No longer passively dependent on the swings of the insurance cycle, risk managers feel they have taken control of their destinies. Phil Zinkewicz comments on the annual meeting of the Risk & Insurance Management Society.
The corporate risk manager in today's chaotic global insurance environment has achieved “star status,” and nowhere was this message driven home more clearly than at April's annual meeting of the Risk & Insurance Management Society (RIMS) in Dallas, Texas.
Twenty years ago, the RIMS annual meeting drew attendees primarily from the insurance community - insurance companies, brokers and, of course, risk managers. The emphasis was more on the educational and issues-oriented subjects that were of interest to risk managers - like market conditions and whether the next cycle was approaching, new exposures such as product liability and asbestos, and regulatory developments.
At this April's meeting it was carnival time. The RIMS meeting in Dallas looked like a toy shop for risk managers, with the exhibit area populated by “hucksters” from a variety of industries who were there to sell their wares. Certainly, insurance companies and brokers were represented, but there were also insurance industry consultants, research firms, attorneys, programme administrators, software vendors and more. Gifts were in abundance. Many of the attendees sported white Stetson cowboy hats, a free offering of one exhibitor. At the exhibit area you could obtain free carrying cases, pens and even bottled water to quench your thirst while travelling from the Dallas Convention Center to your hotel, all intended to woo the risk manager into buying the new products and services that are available in the changing technological environment.
In fact, the lines - queues to the British - to get into the exhibit area were often lengthier than the ones to attend the seminar sessions, and that says something very significant. Twenty years ago, risk managers were very dependent on the cycles of the insurance business during which he or she either benefited from price reductions - or had to pay through the nose. The years 1984-85 changed all that. Faced with a hard market unlike any they had ever seen before, risk managers learned a valuable lesson once and for all. They sought out alternatives to the traditional insurance mechanism, and they were more than successful, with captives and other forms of self insurance taking hold in the marketplace.
Insurers were confident in the late 1980s, when the insurance market had turned around, that risk managers would abandon their self-insurance programmes and accept the better prices and conditions that were to be offered, but the risk managers fooled them. They retained their captives, association groups and risk retention groups which had then become competitors of the traditional insurance industry and, at the same time, took advantage of the soft market for the upper layers. The vendors at this April's meeting, who had once courted only insurance companies with their programmes, are now after the more sophisticated risk managers of today. The exhibit hall at this year's meeting was a siren's song to risk managers.
Here are just a few examples. Cambridge Integrated Services Group, a New Jersey-based provider of third party claims administration and loss cost management services was at RIMS to promote a new programme to manage and administer workers' compensation claims. HNC Insurance Solutions out of California was hawking VeriComp, a new predictive software programme intended to detect workers' compensation fraud. The New York-based trial law firm of Anderson Kill & Olick was promoting its legal expertise in expectation of Y2K problems. EDS, the software company based in Texas, came to RIMS to describe its new Texas Medicaid fraud and abuse detection system. Impact Forecasting, LLC, from Chicago, regaled risk managers with its new catastrophic exposure reporting programme. And the list goes on.
There was no question that the insurance industry itself took a back seat to vendors of technology and consulting services at this year's RIMS meeting. However, that is not to say that the meeting was all play and no work. In seminar sessions and in conversations in the hallways or over evening cocktails, several topics dominated, including the impact of recent insurance industry mega-mergers on risk managers, anticipated directors' and officers' liability claims, particularly in light of the Y2K problem, and a somewhat troubled workers' compensation arena in the US.
Cathy L. McKeon, principal in charge of insurance risk management consulting for PricewaterhouseCoopers, told Global Reinsurance that, as far as risk managers are concerned, the mergers that have taken place within the insurance industry could be problematic. With fewer, but larger firms in the insurance marketplace, risk managers could find that they will lose negotiating power, she says. “But there is still the alternative market out there and new entrants coming into the business,” she quickly adds. “So, risk managers will have options because there is still excess capacity. I do not think there will ever be a return to the hard market of the mid-'80s, but there could be selective tightenings in areas such as disaster insurance, employment practices liability and directors' and officers' liability.”
That said, however, most risk managers came away from the April meeting feeling secure that they are now finally in control over their own destinies. As RIMS enters its 50th year, its members are standing out in the insurance business as sophisticated professionals who have found their way.
Phil Zinkewicz is North American correspondent of Global Reinsurance.