See the Forest and the Trees

The difference between risk management information systems (RMIS) and claims management systems seems to be a gray area for many people. So what is the difference and how do you determine which system is best suited to fulfill your organization’s needs, or if your organization would benefit from employing both?

The What and Why of RMIS
A simple explanation to define the complex functionality of a RMIS is to use the analogy of not seeing the forest for the trees. With a claims management system the capabilities are focused on providing detailed information on one particular claim, or tree in the forest. In contrast, a RMIS provides the capability to look at a claims operation, or the forest, and analyze its characteristics and patterns as a whole.

The primary function of a RMIS is to help risk managers with the necessary information to best manage a company’s risk. It consolidates data from multiple sources, including historical claims and policy and exposure information, and it compiles the information into one system where reports and queries can be run on all the data at once. The benefit is that it provides the ability to analyze data from a conglomeration of claims, like looking at a forest that is made up of an assortment of trees to determine how it is growing or changing. For the claims operation, the RMIS identifies historical data that can help in forecasting trends. Having access to such trend data enables a risk manager to exercise influence and take action to modify or capitalize on the trend.

The value comes primarily in the form of cost avoidance. If a trend is identified where costs are out of line with expectations, the organization can identify what needs to be done to bring costs back in line and/or improve expectations and avoid future claims costs.

A RMIS system empowers risk managers by putting the answers to complex questions at their fingertips. For example, let’s look at the RMIS of a fictional nationwide convenience store chain. In some states, like Florida, claims are handled by a third party administrator (TPA). In others, the carrier adjusts claims. In the remaining states an in-house adjuster handles claims management. Data from all sources (including the Florida TPA) is combined into a corporate RMIS system. The risk manager runs several standard reports in the system, and notices higher claims and costs in the company’s Florida stores when compared to other states over the last few months. Claims occurring in Florida over the last four months are then queried using onscreen tools for instantly available results.

It becomes immediately obvious on a bar graph-based report that the majority of the Florida claims are due to slip and falls. The risk manager then refines the query to filter only slip and falls, which are then displayed on a pie chart broken down by the day of the week. Remarkably, most of the incidents occurred on Tuesday. Further analysis reveals the time of most accidents to be early in the morning. Armed with this data the risk manager investigates further. A couple of phone calls to Florida locations uncover that delivery of refrigerated goods takes place late Monday night into early Tuesday morning. Condensation from the items drips onto the floors causing early bird customers to cross the drip path and slip. The risk manager corrects the problem by establishing proper procedures for employees to follow, e.g. post-delivery mopping. The framework of the RMIS query is saved and set to run automatically in the future.

This is a simple example of how a RMIS presents the data quickly and efficiently so problems can be identified and corrective action taken. In our scenario, a claims management system would provide detailed information on a specific slip and fall claim, including claimant information, litigation details, notes and diaries, but might be limited in its ability to show reports comparing data from multiple sources.

The Value
The risk manager for insured and self-insured organizations would be the typical user of a RMIS. It is beneficial to the following lines of business: auto liability, auto physical damage, workers’ compensation, products liability and general liability. Though these are the typical lines that use a RMIS, they are not the only lines that could benefit from implementing one. In companies where a risk manager is not present, the RMIS can prove even more valuable. Executives who oversee claim costs and risk for their company can utilize the system to efficiently report on all data that is available. This risk data might spread across various TPAs, carriers and also internal systems used to manage certain claims. Without a RMIS system, this information could only be obtained separately from each individual source, then manually combined in order to provide some semblance of a company-wide risk profile. Combined information may not provide the most current and accurate information and is prone to errors.

Claims Management Systems
In contrast to a RMIS, a claims management system focuses on a single claim, or tree, rather than the whole forest. A claim is handled with great detail as a single entity. A claims management system is the workplace of the adjuster and is used to manage claims and all related tasks required to process them. This includes recording all the additional information about the claim and claimant that might be missing from the First Report of Injury, documenting all ongoing communication, making payments by producing checks, and providing correspondence to assist with communication to the claimant. Within the system is the intricate detail on litigation, medical providers, payments, claim contacts (e.g. witnesses, attorneys, and vendors) and thousands of other data elements that are required in a claim file.

Good claims management systems save adjusters time, thus saving the organization money. In addition to time savings, these systems can also significantly reduce costs by providing experienced adjusters with the tools they need to properly manage claims. A true claims management system (not MS Excel, Outlook, etc.) allows adjusters to focus on each claimant.

Who Uses Claims Management Systems
Almost anyone tasked with the responsibility of managing claims should be using a claims management system. Claims management system users might be the adjuster at a self-insured company, or the adjuster at the company that handles all claims under a large deductible. Other users might be risk management personnel who have some claims oversight in addition to the claims management done by their carrier or TPA. Claims management systems are used in virtually all lines of business.

Selecting RMIS and Claims Management System Vendors
As every company has unique requirements, it is recommended that each establish a set of tailored criteria to use when evaluating potential RMIS or claims management system vendors. When developing criteria, a few universal qualifiers may include:

What System Do You Need?
Check the following boxes that are similar to your organization’s needs:

If you checked the top three, your organization most likely needs a RMIS. If you checked the bottom three, a claims management system would be the best fit. If you checked a combination, you may need both systems in order to accomplish your goals.

The More You Know, The Less You Guess
By implementing a claims management system, accuracy and efficiency is improved. Combining that system with a RMIS ensures that the most accurate data is used to examine historical trends. It also helps ensure that risk is mitigated and planning for the company’s future is founded on fact.

It would be impossible to know the details of a particular tree by studying the forest and vice versa. It is the same with RMIS and claims management systems; you cannot use one to accomplish the objectives of the other. Your organization needs to determine if it needs to analyze the forest or the tree, or both.

Terry Preece is senior vice president and cofounder of MountainView Software, www.mvsc.com, a division of Gallagher-Bassett Services. Preece has been involved in the claims and risk industry for 14 years.