risk management and insurance professionals control losses by considering
crime exposures when choosing new site locations and targeting risk control
programs to those existing facilities that present the most risk.
The dot-coms were much less evident than last year, but the trend of established
businesses moving their business models to the Web was still very clear. Take,
for example, Computer
Sciences Corporation's Riskmaster system. With over 400 users, this is one
of the most popular desktop risk management information systems (RMISs) on the
market. CSC introduced a browser version of Riskmaster last year, and its clients
are quite enthusiastic about it. Ron Peterson, Market Activation Manager for
CSC, summed up the advantages of browser based software applications (of any
kind) as compared to traditional desktop installations as follows.
- The system can be put into use with minimal to no involvement of the
user's IT department.
- Since the software resides in only one place, the Web server, rather
than on every user's desktop, it is much easier to install updates.
- By using a standard Web browser Interface, the system is much more intuitive,
and training time is reduced.
- Since the system resides on the Web, it can be accessed by any Web-enabled
computer from anywhere in the world at any time.
CSC was only one of many companies I spoke with that has begun transitioning
its products and service to the Web. There is much more to come.
Certificates of insurance are such a headache for risk managers, RIMS established
a task force with the objective of finding a cure. Perhaps technology will be
at least part of the answer. Computerized certificate issuing and tracking systems
were again quite evident in the exhibit hall. Exhibiting this year were
ConfirmNet Corp.,
DatatracPlus,
Ins-Cert.com,
and Periculum
Service Group.
I spent a few minutes with ConfirmNet Vice President Keith Fisher. They recently
launched a new and improved version of CertificatesNow, their online certificate
issuance system and expect to introduce a certificate tracking system before
the end of the year. Their new tracking service TracCertsNow, is also a Web-based
service designed to allow the risk manager to track and manage certificates
using a fully automated system.
For many good reasons, a growing concern of risk managers is managing the
loss exposures presented by e-commerce activities.
Cogentric
was a first-time exhibitor at RIMS, showing a new software application that
performs risk assessments of e-business sites through remote analysis of Web-site
characteristics. The software provides an underwriting analysis for cyber insurers
and generates prioritized action plans the company can follow to reduce its
risks. Cogentric announced that Liberty International Underwriters (LIU) will
be using the tool to underwrite LIU's cyber insurance program (scheduled for
launch this summer).
While dot-com marketplaces and insurance exchanges were not the buzz they
were last year, they were not altogether absent either.
Global Risk Exchange
survived last summer's dot-com fallout and to return this year. They have concluded
that the application service provider (ASP) model―where they host everything
for all users on their site―won't work for everyone, and they are allowing others
to license their software. In other words, a broker or insurer may license the
software for use with its own customers. Regardless of the deployment method,
their goal remains the same: to provide risk professionals with the freedom
to manage the traditional insurance supply chain over the Web.
New to the RIMS exhibit hall this year―with very different business models―were
MarketScout
and Insuretrade.com. MarketScout has established a system of electronic portals
through which agents and brokers can access a number of insurance products offered
by various insurers. Insuretrade.com is a portal through which agents/brokers,
underwriters, and commercial insurance buyers may communicate to place insurance
programs.
Insurance Innovations
Insurance product development activities appear to be focused on cyber insurance
and intellectual property risks. While there was a considerable amount of interest
in cyber insurance in the exhibit hall and in the sessions, I will leave this
subject for Mike Rossi to address in his cyber insurance column.
We are beginning to see accelerating activity in the area of intellectual
property (IP) coverages. While media insurance―which essentially protects against
copyright infringement and other intentional torts in connection with publishing,
advertising, or broadcasting―has been around for quite some time, coverage for
other IP exposures, such as patent infringement, is a relatively new innovation.
Most of these programs have been developed and offered by the large brokers
(e.g., Aon and Marsh) and a couple of national insurers (e.g., AIG) for large
accounts. However,
Intellectual Property
Insurance Services Corporation (IPISC), a returning exhibitor, is targeting
small to midsize companies as well as large ones with its IP insurance programs.
IPISC offers three different types of policies.
- Defense coverage, which pays the insured's
legal defenses if sued by a third party alleging patent infringement.
- Multi-peril loss of value, which compensates
the named insured for loss of intellectual property (e.g., business interruption
or loss of market share).
- Enforcement coverage, which reimburses
the insured for legal expenses incurred in enforcing patents, trademarks,
or copyrights.
A new exhibitor this year,
Gresham & Associates,
was promoting an interesting concept in The Competitive Edge Protection Policy.
This policy has two insuring agreements that cover (1) the insured's (or an
employee's) legal costs in defending against a claim alleging that it has breeched
a noncompete or nondisclosure agreement with another organization, and (2) the
legal costs incurred in enforcing a noncompete clause with a former employee.
The potential for theft of ideas, trade secrets, and other intellectual property
when competing companies hire employees from each other has become an important
business concern, and some high profile lawsuits have shown it to be an important
risk management concern as well.
I suspect we will see many more product launches in the area of intellectual
property insurance in the next few years. It will be interesting to watch these
developments.
Summary
Based on my observations at this year's conference, the firming insurance
market and managing the risks of e-commerce are the two biggest concerns of
risk managers as a group. We will work hard to keep you informed about both
of these areas through IRMI.com and our various
subscription services.
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.