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."
Another set of standards gaining ground is Security Assertion Markup Language (SAML). Insurers can use SAML as a way to enable single sign on, which is popular with producers. Carriers are also increasingly adopting standards, such as XML, that are not necessarily insurance specific, but preferable to the flat files and mainframe copy books that have been used historically.

 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

Are there good arguments against deploying standards? Actually, there are plenty. The most common, not surprisingly, are time and money. "The models are not simple - it takes work from carriers," Rugg says, noting carriers may be leery of dedicating resources to endeavors where value isn't immediately recognizable.

While most carriers are largely inclined to use a standard than not, ultimately, the decision whether or not to use a standard must be made on a case-by-case basis. In many instances, a carrier may be hesitant to abandon a long-running, highly functional process just to meet a standard, especially if they feel that process is the source of differentiation in the marketplace. This may be truer in some lines of business than others. Lines that are more complex, and require more collaboration among trading partners on what data elements mean, are more likely to retain proprietary interchanges, while lines that feature high-transaction, low-value exchanges with relatively few data elements are more likely to embrace standardization.
In addition to the technical challenges, adoption of standards may create challenges for workers long accustomed to proprietary systems. For example, adoption may foster a knowledge gap if workers on different systems wishing to communicate are not both versed in a certain standard.
Another consideration is the reaction of vendors, who may be disinclined to embrace a standard at the expense of their own, proprietary format. Some technology providers may balk at incorporating a model as large as ACORD, citing the performance overhead.
It was the need to prevent this sort of vendor balkanization that prompted ACORD to widen its offerings. "By creating a data model and a component model, we're hoping to eliminate some of the bifurcation that could happen in the industry," Kellington says, "If not, vendors will create their own version on the model."

Standard Deviations

So, are there instances when carriers should deviate from a widely established standard? Zacharias contends the only reason to deviate from standards is if there is some differentiation advantage to be gained.

Chubb's Tribulski voices a similarly pragmatic view, saying it is often less a matter of whether or not to embrace a standard but when. "Generally, the more standardization you have, the richer the experience," he says, "But reality frequently dictates that when new business initiatives come along, it takes time to put the right standards in place. Deviation is never desirable, but often we do things with an eye toward enhancing the overall standard."
Yet, even when the decision is made to follow a standard, problems can arise. Even the best-designed models can only be so specific. As a result, many models are augmented with extensions that enable customization. These extensions, while fully compliant with the standard, can sometimes cause conflicts. This is often the case with the unique underwriting extensions that carriers append to standard forms. "The reality is that [the standards] are only 80% to 90% of the way there, especially the higher up in the market you go. Agents end up having to go to a carrier's systems to do underwriting-specific questions or a supplement," Zurich's Hunter says. "Each carrier takes the standard and mixes it with their secret sauce."
Accordingly, architects need to remain cognizant of the limits of standards, and communicate them to partners. This is especially true of agents who have long been promised a Single Entry Multiple Carrier Interface (SEMCI) that would grant them the ability to hit a single button and submit to multiple insurers, and instantaneously get a quote back. "It's more about managing expectations than a technical issue," Hunter says.
When it comes to communication between systems internally, standards are probably more so the exception than the rule. Conversely, when governing external communications, standards are more so the rule than the exception.
This does not mean that any standard is truly universal, much less universally beloved.
Hunter says the growth in the adoption rate among producers for certain standards is glacial at best. "It's not on an exponential growth curve that one would expect with the implementation of most technologies," he says.
Whatever the adoption rate, Tribulski says the progression of standards is vital for the industry. "There are always new capabilities that can enhance the standards and make them even richer," he says. "The truth is we're never done. It's a continual evolution."

Standards and SOA

The increasing prominence of service-oriented architectures (SOA) has forced insurers to reassess the issue of standardization.

"You can't have a SOA without standards and the standards are tough to implement without a good SOA," says Pete Tribulski, an enterprise architect at Warren N.J.-based Chubb. "There's a symbiotic relationship between the two."
Indeed, many carriers have adapted for internal use messaging standards from ACORD that were originally conceived for external communication. The necessity to standardize is more apparent in larger organizations that may have to exchange data between multiple policy administration, claims and underwriting systems. The need to be on the same page is even more acute at multi-national insurers.
"You have to have standards, if for nothing else, to agree on names and definitions," says Kevin Hunter, chief architect at Schaumburg, Ill.-based Zurich North America.
Hunter says that implementing standards across a global organization takes a great deal of work, and that building a consensus among all parties is critical. "We operated in a more federated environment up until 2006," he says. "That's when we started to take a more globalized approach."
Once implemented, the benefits of a standardized approach are plentiful.
Tribulski says one primary benefit is agility, and that standardized IT operations are better able to deal with a constant rate of change. Another benefit is the ability to extend the useful life of existing systems. "The value of legacy systems is enhanced by being able to adopt standards into them through a SOA layer," he says. "We've found that to be very valuable."

Standards Go Global

With insurers operating in a global economy, the push toward standards cannot end at the shoreline, says John Kellington, SVP for Pearl River, N.Y.-based standards organization ACORD.

"Standards need to be global first and foremost," he says, noting the organization is currently working to help establish standards in Australia, China, South Africa and Canada.
One challenge is reconciling the peculiarities of each domestic market, such as terms, with the larger standard. "To do this on a large scale, we need to make sure the standards are traceable across geographies," Kellington says.
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