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It must be remembered that there is nothing more difficult to plan, more doubtful of success, nor more dangerous to manage than the creation of a new system.

-Machiavelli, 1513

PROPHETIC WORDS FROM A MAN who never had to wrestle with such crucial issues as "Do I invest in client server technology or wait until there is an Internet-ready risk management information system?"; "Should I outsource the RMIS or bring it in-house?"; "Do I upgrade my RMIS now or wait until my broker or insurer comes out with that 32-bit system later this year?"; "What impact will the recent acquisition of broker X by broker Y have on my broker X-provided information system?;" "Do I invest in network computers or stick with PCs?"; "What about data integrity?"

It seems Mr. Machiavelli was right on target.

Systems decisions these days are among the most ethereal and fraught with risk. Seemingly wise decisions made today can be rendered ineffectual at best within months by forces outside the risk manager's control. Therefore, the above questions-and related ones-undoubtedly will occupy the thoughts of many risk managers and MIS directors as they visit the plethora of RMIS vendors and systems during the Risk & Insurance Management Society Inc.'s 35th annual conference and exhibition in Atlanta.

One of the reasons for this difficulty is the constant atmosphere of change. From my perspective, it is very difficult to encapsulate in one column all of the changes over the past year, not to mention those that will have the most significant impact over the next few months. In fact, the recent "RMIS Review" I just wrote-due to be released at the conference-already is missing some of the latest organizational developments: including the acquisition of Johnson & Higgins by Marsh & McLennan Cos. Inc. (BI, March 24) and the mutual disbanding of InfoRisk, a joint venture between Arkwright Insurance Co. and Effisoft SARL. Interestingly, many of the changes and trends are organizational and not just technical.

Because of the dynamic nature of the industry, my purpose in this column is to best organize these changes or trends from a proactive perspective: Which are the most significant to the end user and provider? The two major categories of change and trends are organizational and technical.


The most sensational changes have been here.

Industry contraction: During the past six months, the RMIS industry has seen significant evidence of the contraction I have been predicting. To wit, Aon Group Inc.'s acquisition of Alexander & Alexander Services Inc. and the other recent blockbuster: M&M's takeover of J&H. Aon, of course, has one of the leading turnkey or comprehensive risk management information systems in Pyramid, whereas A&A has Anistics, one of the oldest and most respected RMIS providers.

J&H has several system products, the most popular of which is J&HStars, another comprehensive RMIS. M&M since the mid-1980's has been without a system product; instead it positioned itself as an RMIS consulting firm. Now it has one of the most comprehensive RMIS products in J&HStars and must incorporate it within its consulting organization.

Obviously, these deals were made for larger reasons than RMIS. Nevertheless, these important departments within Aon and M&M must make some difficult decisions in the months ahead to deal with such issues as account consolidation, technical differences, staffing, strategic direction, client service continuation, and the inevitable problems of some clients "falling through the cracks" during this transition process. Clients must be sure to proactively work with the new vendor to ensure their problems are not tabled until "transition problems" are resolved.

Continued insurer growth in RMIS: Another dominant theme, sure to be validated as one walks about the exhibition hall, is the continued development of RMIS systems and related services by insurers. Liberty Mutual Group, American International Group Inc., Kemper Insurance Cos., Chubb Corp., ITT Hartford Group Inc., Travelers Corp., USF&G Corp., and Zurich Insurance Group all have made significant investments in their client systems. Many of these have re-engineered their internal underwriting, administration and claims systems as well. While most still "bundle" their system services with the main underwriting and claims products, many do allow for other data sources to be input for a more complete snapshot of a client's risk profile.

Strategic realignment and alliances: The rest of the RMIS market also has been making moves. Many of the smaller vendors continue to search for capital infusion through strategic alliances with insurers, large brokers or other investors. Here are two examples:

Envision Enterprises L.L.C./Near North Insurance Agency: Envision possesses one of the best claims administration RMIS available, but as a small vendor would be unable to make the necessary ongoing investment to improve the product as well as service its growing clientele. Near North Insurance Agency investment in this vendor provides the necessary capital as well as important input from a broker's perspective.

Risk Laboratories Inc./Intelligent Systems: Risk Labs, founded two years ago in Atlanta, provides one of the most comprehensive risk management and analysis systems available today. It was designed not only for claims analysis, but also for exposure and policy analysis from a risk manager's perspective. Yet it needed the necessary capital infusion and system design expertise Intelligent Systems provided.

Some other vendors are making different strategic decisions.

Crawford RSG: Much has happened here in recent months. The RSG subsidiary has been pulled closer to the parent, Crawford & Co., and has made decisions not to promote its standalone, client/server ParaRisk claims administration system. While it will support ParaRisk, it will focus its total risk management orientation through Sigma for Windows and a new product on the design board now. The changes have caused some high-level personnel movement, and it will be interesting to watch the new Crawford RSG organization.

InfoRisk: InfoRisk was the new company created as the result of a joint venture between Arkwright Insurance and Effisoft SARL of Paris and London last year. Arkwright clients could have access to their engineering recommendations and property data through InfoRisk as well as a well designed risk management information system that focused on policy and exposure, rather than the U.S. orientation on claims. Recently, the joint venture was dissolved amicably.


Technology is the one constant variable of change. Everyone expects advancement, and it continues to be true in the RMIS industry as well. As one walks about the RIMS exhibition hall, the attendee will see Windows-based, client/server, graphical user interface products by the truckload. These system features are now fairly industry standard, with some exceptions.

Secondly, the use of more object-oriented tools and application languages, such as Visual Basic, PowerBuilder, and powerful database languages, such as SQL Server, Oracle and SyBase, have combined to allow RMIS vendors to simultaneously increase ease of use, flexibility and functionality.

But among the more interesting developments is the continued interest in the development of Internet/World Wide Web products, intranets, expanded use of electronic data interchange, and links to popular office software and internal systems.

A case in point is CIGNA Property & Casualty's cooperative venture with Microsoft Corp. CIGNA's Special Risk Facilities organization has created a new pilot RMIS product utilizing Microsoft Office '97-the leading integrated office software product offering word processing, spreadsheets and presentation software.

But Office '97 also has rich Web and ActiveX technologies, Microsoft Internet Explorer 3.0, Office doc hyperlinks, open data access interfaces and integrated support for Visual Basic programming technology across the suite of Office 97 applications.

The product is really designed as a decision support tool for CIGNA risk consultants who conduct research on the several available databases for their clients who are looking for benchmarking and specific claims analyses. The process begins by utilizing the internal company intranet to request a client report, i.e., workers comp losses as a percent of payroll. The request is processed in the data warehouse and fed to the Excel component. Automatically, the system places tables and graphs into PowerPoint and produces a Microsoft Word document, ready to be discussed with the client. In the future, CIGNA plans to make the data available on a secure Internet site for client access.

This is just one example. Many other vendors are working on similar products and services to meet the changing nature of the risk management industry. The big question will be how these vendors maintain or improve their client service records. The more services and system functionality, the greater the complexity of the hardware configuration, the greater the need for exemplary service. This is especially true for those risk managers with downsized departments and outsourced functions who rely so much on their RMIS.

As we approach and pass 2000, risk managers will face an ever-changing array of technology, functionality and services offered by a constantly evolving host of service providers.

I guess Machiavelli had it right after all.

David A. Tweedy is principal of Tweedy Risk Consulting in South Kingstown, R.I. Mr. Tweedy's column on risk management information systems appears quarterly.