BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.

To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.

To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.

Login Register Subscribe



Carol Harrington, director of risk management at Palo Alto, Calif.-based Sun Microsystems Inc., is credited with in 1996 helping develop an innovative site on the World Wide Web that allowed information to flow among Sun, its broker Sedgwick Group P.L.C. and insurer Chubb Corp.

She also is credited with encouraging the development earlier this year of a multiyear, multiline insurance program for the $8.6 billion-a-year maker of powerful server computers and software.

Prior to joining Sun nine years ago, Ms. Harrington held risk management positions at Raychem Corp. and Rolm Corp. and had been a risk analyst for Varian Associates. She also has been an agent for Fireman's Fund Insurance Co.

Ms. Harrington, 57, is a graduate of San Jose State University, with a B.S. in Business/Finance. She is a past president of the Northern California chapter of the Risk & Insurance Management Society Inc., an instructor for the Insurance Educational Assn. and holds both the Chartered Property & Casualty Underwriter and Associate in Risk Management designations.

With her computer periodically beeping with e-mail notices in the background, Ms. Harrington talked with Senior Editor Judy Greenwald.

How did you get involved in using the Internet to communicate with your broker and insurer?

Working for a technology company, I definitely have the advantage. As you can see, I have the tools available to me.

I felt that we should stretch and we should involve the brokerage firm as well as insurance companies. So I contacted Sedgwick and asked if they would be interested in networking with Sun Microsystems electronically so that we could transfer information.

We started with the small step of actually electronically trading e-mails, and then we extended from that to sending information via attachments and things of that sort.

As we grew, then, we moved in and selected Chubb Insurance Co. as the third point of the triangle. (Along with two consultants), we worked on a team basis.

We met periodically and talked about all the steps that we wanted to do to expand the opportunity to communicate more on an electronic basis, in other words to make our lives simpler and to get information to communicate more prospectively and more timely, too.

We started with one goal, which was to communicate the certificates of insurance, and then we traded information like local offices and loss control procedures and contacts and things of that sort.

More information could be gained by any Sun personnel worldwide just by going onto our Web page and clicking on and filling out templates, giving information that would automatically go both to the broker and also to the insurance companies.

Are you still working on this with Chubb and Sedgwick?

We will continue to communicate with our business partners electronically and will add new partners as we change and expand the insurance program.

We all used this almost as a learning base and then we took it on from there, expanded the concept of communicating electronically.

What are some of the other ways that you've been using technology as a risk manager?

One way that we use it internally is we have a risk management Web page so that all of our information is out there. All the Sun offices can see the information, such as frequently asked questions about their insurance coverages, templates for losses and things of that sort.

We've gotten very involved in a local Santa Clara Northern California RIMS group. We communicate electronically with these local companies.

If there's any information that we want shared, we just send it out. It goes out to all of our peers and counterparts, and we can all assist each other and help each other.

How quickly do you feel others in the risk management profession will move along the same lines? How far ahead of the pack are you because you work for Sun?

I think I definitely have an advantage because within the Sun organization, in all countries, we all use systems and we all communicate electronically; it's just paperless. We don't send memos from one to the other, so that's definitely been an advantage.

But I think if you look around, we're in the world of computers now. I think everyone has computers on their desks, their laptop, all kinds of computers.

I think the risk managers, as far as I know, are all somewhere along that curve of setting up Web pages, trying to figure out how they can communicate electronically, and looking for their suppliers, their brokers, their insurance companies, their consultants to provide them with information online.

I see all of that at various levels of stages, but all going toward the same goal of being able to communicate electronically.

What are some of the new ways that you envision technology and risk management developing in the future?

I think we're going to see a lot of our traditional work being done electronically, not only just on a communications level, but also in the processing of information.

I envision that in the future we will take information that's needed by insurance companies and pull that from various databases within our organization and transmit that information online directly to insurance companies, which in turn will be able to take that information and make it part of their policy contracts.

There won't be a lot of redundancies and passing of this information to a broker, who in turn will copy it into some format application and send that onto an insurance company. As you copy and re-send it, there's a higher level of chance for error. I think this will prevent that, so there won't be a lot of corrections, endorsements and changes to forms.

I envision insurers of the future going to companies' home pages where we have annual reports and new product introduction information. They can gain at any point in time during the policy period information on the company just by virtue of looking at their Web site.

Ideally, I'd like to pay their invoices online, too. Why have an invoice that's typed up by an insurance company, that's sent to a broker, who types up an invoice on brokerage paper, who sends the invoice in the mail to Sun Microsystems, who transmits the invoice to Sedgwick, and then on to the insurance company?

Ultimately we should be able to somehow transmit those funds electronically, directly to the insurance company, and that would prevent redundancy in the system.

I think another thing is, insurance companies are going to be able to offer products online. I think some of the direct writer insurance companies, life insurance companies, are doing that.

I think you see that moving more into larger clients, Fortune 100, or Fortune 500 companies, maybe they are too complex for that online quote, but I think we'll be moving toward that in the future.

Would you discuss the development of your multiyear, multiline insurance program?

I think we're seeing some amazing trends in the insurance industry now. I think products over a number of years haven't changed that much, and insurance companies have always provided products to the insured off the shelf, products designed by the insurance company in traditional lines of coverage.

I think what we're seeing now is that insurance companies are listening more to the customers, and they're developing products that specifically respond to customer needs, and that trend is continuing.

There's a lot of capacity out there and we've taken advantage of the situation by virtue of putting together a response to Sun Microsystems' risk management needs.

We've tried to build a product that's more simplistic from an administrative standpoint, multiline coverage, multi-years, thereby preventing us from having to go annually to the market for 40 to 50 insurance contracts that renew every single year.

As soon as we finished that old renewal process, and the policies were completed and forwarded in, we went through the process again and back out, reviewing and renewing policies.

Now that we have a multiyear program that is designed specifically for Sun, we can focus on the things that we need to be focusing on, which is defining what our risks and exposures are, going out and -- they call it risk mapping or risk profiling -- determining what exposures you need to address, focusing on contingency planning.

What if something happens, if you lose major manufacturing or a sole source supplier? What's your plan for the future?

It frees up a lot of time to do more of the strategic things that should be done rather than the traditional renewal and administrative processing things.

We're also able to set up a base of coverage that can be expanded as we find we have more needs for more creative types of coverages, non-traditional-type coverages such as political risk coverage.

It allows us to take a look at some of the commercial exposures, the financial risk, the financial exchange rate risks, credit risks, things of that sort, and also expand traditional insurance coverage, to infringement-type coverages or employment practices coverage, things that are available out there and can be just rolled into that blended program.

The new program is a three-year, multiline property and casualty insurance program. The catastrophic insurance limits have been provided by X.L., CIGNA and Swiss Re.

We have $300 million per-occurrence limits and $600 million in the aggregate. Allendale provides an excess property insurance program to blanket limits.

The new catastrophic program is excess of our captive insurance company retentions.

What are some of the other particular challenges facing you at Sun as risk manager?

I think a lot of us are trying to really focus on what really makes sense for the corporation as a whole and to redefine what risk is within our organization, so we're involved a lot more with top management and working with exposures other than traditional insurance exposures.

This involves thinking out of the box, and going out to suppliers, asking them if, in fact, they have any solutions that can address our specific needs, and always focusing on what makes sense from a strategic standpoint for the corporation, the shareholders, the stake holders, to protect the balance sheet, the bottom line for the corporation, for all the risks that are involved, not just property and casualty insurance risks.

Sun is a relatively new company. Do you think that gives you an important advantage in using these new approaches that perhaps other companies might not have?

That's a good question.

I think companies have to be financially strong, with a really good balance sheet, to involve programs where you have a high level of retention.

You have to be a company that is willing to open your mind toward taking on your own traditional exposures and claims and funding for those that are at a high excess level.

Also, the ones that are open and innovative that are, like I say, able to make change happen within the organization, those are the type of companies that will moving forward into these new models.

What are some of the other problems and challenges you see facing the risk management profession in the future?

The traditional administrative tasks will be outsourced so a broker or an insurance company will be doing those transaction-type exercises, such as getting certificates, filing certificates, issuing claims forms.

Any kind of repetitive transaction will be outsourced to various suppliers.

I see the risk management function in the future involving more of a strategic, high-level partnership with the organization, working at the vp level and working with management.

The others in the risk management organization, the staffs that will support that, won't necessarily be insurance technologists -- if there is such a term -- with insurance expertise.

Rather than just traditional insurance people, they will be individuals that will have financial expertise or even operational expertise within their own organizations.

They will be familiar with the operations, the manufacturing, the logistics, and will be able to use that information, along with their understanding of financial concepts, to come up with new ways of handling risks and exposures.