Newsletter Sign-up

By Tom Starner

Emerging technologies, which allow risk managers to capture data in a meaningful way, are allowing managers to do so at lower cost and with less disruption than in the past.

In a November report titled "Worldwide Risk Technology Spending ? 2011 Analysis and Forecasts," IDC Financial Insights predicts that worldwide information technology spending pertaining to risk functions will reach more than $74 billion by 2015.

In addition, the research concludes that growth in technology spending on risk management will outpace the growth of overall technology spending in financial services.

"Although our macroeconomic assumptions continue to point to downward pressure on overall information technology spending in financial services, in our estimation, the risk technology market is large and still growing at a good clip," said Michael Versace, global risk research director at IDC Financial Insights.

For some risk managers, investments in risk management information systems is money well spent.

Jo Harris, vice president, risk management for Dean Foods, the $12 billion Dallas-based global food and beverage provider, said her company can offer a prime example of how to use predictive analytics tied to workers' compensation claims to lower costs with less disruption, allowing Dean Foods to capture data and put it to use in a meaningful way.

In this case, an analytics application was embedded within Dean Foods' risk management information systems. Harris said the basic concept was to find a way to predict which claims would benefit most from early intervention, which is often amajor objective for employers, especially those who are self-insured for workers' comp risks.

Dean Foods partnered with Marsh's CS STARS, a popular vendor of risk management information systems, and Oliver Wyman, a global management consulting firm also owned by Marsh, to take on the challenge.

"We were looking to drive down our cost structure but also help employees get healthy and back to work as quickly as possible," Harris said. "I told them we had all this data, but we needed a better way to take advantage of it."

In March 2010, Dean Foods began using predictive analytics modeling tools that were "baked into" STARS Professional, the CS STARS' risk management platform Dean Foods currently uses.

Instead of sifting through 100 percent of its comp claims, Dean Foods, the nation's largest diary producer with 25,000 employees worldwide and 40 different brands, now needs to closely examine just 30 percent of the claims singled out by the CS STARS platform to get better results.

For Harris, there is little doubt that using predictive analytics as part of its risk managementapproach is having a positive effect.

"It has resulted in an amazing ability to connect the dots with these early intervention cases and has been critical to success," Harris said. Dean Foods has experienced a 20 percent reduction in loss costs in workers' compensation, she said.

Ron Carlson, risk management information systems and process improvement manager for The Church of Jesus Christ of Latter-day Saints, in Salt Lake City, said that his organization has enjoyed early success using its risk management information system, provided by Riskonnect, a supplier of cloud-based technology for the risk management industry.

"Right from the start, we designed a request for proposal for a risk management information system around our functional requirements, areas of risk, as well as the vendor's commitment for product growth," he said.

"The vendors were evaluated on how well their written answers and product demos matched our business functional requirements."

Based on the request for proposals, Carlson knew which vendors could provide incident intake, claim management, business intelligence, efficient system administration, compliance reporting, and other functionality it wanted to have in the future -- especially the ability to move quickly when the need presented itself.

"There are so many changes in risk management that require very quick process changes," Carlson said.

For example, in an area like Medicare reporting, if you are self-insured you have to be able to comply with any new regulations, and do it fast. In this case, Carlson said his organization once received a reporting requirement on a Friday and needed to go live with it by the following Monday. "With our new technology platform, we were able to move that from test to production in two hours, something we could have never done before," he said.

Angela Trygestad, director of insurance services at the Schwan Food Company, a privately held, multibillion-dollar company that manufactures and markets frozen foods through home-delivery, retail-grocery and food service channels, said that Schwan is in the process of completing implementation of its new risk management information system.

The primary challenge is Schwan's risk management department needs more consistent information faster, with much more flexibility than it had in the past. "We are trying to do more with less, to manage the same information and other risk management issues with less people," she said. "Technology is the way to get there and within the past few years, the tools have expanded."

Trygestad added that in her 10 years of experience, the risk management industry tended to lag behind other comparable industries when it came to adopting new, innovative technologies. But today, she said, it seems to be moving much faster and showing even better results than other industries.

"Today, with these new technologies, you have a much better chance to really learn about your company and complete process improvements and changes quickly," she said. "There is just more time to focus, and you can spend more time on the analytics as opposed to the data gathering."

That, she said, has led to a more strategic approach especially with renewals, which are critical as the hard market approaches. For Trygestad, the ability to aggregate data has been where technology has been extremely effective.

"Working with Excel spreadsheets is not very helpful," she said. "You need a piece of technology set up to organize and slice and dice the data. Timing is everything. The more informed you are, the better you can adjust and adapt."

Bob Morrell, Riskonnect's CEO, said that some organizations still don't even have risk management information platforms in place.

"They have something in place," he said. "For example, they have systems that can run reports. Some can depend on the data and some can't. But some don't have a risk management information systems platform at all."

To Morrell, the risk management world right now is a "muddy, messy" one when it comes to technology.

It's a fragmented market and some companies' data batches aren't necessarily going to fit well with some predictive analytics tools. But things are starting to change, with the adoption of cloud-based computing, mobile applications and other emerging technologies.

"Most people are still at the starting line," he said. "I know how far old school technology was able to get people, and new technologies are able to take people much farther."

Dean Foods' Harris said the true challenge facing risk managers today is, while there is great data in multiple systems across the enterprise, there has yet to be a software analytics tool where you can bolt it on to different databases and run it in a standardized manner without requiring heavy information technology resources.

"You can do the job using the data available, but we are constantly looking for ways to bolt together these critical data bases," she said. "We may have a piece of it in our RMIS, but there also is great data in financial reporting and other company systems. Right now, we can get to it easily. We are trying to find that analytic tool to drive meaningful understanding of all data within the company."

The trick, she said, is bolting multiple data sources into a single analytics platform without building a whole new, expensive infrastructure.

"It will happen," she said. "Right now, we are using one aspect of technology to drive results, and that works. But now we want to do that in a way that marries multiple sources."

TOM STARNER is a freelance writer who specializes in technology. He can be reached at riskletters@lrp.com.

March 1, 2012

Copyright 2012© LRP Publications