Investment in Risk Management Systems Booming, New Study Finds
Staff Writer | June 02, 2020
Businesses and public entities throughout the U.S. are increasing their investments in risk management information systems (RMIS), which offer expanded capabilities that streamline workflows, automate processes, facilitate data/analytics, insurance program management, among other functions that help drive efficiency and improve performance, according to a new report from Redhand Advisors.
Among the 825 executives using RMIS surveyed in December 2019 and January 2020 for the 2020 RMIS Report, 33% indicated their organization’s annual systems costs exceeded $100,000, including 6% whose costs were above $500,000. Meanwhile, 28% had annual costs below $25,000 and the remaining 40% spent between $25,000 and $100,000.
Not surprisingly, with claims management and related services ubiquitous among all RMIS, these capabilities continue to be the most widely used. More than 8 in 10 survey participants use their RMIS for claims management, 52% for claims administration, and 41% for incident entry and management. In addition, 38% use their RMIS for loss control and safety analysis, 30% for insurance renewal and data collection, 27%, for litigation management and 25%, for benchmarking.
Other areas of RMIS utilization include: OSHA compliance (23%), insurance policy/program management (22%), exposure and asset management (21%), enterprise risk management (17%), premium allocation/calculation (13%), captive and pool management (13%), total cost of risk, key performance and key risk indicator management (11%), underwriting (10%), and certificate management (9%).
“For many employers, RMIS have become increasingly mission critical to a wide range of functions, including risk management, safety and loss control, compliance, enterprise risk management,” said Patrick O’Neill, founder and CEO, Redhand Advisors. “In recent weeks, this was underscored by how fast the leading RMIS providers developed tools and functionality to help clients address the impact of the COVID-19 pandemic on their organizations.”
Specifically, the COVID-19 tools developed by leading vendors included:
- Tracking and visualization tools to assess the spread of the virus by location
- Reporting tools and claim workflows for COVID-19 incidents
- Safety audit and non-clinical rounding resources
- Checklists to help healthcare professionals and hospitals ensure their facilities are prepared to safely care for suspected and confirmed COVID-19 patients
- Specialized functionality for the health-care industry, including COVID-19 diagnosis codes, personal protective equipment fit-testing data, and links to industry resources
- Real-time access to global pandemic-related data
“Today, the RMIS marketplace has evolved significantly from its roots in claims management and reporting,” said David Tweedy, senior risk advisor and partner, Redhand Advisors. “Today, functionality to support environmental health and safety, client relationship management, ERM, global risk and compliance, and AI all are becoming integral elements of a RMIS.”
The survey participants had varying views of RMIS functionality, which may be traced to their own job responsibilities and disciplines. Among those surveyed, 66% cited product functionality as a key RMIS differentiator, 46% chose customer service, 25% cited breadth of services, and 21%, vendor viability.
Additional key findings of the 2020 RMIS Report include:
- Growth in niche and specialty RMIS vendors. Fueled by technology and investment capital, this emerging group of vendors serves markets and clients that may not otherwise be addressed. With the ability to interface with other technology platforms, many of these specialty providers will carve out niches likely to continue to grow.
- Private Equity investments having varied effects on RMIS. While generally seen as a positive development that affords RMIS vendors new opportunities for growth and expansion into specialty markets and disciplines, investments by PE firms also tend to cause disruption to client service and compatibility of systems. One factor drawing interest from PE firms is RMIS providers’ access to vast amounts of risk information.
- Bundled providers had higher satisfaction ratings. As a group, the bundled RMIS vendors exceeded their unbundled counterparts in user satisfaction scores. This is likely the result of the bundled vendors’ on a narrow set of their “bread and butter” functions: claims, reports, and policies. Meanwhile, the unbundled, independent RMIS systems have far more moving parts. Further, some independent vendors have acquired other systems over the years, which can negatively affect their satisfaction scores.
- Overall satisfaction with RMIS providers is directly correlated with service. Service is a key differentiator. Despite the functionality range of a vendor, if they don’t provide high quality service it doesn’t matter what capabilities their system offers. Client feedback is really the most important element in evaluating a RMIS and vendor.
“Even as many RMIS vendors continue to add new capabilities, this should only be one of many factors for those in the process of evaluating RMIS systems,” advised Mr. Tweedy. “Customer service and delivery often translate to real value and can be game-changers when it comes to choosing a provider. While the providers all have different approaches to the customer service/implementation models, one size clearly does not fit all.”
“Another key in evaluating potential investments in RMIS is to calculate their ROI,” added Mr. O’Neill. “This starts with analyzing the full cost of the investment, calculating ROI based on the business case made for the investment and comparing it to other investments including doing nothing at all.”
According to the report, the cost of the investment includes:
- Direct costs of the software, hardware, and related implementation services.
- Ongoing software maintenance and support multiplied by the number of years the entity plans to measure the ROI (typically 3 - 5 years for software investments).
- Indirect costs of system implementation and support, including internal administration.
Mr. O’Neill added: “Determining ROI is helpful not only in decision-making, but also in measuring the success of the implementation and utilization of the software over multiple years. Use the ROI targets identified in the business case to measure the effectiveness of the RMIS.”
Now in its third year, The RMIS Report is the industry’s most widely read annual guide to the risk management information system industry, downloaded each year by more than 2,000 risk management professionals. In addition to the survey of 825 individual RMIS users, the report’s findings are based on responses to detailed questionnaire completed and submitted by 22 leading RMIS vendors, as well as anecdotal evidence and expertise and perspectives of the report’s co-authors, Patrick O’Neill and David Tweedy. Copies of the 2020 RMIS Report are available free of charge by contacting email@example.com or by visiting www.rmisreport.com.
About Redhand Advisors
Redhand Advisors, a risk management technology consulting firm, offers expertise in a broad range of risk technology solutions, advising organizations on how to best use technology to manage risk and maximize their investment in technology in the areas of risk, insurance and health IT. The firm works directly with organizations that use the technology as well as the providers that deliver the technology solutions. For additional information, visit https://www.redhandadvisors.com.
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