RIMS reveals restructuring

The Risk and Insurance Management Society 2000 Conference & Exhibition, which was recently held in San Francisco, drew a record number of more than 12,000 attendees and exhibitors. The event marked the society’s 50th anniversary as the North American body for the risk management profession. Key factors raised by executive board members at the conference included a restructuring of the society to reduce operating costs and broaden its membership base, and the likelihood that commercial insurance rates on both liability and property lines could rise significantly in the year ahead.

In his opening address at the Risk and Insurance Management Society Inc.’s (RIMS) annual membership meeting, which served as the formal opening of the RIMS 2000 Conference & Exhibition, newly elected president Roger Andrews unveiled significant restructuring plans for the society.

Faced with declining membership and resources due to corporate consolidation, RIMS has reduced its executive board of directors to 17 members. The “old board” has been replaced with a “House of Delegates” representing elected chapter members who, in turn, will be responsible for the annual appointment of executive board members. The result of which is that the society’s management structure has been considerably streamlined, observes Andrews.

In addition, Andrews says in the year ahead the society will investigate replacing its current corporate membership requirement to that of individual membership. “The risk management [field] is changing,” Andrews notes, “and it’s unfair that our members cannot benefit from ongoing membership as a result of being out-sourced [by the companies they work for]. We used to be individual membership-based, and we will be looking at this again as a priority.”

Susan Meltzer, president of RIMS for the 1999/2000 term, drew attention to the strong support the conference and exhibition drew. “This [year’s conference] has been the largest in terms of paid delegates and exhibitors…which has put an extra shine on the 50th anniversary celebration.” The last conference which drew almost the same number of participants was the RIMS 1990 conference held in Boston, Meltzer notes. Andrews was also upbeat of the strong support the 2000 conference received, pointing out that “it’s not just about numbers [delegates and exhibitors], people have been staying at events…there’s been a lot of positive feedback”.

Rate hardening outlook

Risk managers are preparing for a hardening of commercial insurance rates in the year ahead, observes Meltzer at a press conference of the top executive members. Insurers have made it well known that they are looking for rate hikes of between 5% to 15% in the year ahead, she adds. The reality is that insurance rates are currently undervalued, and she adds, “I wouldn’t kick anyone [broker/insurer] out of my office if they came to me with a 5% rise [in premium]”.

Meltzer’s predictions of higher insurance rates are confirmed by two surveys of risk managers which were released at the conference. A Liberty Mutual Group survey of 200 risk managers to identify their top priorities for 2000 shows “the changing insurance marketplace including the cost of insurance and insurance company mergers and acquisitions” is the prime concern of the profession.

A similar survey conducted by Lloyd’s of London of 250 attendees at the RIMS conference, comprising of both insurance and risk management professionals, suggests, however, that any rate increases introduced are likely to be applied on a selective basis and not broad-based. Approximately 70% of those surveyed by Lloyd’s support this view. More specifically, 60% of the respondents expect property rates will rise, 49% see the same for workers’ compensation, and 43% for casualty lines.

While commercial rates are expected to rise this year, it remains debatable whether 2000 will bring about a real upward turn in the insurance cycle, comments Andrews. Should a broad rate increase come about, an interesting factor to watch will be, “how the new generation of risk managers respond to the market,” he adds.

The latest round of discussions with insurers on rate increases has revealed a positive turn in that, unlike past periods of a rate hardening, the insurance industry appears to be interested in meeting risk managers “half way”, observes Meltzer. “It seems that insurers are talking of ‘relationship building’ in the same sense as risk managers…we have to be responsible business partners.” Furthermore, Meltzer is encouraged by what she sees as, “a lot of underwriting happening now” in terms of how insurers are approaching their pricing. “That’s a really good thing,” she adds.

Service quality

Consolidation among insurers and brokers has resulted in another positive spin-off in that the “talent” in the insurance industry has become more broadly accessible, observes David Mair, first vice president of RIMS and president elect for the 2000/1 term.

This view was supported by Meltzer, noting that consolidation in insurer ranks has actually increased the coverage options open to risk managers. This, however, has not been the case on the brokerage side, she comments. “What will be interesting is how the brokerage market changes when the “non-competing clauses” structured into the deals of the mega-broker mergers expire in about a year from now. It’s going to be a very interesting time.”

In that respect, Andrews confirms that the RIMS annual quality score card, which rates insurer and broker service levels, will continue in the years ahead, despite the fact that one of its major driving proponents, the Quality Institute, will not be involved. The decision has been made to produce the quality score card every two years, he adds, with the next release set for the RIMS 2001 conference to be held in Atlanta. In addition, Andrews says RIMS has established an internal “quality committee” which will take over the planning of the quality score card. “The quality committee will set a new focus on the score card…we have to teach risk managers to communicate their needs to their business partners [the insurance industry].” The objective, he adds, is to uplift service quality from both sides of the business partnership equation.

Lloyd’s survey highlights

e-commerce risks

A survey conducted by Lloyd’s of London of 250 delegates at the RIMS 2000 Conference & Exhibition shows roughly 70% of the respondents expect e-commerce risks will emerge as the biggest new risk of the 21st century.

The survey results identify “loss of reputation/brand”, “class action” and “terrorism” as being the most likely threats to corporations conducting business over the Internet. Despite the high risk factor, more than 80% of those surveyed believe that the successful businesses of the future will have to have a presence on the Internet. “The scope of risk management is expanding and the concerns of companies and risk managers are changing to encompass a range of areas which were not contemplated even a few years ago,” says Julian James, managing director of Lloyd’s in North America.