Could Web Services Be The Next Big Thing?

IT departments will be able to snap together modularcomponents or services like Lego blocks

Could Web services be the “Next Big Thing” for insurers?Theoretically, Web services will make software programs easier towrite. They will simplify the connections between programs and moreeasily connect internal and external entities and applications.

As a result, many experts seem to think Web services willprovide solutions to some of the insurance industry's biggestchallenges, including the need to facilitate constant IT changesand the demand for increased connectivity, efficiency andinteroperability.

The term “Web services,” however, is a little misleading, as itrefers to both the development tools used to build easilyintegrated Web-based applications and the underlying technologyprotocols and standards required to run and support theseapplications over the Internet.

“Web services” also refers to the resulting componentapplications that run on the Web. These self-contained modules candescribe themselves (their functions and services) to one anotherand automatically link together without the traditional challengesinvolved in system integration.

However, running and connecting applications over the Internetis obviously not new, so how are Web services built to be a“better” mouse trap? And how can organizations avoid beingfinancial casualties of misguided Web services projects?

Web services have already begun to creep into manyorganizations. IT departments have already begun working on Webservices projects or have plans to begin. These organizationsrecognize the many benefits of jumping on the Web servicesbandwagon.

What should excite insurance organizations is how easy newapplications will be to build, modify and integrate using Webservices. IT departments will be able to snap together modularcomponents or services like Lego blocks, allowing developers tobuild complex applications on the fly.

At one time, it would have taken a large number of ITprofessionals working a number of years to build an enterpriseapplication. Today, Web services can conceivably cut this work downto weeks. The modular and shareable nature of Web services enablesorganizations to easily enhance the functionality of applications,leverage investments in legacy systems, and make additional systemimprovements.

Web services will also do away with the whole compatibilityproblem, as these services are interoperable, meaning they willwork with other programs without special integration efforts.Interoperability is critical, especially as the “browserrevolution” and “Internet as computer” concepts become realities.By adhering to established protocols and standards, Web services bytheir very design improve interoperability between diversedevelopment platforms, such as J2EE and .NET.

The fundamental goal of interoperability is to eliminate theboundaries between various platforms and development environments.Developers won't have to worry about what language or operatingsystem Web services are hosted on. Instead, interoperability allowsthem to all work together.

In addition, Web services provide several layers of costefficiency. First, IT development and improvement initiatives willbe more cost-effective. The addition of Web services allows forincreased efficiency and streamlined workflow, significantlyreducing administrative costs. With increased connectivity,insurance professionals have access to the information they need toimprove decision-making at vital points of the insurance process,including underwriting, claims management, investigation,litigation and settlement. All these factors allow organizations tocontrol their costs at multiple junctures.

Claims management and risk management involves the collaborationof many different parties, processes and technologies. In today'shigh-tech world, collaboration and connectivity are two sides ofthe same coin, and Web services help achieve both.

Web services provide a means for disparate systems to talk toeach other, facilitating seamless transfer of information.Traditional methods of connecting point solutions via an interfacecan be cumbersome and time-consuming. Web services simplify theseconnections, acting as an inherent collaboration tool that vastlyimproves communication and compatibility of applications, whilealso enhancing cooperation between various entities.

To avoid squandering resources on misguided projects, insuranceorganizations should focus on designing a low-risk implementationplan by applying Web services to core business processes andobjectives.

For instance, many carriers process a high volume of claims.Insurers are struggling to cut claims costs and improve processingefficiency. The claims process has traditionally been verydisjointed, requiring input from various stakeholders. As such, anyefficiency and connectivity gains achieved via Web services wouldgreatly improve costs, collaboration and outcomes.

Web services allow organizations to integrate additional claimsfunctions and capabilities into their current claims systems. Forinstance, an organization might utilize Web services to integrateapplications that automatically validate claimant employment,connect to outside databases that check for potential fraud,estimate property damage, or set appropriate loss reserves.

Rather than relying on disparate systems, Web services bringtogether many applications in an interoperable environment. Thisallows organizations to more easily implement claimsbest-practices. For instance, they may easily incorporate an onlineinjury-reporting module to enable prompt reporting of claims, awell-known best practice.

Going back to the initial question of whether or not WebServices is a better mouse trap, operating behind the scenes, Webservices will be the “unseen” cheese in a new and more effectivetrap.

Traditionally, the insurance industry has had to shareinformation by exchanging mountains of paper, performinglabor-intensive data entry at multiple points of the insuranceprocess, and relying on outdated legacy systems. With Web services,organizations will be able to update these systems to exchange dataand services in ways that were previously not possible.

Web services will revolutionize traditional labor-intensive,manual processes, and enhance communication and the exchange ofinformation, as well as speed up transaction processing. It isstill relatively new, however, and its benefits and business usesare just beginning to be realized.

Randy Wheeler is founder and CEO of Valley Oak Systems Inc., aprovider of claims administration and risk management systems,headquartered in San Ramon, Calif. He can be reached at [email protected].

Reproduced from National Underwriter Edition, June 18, 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.