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By Cyril Tuohy

ac·cel·er·a·tor

1. A device, especially the gas pedal of a motor vehicle, for increasing speed.

2. Chemistry: A substance that increases the speed of a reaction.

3. Physics: A particle accelerator.

The world of risk management and insurance is a very small place. Now, it has become a very fast place as well.

Pressure to accelerate has become intense. From issuing, binding and administering commercial insurance policies, to settling catastrophe, workers' compensation and disability claims, to billing and policy renewal, to filing a first notice of loss, cycle times are speeding up.

Even the expression "needing something yesterday" may not describe the speed of the change. Managers' patience -- or impatience -- has moved from the speed of sound to the speed of light, according to insurance technology experts and risk managers.

For many risk managers, in effect the end users of the faster technologies available to them, it's a good thing.

Take Greg Kildare, executive officer for risk management with LA Metro, for instance. Using CSC's RISKMASTER Accelerator suite of products, Kildare is speeding up the rate at which he compiles loss and claims reports for the agency that runs Los Angeles' sprawling bus and rail commuter system.

Faster cycle times mean he can generate more quarterly, monthly or even weekly reports for his board of directors. "Cycle time is reduced as we're not moving boxes of claims daily from Downtown Los Angeles out to Pasadena," he said.

That avoids a 25 miles round-trip through notoriously heavy traffic.

Speed also means lower administrative costs for his internal clients -- division heads and C-suite executives responsible for developing safety and loss prevention programs around new pieces of information.

"In terms of responding to their needs for loss control, I can respond more quickly and I can get data that I couldn't get before," he said.

At the push of a button, Kildare can call up field-level information, generate claims information by specific bus line, or search for claims by individual bus operator. It is the kind of information LA Metro board members or senior executives often request on short notice, and Kildare comes up with it in hours instead of days or weeks.

Faster client-server platforms and the use of relational databases have also helped generate new reams of information, said Roy Collins, a former claims and risk control expert with Marsh and Aon, and now a partner with Saber Risk Solutions.

Risk managers and the bosses they report to expect faster results, he said, and the biggest strides have generally been made in the area of claims and property exposures, areas where the industry has amassed mountains of data.

"We want to know the locations of the slips and falls, and why people are falling. Is it a property malfunction? Is it water leaking from gutters? Those are the things we'd like to look into," said Dave Harman, claims manager with the County Commissioners Association of Pennsylvania, which represents the commonwealth's 67 counties.

CCAP also uses RISKMASTER Accelerator. Other licensees of the popular risk management software include The New York Black Car Fund, which provides workers' comp insurance to black car operators in the state of New York, and Ruan Transportation Management Systems, a national transportation management company in Des Moines, Iowa, according CSC.

Faster computing speeds and shorter cycle times have benefited all industries, from retail point-of-service terminals to engineering design. So the changes taking place among risk management departments and third-party administrators are not unique to the insurance industry, according to technology experts.

AGILITY AND CHANGE

Ironically, though, technological acceleration isn't about raw processing power anymore or moving data at the speed of light. The boundaries around speed and computation evaporated long ago, and will continue to disintegrate in accordance with Moore's Law, which holds that over the history of computing hardware, the number of transistors on circuits doubles approximately every two years.

What's changed today is the ability for products, services, organizations and people to alter course quickly, said Matthew Josefowicz, a Boston-based partner and managing director with the consultancy Novarica.

Insurance carriers need to be able to change products on a dime before a launch, while a product or service is in Beta testing, and even after products hit the market. Doing that is no longer a question of supplying raw computing performance, but an ability to alter or tweak systems and products to meet the needs of buyers.

"Rate changes can go from months to days or even less," Josefowicz said. "That's the kind of acceleration we're talking about. We're talking about speed of change and agility as opposed to speed of raw processing."

Insurance carriers have never had a problem running numbers quickly. In fact, they do it faster than practically anyone else. Where the industry lagged was its ability to react and change on the fly.

That, too, is changing as insurance information technology systems move from code-based architectures to more easily configurable systems. Those systems are faster because managers only need to alter parameters instead of rewriting code, Josefowicz said.

Results are beginning to show up on the ground level. The speed with which some carriers have been able to pay the tornado claims in the past two or three years, for example, proves the industry has made gains.

The $10 million check in connection with what is expected to be a $25 million payout in connection with the "Good Friday tornado" that hit Lambert-St. Louis International Airport in the spring of 2011, was cut in less than a week.

Computing speeds in connection with exposure modeling and analytics have allowed carriers to pinpoint where losses are going to occur, Josefowicz said, allowing underwriters to position their adjusters to warn policyholders.

Josefowicz points to the "consumerization of information technology" as a reason for raising the expectations managers have of their technology tools. Claims adjusters, agents and brokers, and underwriters travel with hand-held devices with robust access to databases. There are iPad apps solely for excess and surplus agents. Other iPhone apps are designed for risk adjusters. It is these tools that are shaping people's online and mobile experience.

"People are not tolerant of waiting because of the consumerization of information technology," he said. "When everybody's experience of computer is a wonky mainframe, OK, but when it's defined by Google, Amazon and the iPhone, people have no patience."

CFOs don't want to wait three weeks for his or her risk manager to run a first notice of loss report. Risk managers are fed up with waiting for quarterly insurance program updates from their brokers. Agents and brokers have alternatives to foot-dragging third-party administrators, and third-party administrators in-turn have options when it comes to using subcontractors.

Faster technology ultimately helps organizations make faster decisions, said Loren Padelford, executive vice president and general manager Active Risk.

Padelford cites the example of an engineering company with 100 projects, of which only two destroy the company's entire profitability. The challenge was figuring out which two before the firm spent the money.

If risk management can show senior management which components of which projects are starting to fail two or three months before the company spends the money, that's where the value of acceleration turns up. "If I know sooner, I can change sooner," Padelford said.

Insurance carriers are also tuned into the speed zeitgeist. ACE Risk Management's Web-based platform, ACE Accelerator, was announced in March.

The system allows risk managers to answer questions regarding coverage elections and streamlines the way managers review, execute and submit coverage forms, according to ACE Group's website.

Another small company, SpeedBuilder Systems Inc., promises to help carriers and MGA's get products to market faster, boost sales and improve underwriting results fast.

CYRIL TUOHY is managing editor of Risk & Insurance®. He can be reached at ctuohy@lrp.com.

October 11, 2012

Copyright 2012© LRP Publications