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Two benefits of using a tailored system to process, analyse and distribute risk data automatically, and often cited by risk managers, are that it affords greater control over data and means the company is not beholden to a third party. The automated nature of such systems also means that the accuracy of the data is that much better.
The greater accuracy has in turn enabled risk managers to improve their relationship with their insurers by providing more auditable risk information and enabling a closer monitoring of claims trends, said Ms Fanning.
Ms Fanning [Head of Group Insurance at tour operator TUI Travel] does not believe, however, that the use of a RMIS should directly result in lower rates. What Ms Fanning finds more concerning is the lack of sophisticated systems on the insurer's side. "When it comes to claims, policies and global management a lot of their systems are archaic. I have had lots of situations where I have not understood the information they've provided to me and I think this is because a lot of the big multinational insurers have not invested in new systems. So I find it a bit hypocritical when insurers sometimes criticise insureds for the quality of their risk information when the quality of the data we provide is a lot better than the quality of data we get back from them", she said.
According to Tom Richardson, Head of Customer Relationship Management, Zurich Global Corporate UK, insurers are investing considerable sums in developing their IT systems. However it will take time for this investment to bear fruit because of the numerous challenges they face, he added.
But this is not to say that insurers do not get any kind of benefit from risk managers' use of RMIS. By definition, those firms using an RMIS tend to produce more consistent information, said Mr Richardson. "This still has to be reformatted for our own systems-for example, property data that is geo-coded for catastrophe modelling-however, the data provided by automated systems is of better quality so the reformatting involves less work."
Another challenge is that the majority of RMIS tend to be based on proprietary systems rather than any widely adopted systems using de facto industry standard protocols and formats. A common industry system would be hugely beneficial but without any industry-wide consensus on format it is too difficult a task. And given the age and size of most insurers, there are also significant legacy challenges in terms of technology as well as the challenge of global consistency, especially regarding claims data.
Data consistency is a problem that has plagued the banking industry for years but there is now an increasing use of cloud computing among financial institutions to help bridge this gap. Is this something the insurance industry could replicate?