After the conference, Mike suggested I talk to the Aon eSolutions Impact Blog to share my thoughts about the session and why, we think, it was of interest to attendees, who were primarily staff of state-level municipalities (i.e., the members of the risk pools) and the executive staff of the risk pools themselves.
Mike has blogged several times already here, but he thought that I could bring a unique perspective given my role as managing director of the Risk Pooling practice for Aon Risk Solutions. Mike, his Aon eSolutions colleagues and I work together often, but we thought it could be useful for me, a veteran of the risk pools industry, to bring the holistic risk pools view together with the risk-technology perspective.
I’ll use a question-and-answer format to distill my thoughts into a blog post that will, I hope, be of interest to risk pool members and risk pool administrators alike.
Answer: Just as with most private-sector businesses today, pool members and administrators are becoming ever more sophisticated in how they manage their risk, exposures and insurance. They recognize that in order to optimize their total cost of risk, they need to improve on how they:
In Portland, Mike and I discussed how pools and their members can then take that sophisticated approach to data and put it to work. When members and administrators have all of the information they need in one spot, ready to be mined, they can, for example, match personnel issues to claim issues to exposure issues and then tie it all back to location data. Trends that they could only suspect were occurring can be validated, and then acted on.
Answer: In my conversations with pools, I frequently make the point that when they get large enough, they actually begin to look like small Fortune 500 companies to the insurance markets. Some of these pools have $10 billion, $20 billion, even $50 billion in property exposure, so they’re no longer just an aggregated group of municipalities who are gathering together for buying power. There’s no question that they have market leverage now.
It can be useful for a risk pool to think of itself as a small insurance company of sorts. When a pool reaches critical mass, it definitely has a need to look very carefully at its data and begin to analyze it and use risk management software technology for what it’s best at, which is to reduce the pool’s TCOR.
Answer: First and foremost, pools need to focus on what I call the cross-referencing capability of risk management software. This is something we discussed at length in Portland, and it’s very important.
When risk pools implement risk management information systems and begin warehousing their data, they need to know where to look to get the strongest return on investment. Data associated with litigation management, law enforcement cases and managing evidence of insurance are just three examples.
Craig Bowlus is managing director of the Aon Risk Solutions Risk Pooling practice. Email Craig at Craig.Bowlus@aon.com or visit him on LinkedIn.