Thankfully, technology has improved the efficiency of these processes. The Internet provides an electronic exchange among risk managers, brokers and insurers. Intranets offer an efficient, secure exchange of data between an enterprise's worldwide locations and its central risk management office.

But there is a problem. The success of any of these systems largely depends on the information provided to risk managers by their commercial insurance brokers, third party administrators (TPAs) and insurance carriers. And therein lies the rub. For various reasons, insurers and other outside parties often are unwilling or unable to give risk managers the loss and claims data they need to do their job more efficiently. It is a problem that has dogged risk managers for years, and for some in the risk management community, the situation is reaching a head.   

Does Anyone Have the Information?

One big issue risk managers must overcome when chasing their loss and claims information is specificity, according to Vincent Oliva, vice president and research group director of Stamford, Connecticut-based Gartner Financial Services.

"Risk managers often buy a risk management information system (RMIS) to slice and dice the data so they can run loss projections," Oliva says, "but the historical data they get from insurers isn't very granular, and it makes the risk manager's job very hard."

By granularity, Oliva refers to the specificity of loss data, or in his words, "how deep the data goes." The more granular the data, the more it has been broken down, and the easier it is for a risk manager to pick and choose certain elements and run specific analyses of it.

"Let's say you've got fifteen claims in your packaging division that aggregated one million dollars in reserves and paid losses," Oliva says. "If your loss and claims information is really granular, you can dig down on that information and get not just the total claims and loss figures for your packaging division, but within that, the type of each loss, the time it took to settle them, the number of settlements versus judgments and so on. If you're an insurer, broker or TPA, you have to be able to give this kind of data. Just giving summaries won't do risk managers much good."

Sometimes, details are not the problem. An outright lack of useful information is, says attorney Linda Lamel, former CEO of New York-based Claims On Line, Inc. What risk managers know about their loss history is whatever data insurers, brokers and TPAs provide. In some cases, the data made available is virtually useless to the risk manager.

"When I was an insurance regulator, it was usual for auto insurers to use gender and marital status when they rated comprehensive auto insurance," Lamel says. "When the department asked what was the relevance of that data, the insurers admitted there was no causal relationship between that data and any sources of loss, and so they removed them as rating parameters. That always stood out to me. It was something they were able to collect and there were actuaries trying to make rates off of it, but it made no difference."

Another example Lamel offers involves the efforts of New York's governor to reduce the amount of drinking and driving in the state. As a way of drumming up support for the initiative, he decided to show how expensive this kind of behavior was. For that, he went to the state's insurance companies for data on DWI-related losses. "We all thought this would be the kind of data that auto insurers would have for underwriting and possibly denying coverage to drivers with a history of DWI," Lamel says. "What we found is when auto insurers got claim forms, they did not have the space on them to indicate whether or not the driver had been drinking, so they had no data on it. None."

This taught Lamel that insurance may be thought of as an information industry, but it still has plenty of room to improve, especially when it comes to having the kind of data risk managers need.

The Standard Legacy Problem

Another element of the data problem is the industry's lack of a universal data standard. Major contributors to the situation are the so-called legacy computer systems many insurance carriers continue to use.

Although the insurance industry was one of the first to embrace computer technology over forty years ago, the machines they invested in were huge and costly. As insurers accumulated and stored vast amounts of data on these increasingly dated and rickety machines, they had to choose whether to invest in new, more compatible systems and transfer all of their data, or simply continue to patch and upgrade their legacy systems. Largely as a matter of cost, many insurers have opted to stay with their existing systems. That means, however, a crippling data incompatibility-most legacy systems cannot share information with other computer systems.

Even if they could, insurers, brokers and TPAs have different methods of organizing, analyzing and running projections on data, making a bad incompatibility situation even worse. This is especially true for risk managers who have multiple accounts with multiple insurers and may have had accounts with many other third parties over the years. If each company maintains information in a different format, the risk manager is left with the impossible task of homogenizing all of that information in order to run historical loss analyses and make historically based loss projections.

"The industry needs to standardize data formats and to develop free and clear access to that data," advises Richard Hackenburg, CEO of St. Louis-based Willis Missouri Inc. "That way, you can maintain a principle of consistence, reducing costs over time because everybody's doing things in a consistent fashion. The analytics applied to consistent data will give better forecasts of what is likely to happen."

Jay Deragon, chairman of XS Voice, a Nashville, Tennessee-based insurance technology consulting firm, agrees, saying that getting usable information from a carrier is akin to pulling teeth. From his point of view, the problem is that the insurance industry's early enthusiasm for computer technology has waned, and now many carriers are content merely to maintain the systems they have, investing the bulk of their energy into reserves and market conditions. Working on data standards is simply a low priority.

"Even though data sharing is so popular among clients, many carriers are still not interested in pursuing it," Deragon says. Because companies' loss data often is spread out among various insurance carriers and brokers, data incompatibility becomes a systemic problem that no one insurer or broker can solve. Risk managers know that no matter how hard they work to improve their own data management systems, Deragon says, they still will be faced with different formats of data from other companies. The result is an "it's not worth it" attitude in the industry.

Groups like the Pearl River, New York-based Association for Cooperative Operations Research and Development (ACORD) are making major strides to combat that, but the standard they are developing is very detailed. (See "Advancements in Claims Data Standards," p.20.) Those that adhere to it gain a great deal of functionality from their data, but adopting the standard requires a lot of effort. As a result, the roll-out rate for data standards will be slow. That does not help risk managers trying to make sense of their company's loss history now.

"The best thing for any major corporation to do is to step back and collect their own data, regardless of what goes to the broker, and keep it in their own in-house data management system," Deragon says. "Some sophisticated risk managers are pushing for that already. But getting support for it might be difficult, especially since risk management is not always at the top of the executive profile."

Who Owns Your Data?

Pop quiz: You are a risk manager whose carrier has all of the loss data you need, and the technology to deliver it to you. But when you ask for it, the carrier refuses. What do you do?

Most risk managers naturally assume that their company owns their claims and loss information. Many insurers, brokers and TPAs, however, insist that once such data comes to them, it belongs to them and they have no obligation to return it.

"The issue of ownership of data has to be clarified," Hackenburg says. He believes, as do many risk managers, that any information pertinent to the client company's work product, insurance program, product information, management processes, financial data and business methods is, in fact, client-owned data regardless of whose computer system it is in. "To suggest that a client doesn't own it once it has been partially, wholly or in pieces transferred to a carrier, broker or TPA is a specious argument," he says.

The argument becomes less clear, however, when the insurance company, broker or TPA takes the data and adds value to it by applying proprietary processes, analytics or actuarial evaluations. Then, Hackenburg says, ownership becomes an issue that requires a considerable amount of work from all parties to resolve who owns what. Acknowledging that, Hackenburg suggests that once a client pays consideration, fees, premiums and commissions, it has also acquired the right of ownership to whatever intellectual property has been applied.

For example, a property insurer may draw and develop maps of the  locations it is insuring. These so-called fire maps contain information about the construction, occupancy, various exposures-both from internal operations and external forces-and available protection. The maps ostensibly help the property insurer underwrite those risks, and many carriers would consider them to be their property. But given that they are maps of the client's facility, they could also be used to improve the client's own loss prevention processes, loss control methods and maybe even its production techniques. In this regard, the maps are as much an asset to the client as they are to the insurer.

"The client paid a premium to the insurance company so the insurance company could make those maps," Hackenburg says. Thus, the client could argue the right of ownership to the maps because it paid for them. 

Insurers and brokers often counter that idea, saying that sharing loss data with their clients only empowers those accounts to use their loss data as a price guide and shop around for a better deal from another carrier.

"Are we living in a world of Karl Marx or a world of Adams and The Wealth of Nations?" Hackenburg asks. "At the end of the day, knowledge is power, and the insurance companies have got to figure out ways of partnering with their clients and provide superior services, including sharing their loss data with them." Otherwise, he says, clients will grow frustrated and will take their business to a carrier, broker or TPA who is not quite so stingy with information.

Lamel agrees, noting that insurance buyers do not look at insurance as a commodity anymore, nor do they shop purely on price. "That might be how agents and brokers look at things, and plenty of carriers see agents and brokers as their ultimate client," she says. "But in this case, the risk manager is the ultimate client, and if the carriers are smart, they will acknowledge that if risk managers must pay extra for access to their own loss data, they will."

Lamel points out that some brokers, especially those keen to gain a competitive edge, have become very willing not only to share information with risk managers, but to tailor it for their clients' specific needs. Many smaller brokers have made this their trademark, as have several larger players, including Willis, Gallagher and Sedgwick.

Gaining Leverage

For those risk managers with a carrier, broker or TPA that will still not share loss data, Lamel suggests there are other options. "If you have buying power, that can really be the key to getting the information you want," she says. "If you are a key account, or if you have a twenty-year relationship with your carrier or broker, you can probably negotiate for things that might not otherwise be available to other accounts. In this case, the leverage of being a key account is critical."

But what is a risk manager without a major or long-term account to do? The answer, says Hackenburg, is to spend plenty of time up front with the carrier, broker or TPA before any formal business relationship begins. Define which entity owns what data and what rights of access the client will retain, even once the relationship ends. "Call it a prenuptial agreement," he says.

The key is doing it sooner rather than later. Hackenburg says. "When somebody is after your business, that's when they are most willing to negotiate. Once you're hooked, things may not always be what they seemed."

To illustrate the point, Hackenburg recalls an old joke in which a man dies and goes to Heaven. St. Peter gives the man a one-day tour beyond the Pearly Gates, which, unsurprisingly, seems like a wonderful place to spend eternity. It is beautiful, comfortable and serene. But before letting the man in, St. Peter gives him a day to tour Hell so he can make an informed decision as to where he would like to go. The man agrees and goes to Hell. To his surprise, as nice as Heaven is, Hell is much better. There are raucous parties, all his friends are there, and it seems like a really great time. So, when the man returns to Heaven, he declines St. Peter's offer and goes back to Hell. When he arrives, there are no parties, only fire and brimstone. Bewildered, the man asks Lucifer why things suddenly became so different. Lucifer simply smiles and answers, "Yesterday, you were a prospect. Today, you are a client."

Side Story:
The Road to RMIS

According to Vincent Oliva of Gartner Financial Services, risk managers have a hard time getting the loss information they want. And when they do, it often is in a jumble of formats, making any kind of integrated analysis formidable, if not impossible. Off-the-shelf RMIS packages are touted as a good solution, but many companies find that for true effect, customized packages are the way to go. Below is a list of some of the more common custom RMIS systems. Typical features among these products include: exposure management, policy and coverage management, claims reporting and management, loss development and forecasting, customization, data conversion and Internet capability.

Stars (Marsh) www.marsh.com
RiskFolio (RiskLabs) www.risklabs.com 
Sigma Encore Suite (Risk Sciences) www.risksciencesgroup.com  
Risk Vision (Risk Technologies) www.riskvision.com 
RiskTrack (Liberty Mutual) www.libertymutual.com
Laser (Hartford) www.thehartford.com 
CARMA (Travelers) www.travelers.com 
Riskmaster (Mynd/CSC) www.riskmaster.com 
Risk Monitor (Aon) www.aon.com
RMIS Suite (Chubb) www.chubb.com
Options & Choices (UNUMProvident) www.unumprovident.com
IntelliRisk Net Source (AIG) www.aig.com
CS Knowledge (Corporate Systems) www.csedge.com
Flex System (Cunningham Lindsey) www.cunninghamlindsey.com
Risx-Facs (Gallagher-Bassett) www.gallagherbassett.com
Inform (Inform Applications) www.inform-cs.com
Oasis (Delphi Technology) www.delphi-tech.com
Webrisk (Effisoft, USA) www.effisoft.com
Risk Envision (CNA) www.risk-envision.com
Risk Advantage (ESIS) www.esis.com

Side Story: 

Access Granted

One player in the insurance industry that has made a business out of sharing data with its clients is Memphis, Tennessee-based TPA Sedgwick Claims Management Services. Sedgwick's primary tool is JURIS, an internally developed proprietary claims management system. Surrounding JURIS is viaOne, a Web-based product that gives clients access to their claims and loss information over the Internet. The various components of viaOne include viaOne Query, a system for providing clients with real-time claims information and updates; viaOne OSHA, a system for letting clients access claims data to populate and manage their OSHA log needs; and viaOne Analyze, a data warehousing tool that consolidates claims information from multiple carriers, bundles it with other pertinent (though not necessarily claims-related) information and delivers it to the client in an integrated package.

These products stem from a Sedgwick philosophy of letting clients "look over their shoulder," explains Steve Penman, Sedgwick's director of systems and technology, and a senior VP. "When we manage our clients' claims, we encourage them to be right there with us, monitoring what we do," he says. "It keeps us focused, and it keeps the client from having to call us and ask how their claim is being handled. It makes for a much more efficient environment."

Sedgwick also offers to share the client's claims and loss data with its broker or carrier-so long as the client gives permission. "We invite them to take part as well, to look at the data, to spot trends, and so on. We give them the same capabilities."

Penman shrugs off the notion that sharing data with the client is akin to letting that client leave for another TPA. By his reckoning, openly sharing information is much more likely to endear a client to their TPA rather than encourage them to look elsewhere. "We want our clients to stay with us because they recognize the quality job that we do," Penman says, "not because we're holding them hostage with their own data."

Sedgwick's attitudes are echoed by Arden Young, corporate manager of workers' compensation for the Atlanta-based Georgia Pacific Corporation. Young says viaOne was a major selling point for Georgia Pacific's selection of Sedgwick as their TPA. He also notes that Sedgwick supports viaOne with a dedicated training staff that will come to a client's location and provide users with hands-on training for two days. Young does not often see this from other TPAs, who typically will send a single tech support person to help out an individual user, but nothing more ambitious than that.

Young wishes viaOne provided a forum so users could compare notes and establish best practices for how to optimize the product. That shortcoming aside, he stands by viaOne as an excellent tool not only for managing his claims and loss data, but for managing risk overall.