Using RMIS to Improve Leadership and Governance

1. Using RMIS to ImproveLeadership and Governance Jim Jean Program Administrator Texas Association of Counties Pools JimJ@county.org John Sederberg President Synergistic Solution Technologies, Inc. jcs@s-s-t.com

2. Agenda • RMIS has become critical for pools today • Most RMIS are only partially effective • Enterprise-Wide RMIS • Different approaches to achieving an Enterprise-Wide RMIS • A real world case study

3. Session Objectives • Review why and how RMIS supports pool leadership and governance • Introduce you to a new, proven way of building RMIS that is specific to pools

4. Definition • A Risk Management Information System (RMIS) is a systematic process for collecting, storing, and analyzing data so that it can be converted into actionable information, such as key performance indicators • Vendors have educated the marketplace to believe that their claims administration system is what a RMIS is • TPA claims administration systems are an integral part of a pool’s RMIS

5. RMIS - Leadership and Governance • As Pools grew, Board and staff managers were often required to make complex business decisions without sufficient time and/or resources to analyze the vast amount of accumulated data • Decisions were often made based on personal extrapolation of past events RATHER than fact.

6. RMIS - Leadership and Governance • Information is critical to managing a risk financing program, therefore a comprehensive RMIS is essential • Risk of making a poor decision increases if infrequent analysis is done and there is a large volume of data • Pools have extensive “data” - but are “information” poor due to the inability to access, integrate, analyze and report it in a timely manner

7. Decisions based on insufficient information can be disastrous • TAC’s Workers’ Comp Fund returned dividends of $1.8 million to its members in 1988. • In early 1989, auditors advised management that the Pool was in the red by over $10,000,000!

8. How Did it Happen? • Staff and leadership did not have access to comprehensive, relevant information • The data needed to create the information was locked away in various operational systems owned by our service providers or reinsurance companies rather than the pool’s RMIS

9. The Role of Data and RMIS in Decision Making • Example: Loss costs in isolation rather than considering the components that make up the loss ratio • Financial condition of the pool • Member Contributions and experience • Exposure • Operational performance (e.g. marketing performance, member retention, claims handling, etc.) • Informed decisions must take into account multiple types of data:

10. The Role of Data and RMIS in Decision Making • RMIS as implemented today by pools is often not an effective tool for leadership and governance • A new approach is needed that is specific to pools**

11. Vendor RMIS products typically only provide loss data, which is only part of the picture but often becomes the primary focus Data cannot be readily accessed because it is in different formats and/or different locations Manual manipulation is required to create a complete picture Volume of accumulated data is exacerbating the problem Getting actionable information is increasingly difficult Data is segregated into multiple, separate “silos” Problemswith Today’sRMIS

12. Making RMIS More Effective • Key Challenge: Being able to answer the question “Where are my problems?” that cannot be answered by a loss run • Strategy: Redefine the scope of RMIS for pools to be Enterprise- Wide in order to eliminate fragmentation

13. Enterprise-Wide RMIS Idea

14. Transition Planning Elements • Deciding where and how to integrate data • Defining Key Performance Indicators (KPI’s) • Aligning Business Processes to generate trusted data

15. SST Employee: Have graphic come in on the Financial Performance bullet Key Performance Indicators • “How is our pool doing? • Financial performance • “How is our pool doing? • Service to members • Competitiveness • Sources for ideas • IRIS ratios from NAIC • GFOA Comparative Performance Measurement • Public Risk Database Project for benchmarking loss experience

16. SST Employee: Replace the flying bullets at the bottom with the following 2 bullets: Designing mechanisms to ensure integrity and accuracy of data Determining how much additional data to store up front to lower cost in future Aligning Business Processes Determining how much additional data to store up front to lower cost in future Designing mechanisms to ensure integrity and accuracy of data

17. Integrating Detailed Data

18. Issues in Implementing an Enterprise-Wide RMIS • Leveraging existing investment in “silos” • Accessing data held by service providers • Achieving common definition of financial measures • Re-creating As-Of valuations • Recommendation: Automating the integration of data is more flexible for pools than integrating software that runs business processes

19. Strategies for Integrating Data • Strategy #1: Integrate the data when building a report • Requires very high level of computer skill and knowledge of how data is stored in source systems • Time consuming because integration has to be repeated for each report • Manual manipulation of data is often required to synchronize time and definitions of financial measures

20. Strategy #2: Integrate the data ahead of time and store it in a separate database designed for reporting and analysis • Provides common definition of financial measures** • Reduces computer skill requirements and knowledge of source systems • Incorporates data held by service providers

21. Cost/Benefit Analysis • Expensive if viewed from the perspective of a single years’ expenditure • Reasonable investment when comparing amortized cost to the yearly cost of bad decisions • “Can our pool afford not to have access and capability to analyze it’s data?”

22. Case Study: Texas Association of Counties • Pool for counties and allied political subdivisions • Offers Property, Casualty, Workers Comp, Group Health, and Unemployment Compensation • Started in 1974 with Workers Compensation and added other coverages starting in 1986 • $40M discounted annual premium not including health

23. Situation 1. An in-house accounting system • Our data was fragmented: 2. AL/GL claims TPA system 3. PO/LE claims TPA system 4. WC claims TPA system 5. Separate underwriting program for each coverage 6. Separate program for WC modifiers 7. No system to maintain members history 8. No in-house system to track our various exposure bases • And no way to pull it all together!

24. Analysis • From discussion with other Pool managers I found that most of them operated from this same precarious position • Staff could not exercise control over the programs it was charged to manage • Obviously our challenge was to pull this diverse data together • No product existed that could integrate our data

25. Solution • Develop a data warehouse • Def: A single database containing data from other databases which has been integrated together and restructured from a design efficient for daily operations to a design efficient for analysis and reporting • We are still evolving our data warehouse but we already have a wide ranging set of very usable and valuable management tools

26. What was our ROI? • Limit staff growth • Board better understands the operational components of their program ** • Easier marketing of the pool to reinsurers at renewal • Staff makes more informed decisions and recommendations because they are based on a complete picture

27. Summary • Information is critical to managing a risk financing program • The Enterprise-Wide RMIS concept overcomes the limitations of RMIS for pools • RMIS as implemented today by pools is often not an effective tool for leadership and governance • Data Warehousing is an effective approach for implementing an enterprise-wide RMIS

28. Using RMIS to ImproveLeadership and Governance