Once a software implementation has been completed, bothinsurance carriers and software developers are eager to refer totheir arrangement as a partnership. However, getting to that pointrequires more than a handshake and a signed contract. There is noguarantee deals eventually will turn out to be beneficial to bothsides, but it would be impossible to achieve success without thebasic groundwork being laid long before RFPs are issued.

A major part of that groundwork is conducted by the members ofACORD, the industry's leading standards body. ACORD is made up ofmore than just carriers and vendors, though. As Rick Gilman, vicepresident communications and industry/government relations for thestandards body, puts it, ACORD's membership is made up of all theplayers in the insurance value chain. "We have carriers,reinsurers, solution providers, agents, brokers, and otherassociations all coming together to work on developing and drivingthe implementation of standards," he says. "I would definitely seeus as partners with all those players to move the efficiencies andthe effectiveness of this industry forward."

Mele Fuller, director of partner integration for Safeco Suretyand a 20-year volunteer with ACORD, sees the relationship of ACORDwith vendors and carriers as one of an impartial partner that helpsthe industry develop and implement technology to increase ease ofdoing business. "[ACORD] provides us with leadership, themanagement of the standards, and it pulls us together into workinggroups when the membership requests them. We would not be in astandards environment without it."

Bill Jenkins, CIO of Penn National Insurance, is a big proponentof standards because they lower cost and are more efficient. Aspart of the IT operating principles at Penn National, the carrierwill use standards wherever it can. "If ACORD has standards, we'lluse them," he says. "Vendors will do the same thing, but theproblem is if the standard doesn't exist and you have proprietarysystems, you aren't going to throw out the systems you have thatare working to put in standards that are just being developed andimplemented."

ACORD is designed to function as a mediator among the carriersto define the models, publish them, and make them available so thevendors can use them, believes Matt Josefowicz, director ofinsurance for Novarica, a Novantas company. "ACORD is designed tohelp the technology element of the industry speak with one voice,"he says.

Lloyd Chumbley, ACORD's assistant vice president of standards,does not see the organization as a mediator between the two sidesbut rather as a collaborator. "If you think of us in the paradigmof a coffee shop, we're the place everyone comes to chat," he says."When people want to talk about standards and open ways ofcommunication and how they are going to implement thosedefinitions, we provide the place where everyone can come and jointhe discussion."

From his perspective, Derrick Smith, director of IT atAssumption Life, sees standards groups as leaning to the carriers'side because the carriers' mission is a part of standardizing theentire industry. "The vendors come and go–some have been there fora while, and they probably always are going to be there–but any newvendor ultimately should comply with standards if it wants anyacceptance in the industry," he says.

MEMBERSHIP STRENGTH

ACORD recognizes without the vendors implementing standards intheir systems, the organization would be hard pressed to get broadtakeout of the standards, Gilman contends. "But at the same time,it's the business needs and the perspective of the buyers–carriers,agents, and brokers–that really drive the direction and developmentof the standards," he says.

Everyone is on equal footing when it comes to developing thestandards, Chumbley explains. "The carriers, vendors, and agentsall sit on an equal playing field during the development ofstandards," he says. "No one necessarily leads the effort. Wherethe buyers have the more direct interaction is when it comes to thedirection. They help us decide what we need to accomplish."

Standards today are in very good condition, maintains Fuller."They constantly are evolving to meet our national needs as well astrying to address the growing international marketplace," she says."These days [ACORD] won't add something new to the standards unlesssomeone is going to implement it."

But ACORD needs to work on encouraging new participants,particularly carriers, according to Fuller. "The more companiesimplement, the more pressure there is on the nonimplementingcarriers to come on board," she says.

Smith believes standards ultimately position the industry betterfor the future. "I think it's very important organizations aregoing down the same path," he says.

Assumption Life began looking at and applying standards over thelast few years, according to Smith. The biggest hurdle for thecarrier was learning and understanding everything that isavailable, he indicates. "The biggest benefit [ACORD] could bringcarriers would be more training and information sessions that cancomplement the standards, especially up here in Canada, which islimited in those types of things," says Smith.

ACORD COMPLIANT

ACORD is undergoing a major overhaul this year in terms ofcertification to provide much tighter compliance to the standards.Gilman admits part of the challenge the organization faces isnobody really knows what the phrase ACORD compliant means. "Is itcompliant with a message?" he asks. "Is it compliant with astandard? What does that mean to me as a buyer of softwareproducts? The value we feel and what we've heard from themembership is of a tighter, more demanding certification program.That is something we're moving toward and really will drive homemore succinctly the implementation of standards."

When ACORD first got into the certification process for XML backin 2000, Chumbley reports standards were viewed as an 80/20 rule inthe XML world. "XML would get you 80 percent of the way there," hesays. "Every time you went to a trading partner you would have tonegotiate the last 20 percent."

That mentality is changing, he points out. As the industry hasadopted service-oriented architecture and Web services, the servicenow has to be 100 percent compliant. "Our members are seeing thereis a lot more value in that last 20 percent," says Chumbley."Consequently, they want 100 percent compliance."

ACORD is building an environment that allows people to verifytheir compliance at a much tighter level than ever before, assertsChumbley. At the ACORD LOMA Systems Forum this month, Chumbleyexpects an announcement will be made explaining how ACORD will berolling out a new level of certification in an automated fashion."Any of our members will be able to access the current level ofcertification just by using a testing tool," he says.

ACORD is calling it the "Testing and Certification Facility.""For vendors, it provides an environment they can test against atany time in the cycle," says Chumbley. "For the carriers, it offersthem a way of debugging and validating what the vendors areclaiming. The vendors that use it will be excited because itprovides them a way to make sure they get it right the first time.Both sides see it as a benefit."

Fuller warns if a vendor claims to be ACORD compliant, thecarriers should start asking questions. "You need the details," shesays. "All ACORD standards have been built with a certain amount offlexibility, and you need that flexibility because the people whoparticipate have different needs and abilities."

Even determining ACORD certification is no guarantee the datastream is going to be exactly the same. "ACORD compliant means theyread the specification," says Fuller. "ACORD certificationbasically means their data structure is correct. It doesn'tnecessarily mean it's the right data. ACORD doesn't test the data,ACORD tests the structure. The uninitiated get tangled up in this.The minute you've done it once, though, you understand what toask."

Compliance with ACORD standards can be a deal killer if thesolution provider is not ready to support those models, reportsJosefowicz. "In a lot of cases, people are not careful about whatthat means," he says. "If you ask a vendor whether it supportsACORD, you have to ask the second-level questions: Which processes?What models? What messaging types? Are you using the process modelsor just the messaging standards? You can have 10 vendors sayingthey are ACORD compliant, and they all mean different things."

VENDOR SUPPORT

Vendors are practical business people, points out Josefowicz,most interested in doing what it takes to increase sales. "Ifinsurers are using the industry standards as their internal datamodels and data standards, then adopting the standards for thevendors and mapping [vendors'] own data models, process models, andmessaging standards to the ACORD standards gives [vendors] a leg upwith the clients because this promises [clients] a shorterimplementation time," he says.

Before joining Assumption Life, Smith was employed on the vendorside. "If we had to deal with standards, we certainly did," hesays. Certain clients were more demanding of standards and forcedthe vendor to develop with the standards that were available. Otherinsurance carriers were less demanding, though. "We played bothsides of the field wherever it made sense for our organization tomove," he says.

Ultimately, Smith believes it is better for vendors to complywith standards. "When they do that they ultimately have a packagethat can be spread across a broader range of carriers," he says."You are not being specific to one carrier. You are being specificto an industry."

Fuller asserts vendors are more out front in working withstandards than carriers. "They stay out front with everything theircustomers want," she says. "ACORD actually is in some ways the easypart. The more difficult part is carriers and vendors coordinatingtheir projects. The challenge is a carrier wanting to do X, but thevendor's [other] customers want to do Y. Someone needs to encouragea direction."

The standards language itself is a bit misleading, Josefowiczcontends. "There never is going to be a world in which everyinsurer uses industry-standard data and process models," he says.But he suggests collaboratively developed models save users acertain percentage of integration work. "Whatever degree ofcommonality the industry standard has with the internal needs,insurers can save that much work on either internal integration orintegration with vended solutions," he says. "Most insurers I'vetalked to–the ones that actively embrace the standards–have roughly60 percent overlap between what the model covers and their internalneeds. So, if that means they can have 60 percent commonality withnew elements they bring into their system from vendors, that's alot better than no commonality."

Vendors use ACORD in two ways in developing their products.ACORD acts as a consultant and verification facility for the vendorcommunity. "We provide direction on what the standards truly meanand how they might interplay with a system," says Chumbley. "During[vendors'] testing stage, we will do verification testing they arein compliance with the standards."

The second way ACORD works with vendors relates to getting thevendor message out. "During the development phase, ACORD providesan opportunity for [vendors] to let people know what they are doingand what their direction is in regard to standards," says Chumbley."It provides the buyers a single point to go and discover whatactually is going on in the vendor community."

EASE OF DOING BUSINESS

There are two ways of looking at what carriers do in workingwith agents. One way is to put things on the carriers' Web sites."That is good because some customers always are going to dobusiness that way," says Fuller. "But the more technologicallyoriented agencies–those with big management systems–want to usereal time. The minute I start to look at real-timecommunication–doing transfers between our systems–I'm only going todo that one way: with ACORD standards."

So, while carriers seek to be easier to do business with thantheir competition, Fuller points out they are all likely to end upusing the same standards. "Are there carriers not doing that?" sheasks. "Probably, but they are going to run into trouble. If theyare trying to do an electronic interface with their vendors, thevendors aren't going to want to do it two ways. They want tocommunicate only one way, and carriers want to do this only one waywith multiple vendors. Standards are just heaven for this."

One issue Jenkins believes the industry has to face is the viewthat standards are not simply a technology issue. He believes inEurope more insurance CEOs understand the value of standards thantheir U.S. counterparts. "It's incumbent on all the standardsorganizations and for the carriers to start to understand savingmultiple millions of dollars in developing systems by usingstandards is a business issue," he says.

BIGGEST CHALLENGE

The biggest challenge ahead for ACORD, Fuller believes, is notwith the vendors but rather with independent agents. She suggestsACORD needs to drive change within an agency so agents start usingthe standards-based tools carriers are providing them. A secondchallenge is convincing carriers that are currently notparticipating to join the organization. "We'd love to have morecarriers involved," she says. "We'd like to have them report andlet us know they're involved, but some of them won't even do that.They get very secretive. They don't like others to know what theyare doing. There's some competitive advantage if they can implementACORD standards better than any other carrier, but I'll say itagain, we're still using the same vendors."

In Jenkins' view, ACORD's philosophy has been to play with "thebig dogs of the insurance world," he says. "If you look at itsmembership and you factor in how many members it has today vs. thenumber of P&C carriers that reside in the U.S., I questionwhere it is directing its attention. I don't know whether thepenetration rate is where it ought to be."

DATA MODELING

Another standards group appears to be entering the insurancevertical. Objects Management Group has taken up the cause of thedata modeling for the property/casualty field after a working groupof P&C carriers felt it was not getting sufficient tractionfrom ACORD, states Jenkins. OMG's constituency basically has beenlarge vendors, notes Jenkins. "They have not beenindustry-specific, but they have begun to move in that direction,"he says. "They are beginning to see opportunities."

Chumbley contends it's important everyone recognizes "datamodel" is a loaded term. "That's like saying, 'I speak a language.'Well, what language do you speak?" he asks. "When someone says datamodeling standard, you have to ask what kind of model you aretalking about?"

ACORD is in the process of building what it calls an informationmodel. An advisory committee was convened to work on what Chumbleybelieves will be a high-level model for the industry. The reasonfor creating an information model is to provide flexibility amongthe standards, he explains, so anyone using a particular version ofthe standard can trace back to any other version. "If I haveinformation regarding a policyholder, I can see where it exists inother environments," he says.

A second reason for the model is for internal use at ACORD. "Inmost companies today, instead of siloed systems, they have acorporate architecture they use for the development of theirsystems," says Chumbley. "The information model and the rest of thestandards framework we are building is the ACORD enterprisearchitecture–how we define our business of developing standards.Can it be used by partner organizations to create data models?Absolutely."

ACORD decided to develop its own model, but the OMG effortalready was under way, so, according to Jenkins, the two sidesdecided to part ways. "We have a nucleus with our group, and itcontinues to expand," says Jenkins. The OMG committee will meet inearly May to go over where the plan is, what work has been donethus far, reset the target date, and start to parcel the work out,he adds. "The beauty of the OMG process is, per its bylaws, it hasto have the endeavor completed within 18 months," says Jenkins, whofeels the schedule is ambitious. OMG previously developed the HL7model for the health industry, and Jenkins believes it has theexperience and the expertise to create the models.

Penn National remains a member of ACORD, but Jenkins realizesone of the problems OMG is facing as it attempts to gain tractionin the insurance space is carriers can't afford to be members oftwo standards bodies, especially in these economic times.

Fortunately, in the data modeling effort, the carriers involvedare serving as what Jenkins calls a reviewer group and don't haveto be a member of OMG. "[The carriers] are acting in the capacityof subject matter experts," he says. "They will review the endproducts and validate or challenge them."

Chumbley maintains ACORD is moving forward at an aggressivepace. "We began focusing and understanding this in the third andfourth quarter of 2007," he says. "By the end of 2007, we had adesign to move forward. Our efforts now have been to solidify thatdesign and to build content."

THE DIRECTION

Depending on the market they work in and the solutions theyoffer, it's important for vendors to have standards at the centerof their data model or messaging standard, emphasizes Josefowicz."There are so many factors that go into the success of a vendedsolution; participation in ACORD and the ability to work with ACORDstandards are important," he says. "In a lot of cases, it will getyou selected against if you can't at least say you can adapt to anACORD environment. It's an investment for most technology vendorsto make sure that's the model they are using." TD