Once a software implementation has been completed, both insurance carriers and software developers are eager to refer to their arrangement as a partnership. However, getting to that point requires more than a handshake and a signed contract. There is no guarantee deals eventually will turn out to be beneficial to both sides, but it would be impossible to achieve success without the basic groundwork being laid long before RFPs are issued.
A major part of that groundwork is conducted by the members of ACORD, the industry's leading standards body. ACORD is made up of more than just carriers and vendors, though. As Rick Gilman, vice president communications and industry/government relations for the standards body, puts it, ACORD's membership is made up of all the players in the insurance value chain. "We have carriers, reinsurers, solution providers, agents, brokers, and other associations all coming together to work on developing and driving the implementation of standards," he says. "I would definitely see us as partners with all those players to move the efficiencies and the effectiveness of this industry forward."
Mele Fuller, director of partner integration for Safeco Surety and a 20-year volunteer with ACORD, sees the relationship of ACORD with vendors and carriers as one of an impartial partner that helps the industry develop and implement technology to increase ease of doing business. "[ACORD] provides us with leadership, the management of the standards, and it pulls us together into working groups when the membership requests them. We would not be in a standards environment without it."
Bill Jenkins, CIO of Penn National Insurance, is a big proponent of standards because they lower cost and are more efficient. As part of the IT operating principles at Penn National, the carrier will use standards wherever it can. "If ACORD has standards, we'll use them," he says. "Vendors will do the same thing, but the problem is if the standard doesn't exist and you have proprietary systems, you aren't going to throw out the systems you have that are working to put in standards that are just being developed and implemented."
ACORD is designed to function as a mediator among the carriers to define the models, publish them, and make them available so the vendors can use them, believes Matt Josefowicz, director of insurance for Novarica, a Novantas company. "ACORD is designed to help 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 sides but rather as a collaborator. "If you think of us in the paradigm of a coffee shop, we're the place everyone comes to chat," he says. "When people want to talk about standards and open ways of communication and how they are going to implement those definitions, we provide the place where everyone can come and join the discussion."
From his perspective, Derrick Smith, director of IT at Assumption Life, sees standards groups as leaning to the carriers' side because the carriers' mission is a part of standardizing the entire industry. "The vendors come and go--some have been there for a while, and they probably always are going to be there--but any new vendor ultimately should comply with standards if it wants any acceptance in the industry," he says.
MEMBERSHIP STRENGTH
ACORD recognizes without the vendors implementing standards in their systems, the organization would be hard pressed to get broad takeout 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 development of the standards," he says.
Everyone is on equal footing when it comes to developing the standards, Chumbley explains. "The carriers, vendors, and agents all sit on an equal playing field during the development of standards," he says. "No one necessarily leads the effort. Where the buyers have the more direct interaction is when it comes to the direction. 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 as trying to address the growing international marketplace," she says. "These days [ACORD] won't add something new to the standards unless someone is going to implement it."
But ACORD needs to work on encouraging new participants, particularly carriers, according to Fuller. "The more companies implement, the more pressure there is on the nonimplementing carriers to come on board," she says.
Smith believes standards ultimately position the industry better for the future. "I think it's very important organizations are going down the same path," he says.
Assumption Life began looking at and applying standards over the last few years, according to Smith. The biggest hurdle for the carrier was learning and understanding everything that is available, he indicates. "The biggest benefit [ACORD] could bring carriers would be more training and information sessions that can complement the standards, especially up here in Canada, which is limited in those types of things," says Smith.
ACORD COMPLIANT
ACORD is undergoing a major overhaul this year in terms of certification to provide much tighter compliance to the standards. Gilman admits part of the challenge the organization faces is nobody really knows what the phrase ACORD compliant means. "Is it compliant with a message?" he asks. "Is it compliant with a standard? What does that mean to me as a buyer of software products? The value we feel and what we've heard from the membership is of a tighter, more demanding certification program. That is something we're moving toward and really will drive home more succinctly the implementation of standards."
When ACORD first got into the certification process for XML back in 2000, Chumbley reports standards were viewed as an 80/20 rule in the XML world. "XML would get you 80 percent of the way there," he says. "Every time you went to a trading partner you would have to negotiate the last 20 percent."
That mentality is changing, he points out. As the industry has adopted service-oriented architecture and Web services, the service now has to be 100 percent compliant. "Our members are seeing there is 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 verify their compliance at a much tighter level than ever before, asserts Chumbley. At the ACORD LOMA Systems Forum this month, Chumbley expects an announcement will be made explaining how ACORD will be rolling out a new level of certification in an automated fashion. "Any of our members will be able to access the current level of certification 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 at any time in the cycle," says Chumbley. "For the carriers, it offers them a way of debugging and validating what the vendors are claiming. The vendors that use it will be excited because it provides 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, the carriers should start asking questions. "You need the details," she says. "All ACORD standards have been built with a certain amount of flexibility, and you need that flexibility because the people who participate have different needs and abilities."
Even determining ACORD certification is no guarantee the data stream is going to be exactly the same. "ACORD compliant means they read the specification," says Fuller. "ACORD certification basically means their data structure is correct. It doesn't necessarily 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 to ask."
Compliance with ACORD standards can be a deal killer if the solution provider is not ready to support those models, reports Josefowicz. "In a lot of cases, people are not careful about what that means," he says. "If you ask a vendor whether it supports ACORD, you have to ask the second-level questions: Which processes? What models? What messaging types? Are you using the process models or just the messaging standards? You can have 10 vendors saying they 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. "If insurers are using the industry standards as their internal data models and data standards, then adopting the standards for the vendors and mapping [vendors'] own data models, process models, and messaging standards to the ACORD standards gives [vendors] a leg up with the clients because this promises [clients] a shorter implementation time," he says.
Before joining Assumption Life, Smith was employed on the vendor side. "If we had to deal with standards, we certainly did," he says. Certain clients were more demanding of standards and forced the vendor to develop with the standards that were available. Other insurance carriers were less demanding, though. "We played both sides of the field wherever it made sense for our organization to move," he says.
Ultimately, Smith believes it is better for vendors to comply with standards. "When they do that they ultimately have a package that can be spread across a broader range of carriers," he says. "You are not being specific to one carrier. You are being specific to an industry."
Fuller asserts vendors are more out front in working with standards than carriers. "They stay out front with everything their customers want," she says. "ACORD actually is in some ways the easy part. The more difficult part is carriers and vendors coordinating their projects. The challenge is a carrier wanting to do X, but the vendor's [other] customers want to do Y. Someone needs to encourage a direction."
The standards language itself is a bit misleading, Josefowicz contends. "There never is going to be a world in which every insurer uses industry-standard data and process models," he says. But he suggests collaboratively developed models save users a certain percentage of integration work. "Whatever degree of commonality the industry standard has with the internal needs, insurers can save that much work on either internal integration or integration with vended solutions," he says. "Most insurers I've talked to--the ones that actively embrace the standards--have roughly 60 percent overlap between what the model covers and their internal needs. So, if that means they can have 60 percent commonality with new elements they bring into their system from vendors, that's a lot better than no commonality."
Vendors use ACORD in two ways in developing their products. ACORD acts as a consultant and verification facility for the vendor community. "We provide direction on what the standards truly mean and how they might interplay with a system," says Chumbley. "During [vendors'] testing stage, we will do verification testing they are in compliance with the standards."
The second way ACORD works with vendors relates to getting the vendor message out. "During the development phase, ACORD provides an opportunity for [vendors] to let people know what they are doing and what their direction is in regard to standards," says Chumbley. "It provides the buyers a single point to go and discover what actually is going on in the vendor community."
EASE OF DOING BUSINESS
There are two ways of looking at what carriers do in working with agents. One way is to put things on the carriers' Web sites. "That is good because some customers always are going to do business that way," says Fuller. "But the more technologically oriented agencies--those with big management systems--want to use real time. The minute I start to look at real-time communication--doing transfers between our systems--I'm only going to do that one way: with ACORD standards."
So, while carriers seek to be easier to do business with than their competition, Fuller points out they are all likely to end up using the same standards. "Are there carriers not doing that?" she asks. "Probably, but they are going to run into trouble. If they are trying to do an electronic interface with their vendors, the vendors aren't going to want to do it two ways. They want to communicate only one way, and carriers want to do this only one way with multiple vendors. Standards are just heaven for this."
One issue Jenkins believes the industry has to face is the view that standards are not simply a technology issue. He believes in Europe more insurance CEOs understand the value of standards than their U.S. counterparts. "It's incumbent on all the standards organizations and for the carriers to start to understand saving multiple millions of dollars in developing systems by using standards is a business issue," he says.
BIGGEST CHALLENGE
The biggest challenge ahead for ACORD, Fuller believes, is not with the vendors but rather with independent agents. She suggests ACORD needs to drive change within an agency so agents start using the standards-based tools carriers are providing them. A second challenge is convincing carriers that are currently not participating to join the organization. "We'd love to have more carriers involved," she says. "We'd like to have them report and let 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 they are doing. There's some competitive advantage if they can implement ACORD standards better than any other carrier, but I'll say it again, we're still using the same vendors."
In Jenkins' view, ACORD's philosophy has been to play with "the big dogs of the insurance world," he says. "If you look at its membership and you factor in how many members it has today vs. the number of P&C carriers that reside in the U.S., I question where it is directing its attention. I don't know whether the penetration rate is where it ought to be."
DATA MODELING
Another standards group appears to be entering the insurance vertical. Objects Management Group has taken up the cause of the data modeling for the property/casualty field after a working group of P&C carriers felt it was not getting sufficient traction from ACORD, states Jenkins. OMG's constituency basically has been large vendors, notes Jenkins. "They have not been industry-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 "data model" is a loaded term. "That's like saying, 'I speak a language.' Well, what language do you speak?" he asks. "When someone says data modeling standard, you have to ask what kind of model you are talking about?"
ACORD is in the process of building what it calls an information model. An advisory committee was convened to work on what Chumbley believes will be a high-level model for the industry. The reason for creating an information model is to provide flexibility among the standards, he explains, so anyone using a particular version of the standard can trace back to any other version. "If I have information regarding a policyholder, I can see where it exists in other environments," he says.
A second reason for the model is for internal use at ACORD. "In most companies today, instead of siloed systems, they have a corporate architecture they use for the development of their systems," says Chumbley. "The information model and the rest of the standards framework we are building is the ACORD enterprise architecture--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 effort already was under way, so, according to Jenkins, the two sides decided to part ways. "We have a nucleus with our group, and it continues to expand," says Jenkins. The OMG committee will meet in early May to go over where the plan is, what work has been done thus 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 has to have the endeavor completed within 18 months," says Jenkins, who feels the schedule is ambitious. OMG previously developed the HL7 model for the health industry, and Jenkins believes it has the experience and the expertise to create the models.
Penn National remains a member of ACORD, but Jenkins realizes one of the problems OMG is facing as it attempts to gain traction in the insurance space is carriers can't afford to be members of two standards bodies, especially in these economic times.
Fortunately, in the data modeling effort, the carriers involved are serving as what Jenkins calls a reviewer group and don't have to be a member of OMG. "[The carriers] are acting in the capacity of subject matter experts," he says. "They will review the end products and validate or challenge them."
Chumbley maintains ACORD is moving forward at an aggressive pace. "We began focusing and understanding this in the third and fourth quarter of 2007," he says. "By the end of 2007, we had a design to move forward. Our efforts now have been to solidify that design and to build content."
THE DIRECTION
Depending on the market they work in and the solutions they offer, it's important for vendors to have standards at the center of their data model or messaging standard, emphasizes Josefowicz. "There are so many factors that go into the success of a vended solution; participation in ACORD and the ability to work with ACORD standards are important," he says. "In a lot of cases, it will get you selected against if you can't at least say you can adapt to an ACORD environment. It's an investment for most technology vendors to make sure that's the model they are using." TD
