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Insurers Drill Deeper With Data Standards
Information Management Online, May 12, 2009
At a purely theoretical level, you'd be hard pressed to find people in the insurance industry opposed to data standards. The values are clear: lower transaction cost, better data quality and greater ease of doing business.
Yet, standards remain far from universal acceptance, and some still make compelling arguments against their deployment. The most common, not surprisingly, come down to time and money, but there are other reasons as well. So, what does the future hold for industry data standards?
The effort to standardize business-to-business transactions is an ancient one. The historical record reveals the use of standards as far back as ancient Egypt and Sumeria.
Indeed, the business logic behind standardization - uniformity, interoperability, stability - is still the same whether a transaction is done via XML, EDI, carbon copy or cuneiform.
"It's just an evolution of how we capture data; the actual elements themselves are critically important but the medium is constantly evolving," says Spero Zacharias, international field operations manager, at Warren N.J.-based Chubb Group of Insurance Cos. "We're just keeping pace with the medium in which forms are captured."
Zacharias knows all too well. In addition to his work at Chubb, he chairs the P&C, surety and steering committee for Pearl River, N.Y.-based ACORD, which was conceived in 1970 to help set standards for the insurance industry. He says that the governance process at ACORD is conducive to collaboration. "From an industry perspective, I think the ACORD process is a very open, equitable and transparent process to achieve standards." he says. "The standards setting process requires consensus building, so it's not really an obstacle, it's an activity."
Costs and Quality
According to Zacharias, the value proposition for standards in the insurance industry is threefold: lower transaction cost, better data quality and greater ease of doing business. While the enthusiasm for the first factor is largely self evident, the latter two bear consideration.
The strict regulatory environment in which insurance companies operate puts a premium on data quality. The events of the past year seem to indicate this issue will not go away anytime soon, and information mapped in a consistent standard is a good start to ensure compliance. "The more you standardize, the easier it is to validate and verify the accuracy of your data," Zacharias says. "If you're not going to standardize applications, you at least have to standardize data elements to check for quality."
The third factor, ease of doing business, is especially import considering the ever-expanding array of actors in the insurance value chain. A primary insurer may deal with agents, brokers, reinsurers, regulators and vendors in the course of business. It is the role of standards to improve the flow of information between these disparate entities. "The expectation of service has changed over time, and data standards do facilitate responsiveness throughout the value chain," Zacharias says, stressing that standards offer value for all players-a quicker quote helps producer and carrier alike.
Insurance companies use standards to communicate with partners, suppliers, intermediaries and entities such as the National Securities Clearing Corp. While standards are especially important to insurers utilizing independent producers, who may be leery of proprietary applications, one additional sign that standards are gaining in acceptance is that even carriers that rely on captives are using ACORD.
"Historically, we've always been an ACORD download participant," says Kevin Hunter, chief architect at Schaumburg, Ill.-based Zurich North America. "Now, we're embracing the standards more fully to take upload-type transactions from agents and brokers as well."
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In House
As much as standards have proliferated as a means to communicate outside an organization's walls, they also are gaining ground as a means to facilitate interoperability between systems within an organization, as service-oriented architectures become more prevalent (see Standards and SOA, p.20).
The use of ACORD standards within the enterprise is not new. Many insurers use ACORD messaging standards for internal communication. Yet, the association says, work on creating data, information and component models will increase its value to the industry.
"We're opening up to a community that has never been a part of ACORD-the architecture community," says John Kellington, SVP at ACORD. "Before it was purely about relating with business partners outside your own walls. Now, were providing standards that the IT architect, project manager and technical people in the industry can latch onto. We've never done that before."
Pete Tribulski, an enterprise architect at Chubb, says that internalizing standards has made the organization more agile. With standards built in to their architecture, an organization can leverage the reliability of what's already in place without having to agonize over details with each new requirement, Tribulski says. "By having standards in use we are able to adapt and put new systems in place more rapidly and achieve speed to market on some products because we have that baseline to enhance."
Additionally, a standards-based approach can pay dividends in areas such as data warehousing, where using an ACORD format can ensure the same data fields are used for separate documents.
Kellington says that while the association's primary value statement to the industry remains business-to-business standards, the ACORD framework now drives the value of standards much deeper into the enterprise. So far, the reception from the architectural community has been positive. "When I speak to architects around the world, they say 'we used to argue about this all the time.'"
Kellington is especially bullish about ACORD's effort to establish an information model for insurers to help them with internal operations. The goal of the information model is help insurers harmonize data across all disparate insurance domains with a single conceptual model that spans lines of business, geography and product offers. Kellington sees widespread enthusiasm, noting that work on the information, component and data models at ACORD is largely complete. "A lot of what we're sensing is that 'it's about time,'" he says.
Kellington is not alone in this sentiment. "There's momentum and movement around going from a traditional focus on forms and a messaging model to the creation of an information model for the industry," says Ken Rugg of Bedford, Mass.-based Progress Software Corp., whose DataXtend Semantic Integrator was chosen by ACORD for mapping and schema generation development. "Carriers are hungry for guidance."
Besides architecture, Rugg sees standards also playing a large role in governance. "Standards adoption goes hand-in-hand with central governance," he says.
However, despite the efforts of standards bodies, Zacharias says the onus is also on carriers to constantly update their processes. "It doesn't mean you have to reinvent the wheel," he says. "It does mean that you have to be forward looking, innovative and thoughtful in your approach to gathering data."
The Downsides
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