Brokerages ready for a RMIS rumble

Risk & Insurance, June, 2004 by Cyril Tuohy

After lagging behind Marsh Inc. for years in the world of risk management information systems, Aon Corp. buys a small but respected RMIS vendor. Aon appears ready to take on the industry's 800-pound gorilla, Marsh's popular STARS application. It will do so by stressing service and consulting at the expense of product features and functionality.

Get ready to rumble. Aon Corp.'s purchase of an Atlanta-based specialty risk management information company alters the RMIS landscape whereby the No. 2 brokerage is poised to compete seriously against STARS, the popular application developed by Marsh Inc., the world's No. 1 brokerage.

The purchase of Risk Laboratories LLC from AIG's American Home Assurance Co., will allow Aon to offer clients a proven risk management information system with a 10-year track record.

"We think Marsh (STARS) is a good product and it is the market-leading product in terms of revenue and clients," says Mark E. Stephens, managing director of Aon eSolutions. "But we think what we have done is we have created much more of a consulting solutions, problem-solving type approach to the marketplace rather than [an approach that is] product-based."

The purchase of Risk Labs and using the company for its consulting and analytical expertise, not just the application firepower of its software, was done after consulting with some of Aon's top clients, including Nike, NCR and Microsoft.

"What they said is, 'We're being overwhelmed with amounts of data, and how do we take that data on a continuing basis and convert it into business intelligence to make good risk decisions?'" Stephens says. "We were having difficulty with that."

A number of Aon's Fortune 1,000 clients also bluntly pointed out that Aon was falling behind in its efforts to develop a satisfactory RMIS program.

In addition, a management consultant's study last year recommended Aon rewrite its entire Risk Monitor application, or enter into a partnership with a vendor to have any hope of making inroads into the RMIS world.

In a statement following the March announcement of the purchase, Dick Verbeek, CEO of Aon Risk Services International, said global and multinational companies are "increasingly looking to technological solutions" to improve collection and analysis of their risk data.

Stephens also says that Aon CEO Patrick Ryan was "very involved" with the Risk Labs purchase, and is ready to give the company what it needs to compete.

Risk Labs' applications will be marketed under the brand Aon Risk-Console. The applications are scheduled to replace Aon's web-based RMIS products distributed under the Risk Monitor brand. Risk Monitor, launched in 1999, followed on the heels of Aon's client-server RMIS offering, known as Omega.

But despite Aon's efforts, it was too little too late. Risk Monitor was handicapped from the start because it was too complicated for clients to use, says Stephens. In addition, the executive suite never gave Risk Monitor the attention it deserved. Managerial changes and a fractured approach to RMIS, partly the result of Aon's many acquisitions, prevented Risk Monitor from developing into a serious RMIS competitor.

Meanwhile, STARS further penetrated the marketplace and independent vendors were bringing to market RMIS applications at lightning speed.

Marsh declined to comment on the Aon-Risk Labs alliance.

But Stephens says that in a conversation with Marsh's Managing Director Bob Petrie, who heads Marsh's STARS initiative, Petrie acknowledged that STARS is finally facing "a very aggressive competitor" in the Aon-Risk Labs union.

A director with a competing risk management information systems vendor sums up the Marsh-STARS vs. Aon-Risk Labs heavyweight bout like this: "Now you are dealing with two giants in the industry that have competing claims products," he says. "It will be interesting to see how these two products compare with each other ... Are they at war--even from the brokerage aspect? Absolutely."

Consultant Richard Betterley calls the Aon-Risk Labs alliance "a very smart move," as it will further Aon's position in its battle against the No. 1 broker.

The Risk Labs purchase was considered so important that Aon CEO Patrick Ryan was intimately involved in its purchase, says Stephens. He adds that Ryan is also ready to give Risk Labs what it needs to compete.

Marsh doesn't appear to be resting on its STARS laurels. In April, Marsh announced its intention to buy Amarillo, Texas-based Corporate Systems Inc., a claims management and incident reporting technology firm.

Petrie says STARS users will now have access to bill review capabilities. "The combined (Marsh-Corporate Systems) organization will also offer extensive claims administration capabilities for insurance companies, third-party administrators, corporations and government entities," he says. "The combined entity will operate under the CS STARS name."

As if to underscore the coming battle between Ann and Marsh over the RMIS issue, the risk management marketplace needed to look no further than the 900 row at the vendor exhibit of the Risk and Insurance Management Society Inc.'s annual trade show in San Diego in April.