By David Tweedy, Senior Advisor, Redhand Advisors
Good data will be key to surviving the hard insurance market in 2022 and beyond.
Data will help you project claims so you can accurately fund them. It will speak for your risk exposure. It will illustrate your loss prevention and show the results of your claims management efforts.
A good RMIS system will turn risk data from across your organization into solid analysis, providing the context underwriters want to see. When choosing a RMIS, the question becomes: Bundled or Unbundled?
Bundled vs. Unbundled: What’s the difference?
The simplest definition of a “bundled” RMIS is that the system is owned and controlled by the insurance entity, not the client or policyholder. Bundled systems are typically provided by insurers, third party administrators and brokers. The system is only available to the client while they are under contract with the services of the insurer, TPA or broker. The cost of the system is typically included within the overall service charges by the insurance entity.
By contrast, an “unbundled” system is sold by independent software providers to clients and is therefore under the control of the client. Businesses buy (or rather, license) the software and ongoing support services from the independent RMIS vendor. Unbundled systems typically integrate with the business’ existing bundled systems to provide a total view of their risk profile.
For example, it’s a common strategy for businesses to have multiple insurers for different lines of coverage. For example, you may place your P&C policies with one carrier and your Executive Liability policies with another. Each insurer tracks their portion of your claims data and policy information within their proprietary, bundled RMIS system. If your business also uses a third-party administrator (TPA) for claims, then you’ve got another entity with ownership of the claims portion of your risk data, also housed by their proprietary bundled RMIS system.
At some point you’ll want to calculate the business’ total cost of risk (TCOR), GRC risk, total losses or do benchmarking analysis on your data. To do so, you’ll have to aggregate all the data from the disparate bundled RMIS systems of each insurance provider or TPA. Small to mid-size businesses will typically pull all the data together in an excel spreadsheet or legacy internal system. Large organizations with complex risk or those with lots of claims will want to aggregate the data from multiple bundled RMIS systems into their own unbundled RMIS system, acting as an umbrella system over each of your bundled programs.
Bundled RMIS systems have come a long way in the last decade, providing new features and functionality, with more robust reporting and analysis capabilities. They provide their clients with access to real time claims and policy information, a distinct plus. Some have the ability to pay premium directly through the bundled system. Another plus: the bundled system provides 24/7 communication access between client and insurer entity. Additionally, some insurers and TPAs are adding new functional capabilities that used to be only offered by the unbundled vendors.
And yet, there remains a functionality gulf between bundled and unbundled RMIS systems. For example, the unbundled system is able to draw data from many bundled systems from insurers and TPAs to give a true Total Cost of Risk (TCOR) view. And the unbundled system will remain even though the client may frequently change its TPAs or insurers (and their systems).
Which system is right for my business?
The answer to this question is never as simple as small businesses = bundled systems and large organizations = unbundled. Because bundled systems have increased features and capabilities in recent years, determining what is best for your organization requires a deeper dive into what risks and reporting your business seeks. Consider the following 6 questions:
- List all insurance service providers and what they each do for your organization.
Include TPAs and all insurance companies and any other providers collecting your business’ risk data. If most are with one organization (such as an insurer), you would greatly benefit from depending on their bundled RMIS. If, however, you have several insurers or TPAs, an unbundled RMIS tying all data together would be a good choice.
- Are you using a bundled RMIS system from your insurance service provider? If not, how do you collect claims and loss data?
Unfortunately, many businesses do not take advantage of the bundled RMIS provided from the insurer or TPA. If you find yourself depending more on an Excel spreadsheet to gather data, you should investigate how the bundled RMIS can take away some of those manual operations.
- What key reports does your organization require each week/month/quarter/annually? Can your bundled provider meet them?
Make a list of the reports and the type of data. Businesses often don’t realize the true functionality and available analysis of their existing bundled RMIS systems. If your bundled RMIS cannot adequately handle these key reports and data, consider an unbundled RMIS to pick up the slack.
- What isn’t working right now when it comes to risk data analysis?
What are you unable to do with your current system. For example, if you are currently using a spreadsheet for certain calculations, how is it done?
- What automations could reduce the time it takes to perform your data analytics?
RMIS automations can be engaged to reduce error, duplication of information and reduce the workload of your internal team in both bundled and unbundled RMIS systems.
- What’s your RMIS budget?
As mentioned above, most bundled systems are included as part of the overall services offered with an insurer or TPA. However, there are a few bundled providers who can provide more analysis for an additional cost. It is worthwhile to discuss this with your provider. Of course, the unbundled RMIS will cost you but perhaps it should be considered if you have multiple providers and diverse information needs.
In 2022, it’s not enough to have a good data collection system in place. That system must help your team to use the data collected to make better decisions when managing claims costs and high-stakes risks. Choosing the right RMIS systems for your organization is the first step in achieving it.