New Life Standards Are Evolving

Standards are living and evolving entities, becoming morerefined and robust with time and input from those using them. ACORDLife and Annuity standards are no different. They are, in a sense,a house that we have already moved into. We formed a strongfoundation; we've put up walls and decorated. Now, we are improvingand expanding the house, adding new rooms and updating others.

The benefits of these “home improvements” became truly apparentover the past year. ACORD witnessed a dramatic increase inimplementations within its membership, which includes many of thetop life insurers. In fact, implementations of ACORD Life andAnnuity standards rose nearly 400 percent in 2003. Activityincluded a 30 percent increase in certifications of implementedtransactions, a 40 percent growth in messages, and 20 percentgrowth in group participation over 2002 figures. Clearly, theindustrys leaders are realizing the benefits of data standards andare implementing them for their data communication.

ACORD Life and Annuity Forms are an area of significantprogress. There are now 21 standard forms (including LifeApplication I and Life Application II) in the process of beingfiled, where necessary, with the states. A number of forms do notrequire filing, such as the Producer Appointment Data Sheet and theFair Credit Reporting Act Disclosure, and they are now availableand in use. Standard forms have received strong industry supportfrom such notable groups as NAILBA, NAVA, ACLI, LIMRA and SOA, andthe number of carriers accepting the forms is growing. Expect tosee ACORD-compliant forms within Microsofts InfoPath in Office2003, in Adobe 6.0, and within solutions from other parties.

Straight-through processing (STP) for annuities has alsoundergone a great deal of expansion. Implementation of thestandards has dramatically reduced “not in good order” business andenhanced the overall process. Recent estimates from those who haveadopted the standards indicate that error rates have plummeted from60-to-70 percent to nearly 0 percent and that turnaround times arenow hours, instead of weeks. This can only lead to increasedsatisfaction, and business, for all parties. These messages alsoinclude commission information, which eliminates the need to sendcommissions back to the originator. Commissions can be calculatedand netted.

One organization is using the standards to improve STPcapabilities. At present, 20 carriers and 9 distributors are usingtheir platform to enter application and subsequent premium paymentannuity transactions. The company is using commission table feedfrom carriers to compute commissions and net the commission fromthe final transaction. The netting of commissions expedites theoverall transaction time. The system is configured for individualproducts via data feeds from the carriers of ACORD standard XMLproduct profile for annuity (PPfA) files. Another big win is thatthe distributors get a homogeneous order entry experience acrosscarriers. Also, the “not in good order” rate is very low with theACORD standards-based system.

There has also been a major change in the underwritingrequirements with such members as labs, parameds, medical companiesand those rendering services to the insurance industry. As theycollectively moved ahead on standardizing messages for ordering,status and fulfillment requirements, they also used the ACORD forumto further clarify some of their own business processes. Until now,the definitions of such things as blood tests varied from companyto company. By utilizing ACORD and our anti-trust exemption venue,they were able to help standardize more than just their data. Theresult will be increased efficiencies and more transparentdata.

Licensing and appointments is an area that has seen a great dealof attention. For more than two years, ACORD has been working onimproving the workflow and messaging involved with licensing andappointments. In any case where the data requirements are mandatedby the states, ACORD and its membership looks to the regulatorybodies for guidance on the development of standards that meet thefull requirements of laws and regulations.

An example is the validation of the Producer Inquiry (“CanSell”) message, which has been developed in cooperation with theNational Insurance Producer Registry (NIPR) and NationalAssociation of Insurance Commissioners (NAIC). The message enablesany system (especially pre-sale systems like illustration, newbusiness and contact management) to quickly and easily validatewith carriers a producer's eligibility to sell a given product in agiven state. This system not only provides the necessary compliancebut also permits all parties to identify potential issues wellbefore an application is actually submitted. The result is that atransaction that once took up to 120 days to get done can becompleted in a matter of minutes or seconds of real-timeprocessing.

One area where members have focused standards implementation isdata quality and transparency. Data is the lifeblood of theindustry; it connects and flows between trading partners to supportbusiness operations. Members have recognized that using standardsto define that fundamental first piece of data collected in thefirst client transaction begins a process that ensures data qualityand transparency for improved decision-making, underwriting,financial and regulatory reporting, and error reduction. For thesereasons, the use of standards has become an enterprise-widestrategic consideration.

ACORD and its working groups have focused on their many projectsin the past year. While the Life and Annuity standards have greatbreadth they contain more than 12,000 items and nearly 200 messagessupporting the entire insurance value chain the focus now is totake them deeper into business processes. The goal is to enhanceour “house” and build a bigger, better and more accommodatingstructure.

Rick Heil is program manager, Life Standards, for Pearl River,N.Y.-based ACORD. He can be reached at [email protected].

Reproduced from National Underwriter Edition, May 21, 2004.Copyright 2004 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.