Controlling the Cost of Risk in State and Local Governments.

• Author: Spain, Catherine L.
• Position: The Public Risk Database Project - Industry Overview

In the last 20 years, many public entities have chosen risk financing alternatives, such as self insurance and intergovernmental risk pools. One result of this movement away from traditional insurance has been a reduction in the public-entity loss data compiled by the insurance industry. Because analyzing claims data is a way for state and local governments to find solutions for controlling the cost of risk, public entities often do not have the data needed to effectively make risk-management decisions. These decisions may involve choosing among risk financing alternatives, deciding to implement loss prevention programs, and selecting litigation management strategies.

PRDP

The Public Risk Database Project (PRDP) is a nonprofit organization created to affect the terms of a 1995 insurance antitrust settlement agreement between 20 states and the insurance industry. The settlement called for the creation of a database facility providing aggregate and comparative data to meet public entity information needs.

Data Exchange ™ is a new source of claims information that will assist governments in forecasting loss frequency, analyzing loss severity, comparing key performance measures with peer groups, and studying other patterns, trends, and factors affecting the cost of risk.

The Data Exchange is a fully Web-accessible database that will be the nation s primary source of public entity loss information and reports. Initially, the database will contain liability loss and exposure data, but it will expand in the future to cover workers' compensation and other coverage areas. The database opened in August 2000 to begin the collection of data.

Crossroad on the Information Highway

The Data Exchange is poised to become the center of activity for the collection of data and the distribution of information about public entity risk. Data flows into the Data Exchange from public entities, pools, insurers, and third-party claims administrators (TPAs). Data suppliers use vendor-provided risk/claims management information systems (RMIS/CMIS) or systems developed by their in-house staff to code and collect the loss data. The Data Exchange employs data warehousing technology to transform the data from diverse sources into information and reports for subscribers.

In addition to loss data, data suppliers provide loss exposure data that quantify the perils facing entities that result in accidental losses. Loss-exposure elements include population, operating budget, number of full-time equivalent sworn officers, and the number of vehicles in an entity's fleet. Exposure data normalizes loss data that is used to analyze trends from year-to-year and to provide comparisons among organizations. For example...