For being just five years old, the eXtensible BusinessRe-porting Language (XBRL) has gained some important fans in theinsurance world, not the least of whom include the NationalAssociation of Insurance Com- missioners (NAIC), the people withthe charge to keep an eye on the insurance industry and (some wouldsay) make life miserable for the carriers of the country. Althoughthat latter job description is nowhere to be found in the NAICcharter, insurers are to be excused if they are somewhat leery ofthe regulatory world. Fifty regulators in 50 states make statutoryreporting a nightmare, both in the submission of reports and theaccess insurers desire to the reports submitted by their peers.Thats why the NAICs move to adopt a standard that will make thereporting process much easier is a sign commissioners dont reallyhate insurers after all.

Security National Life, like many insurance carriers, submitsits reports to the states on PDF files that are sentelectronically. This is more beneficial than the paper-form days,but Steve Sill, vice president, treasurer, and CFO of SecurityNational Life, knows the system has its drawbacks. [PDF files] makeit hard to exchange data with other companies, he says. Its prettyimportant to know what your competitors are doing and get that typeof information. As he points out, an insurers annual report to thedepartment of insurance in the states in which it operates arepublic documents, so any step to have a standard reporting languagewill make it simpler for carriers to get the information theyneed.

Mele Lynn Fuller, interface architect with Safeco Insurance,says her company has no plans to jump on the XBRL bandwagon untilone significant event occurs: The NAIC requires it. Having workedfor years with standards organizations such as ACORD, she pointsout, Unless somebody has started to deal with internal integrationusing XML in the financial end of their work, I suspect [insurers]are going to sit back and wait until somebody demands it.

Whos Behind It?
Alex Spencer is an assistant commissioner with the North CarolinaDe-partment of Insurance and recently chaired a working committeeon XBRL that in December recommended to the NAIC executivecommittee that the NAIC adopt XBRL as the organizations datatransfer standard. The decision to go with XBRL, he says, wasntdifficult. The only real choices were XBRL or develop somethingelse, he points out, adding he expects the executive committee toadopt the standard and to fund some pilot projects to help theregulators in the NAICs Kansas City, Mo., office understand whatbenefits can be derived from XBRL.

Spencer traces the NAICs interest in making life easier forcarriers back to the groups earlier formation of SERFF, anelectronic system of rates and forms filing. The theory is,companies can go to this one place, put together a filing, and itall gets distributed to the states they need to file forms in, heexplains.

The problem with such systems is there are 50 different states,and there always seems to be some conflict as to what data thedifferent states want. The more you can standardize, the easier itgets for everybody, says Spencer. But its been difficult. We [NorthCarolina] have had trouble in creating an interface between SERFFand our back-end system. If we were moving the data back and forthin XBRL, these issues wouldnt be nearly as large.

The issues between the regulators and the carriers have beencompounded in recent years by a number of insolvencies amongcarriers. The NAIC moved to tighten down regulations to helpprevent insolvencies, says Spencer. Now weve got a lot of companiesgrumbling about slowness of processing, inconsistencies, and a lotof stuff that really shouldnt happen.
This has caused the regulators to reexamine their own processes.Theres been a big effort to standardize, says Spencer. In somecases, thats difficult because we have 50 states. I think XBRL willhelp that whole issue. For example, he points out it shouldntmatter if North Carolina wants something different in its formsthan South Carolina. What you want to look at is the speed of theprocessing, not the information requested to process, he says.

For XBRL to be successful, Fuller believes there has to be theproverbial 800-pound gorilla behind it. Somebody with a lot offorce who decides this is going to save us a lot of money, shesays. Such an organization as the NAIC, she adds, eventually couldsay, Weve got these people who have to talk to us, and were goingto tell them to do it this way.

XBRL Goal
Mike Willis, partner in audit business and advisory services withPricewater-houseCoopers, has been involved in the development ofXBRL since its inception back in 1998. The goal is to promulgatethe market adoption and implementation of XBRL as a tool to enhancewhat we call the business reporting supply chain, which really isto enhance business reporting both inside companies and betweencompanies and their stakeholders, he says. As with any technologydevelopment, XBRL International, the not-for-profit organizationspurring the business languages development, realizes it has tocreate a demand for the standard as well as encourage developmentof a companys ability to use the standard internally.

Willis sees three benefits to insurance carriers using XBRL:production of information, consumption of information, andmanagement of information. The financial services sector actually[can realize] all three of those benefits, he asserts. That isgreater than any other [business] sector because [financialservices companies] consume a lot of business information as partof what Ill call their transaction activities. Because of thosebenefits, he says, financial services have been a target of XBRLInternationals efforts from a market-adoption perspective.

For insurers, Willis adds, the idea of enhancing internalreporting has caught their attention. In the insurance sector, theidea of transaction-level data typically is articulated by theACORD standards. XBRL International and ACORD, he says, havedeveloped an interoperability agreement and are working tointegrate not only specifications but also definitions that mightbe overlapping.

XBRL has caught the attention of industry organizations such asIASA, as well. [Standards] are important for the industry to get acommon exchange mechanism, says Sill. Its important [to IASA]because [XBRL] is going to be an industry standard. We want to makesure we can get our members information on a timely basis on how tocomply with it.

Having vendors that are XBRL compliant is not going to convinceinsurers to take the step to XBRL. Fuller believes many of them arelooking to sell a product, not necessarily advance the industry.Until the NAIC tells all the carriers this is the only way we willreceive your data, people arent going to use it, even if it isoptional, she says. Carriers believe if the old way still works,why spend the money?

Regulators
Getting the NAIC to endorse the standard was a major step for XBRL.Sill reports that Security National Life has yet to use thestandard, but after learning of the NAICs actions, he says, Thiswill affect all insurance companies. Its something well have totake up with our software people.

Gary Wicklund, vice president industry relations with EagleTechnology Management, a service provider for insurers working tofile quarterly and annual reports, believes regulators weresatisfied with the way things were done with PDF files but haveaccepted the fact they need to be more responsive to theirconstituents. Its not easy to get data out of a PDF, he says.Somebody literally has to sit there and key it in.

Since state and NAIC reports are public documents, insurers arecurious to see how their peers are performing, so there is a greatdemand for the reports. Acquiring comparison data for companies isnot easy, though. Most insurance carriers pay for such a servicethrough an outfit such as A.M. Best, which analyzes the data theinsurer requests and then sells its reports back to thecarriers.

Willis agrees the NAIC decision was important for the future ofXBRL. Regulators have the ability to enhance awareness, he says. Itbegins to open the companies eyes to the application of XML and Webservices in terms of their own data management concepts.

Regulators will be able to take advantage of this standard aswell, he points out, particularly through the validation of thedata that is submitted. In todays regulatory process, thevalidation process is on the regulators shoulders. Through some ofthe XBRL concepts, we are able to put that responsibility on thepreparer of the information where it rightly belongs.

There are two other benefits for insurers, though, according toWillis. He points to the idea of speed and accuracy in theinformation exchange and the idea of embedding business rules. Ithen could look at a thousand regulatory reports, and those reportsmight tell me which didnt meet certain business rules, he says.Today, that concept is built into an application. Im suggesting thebusiness rules actually could be built into the taxonomies used forreporting.

Will It All Work?
It is too early in the game to say everyone is going to jump on theXBRL bandwagon. Michael Key, president of the Freedom Group, a unitof Fiserv, says his company supports standards but adds, We see[XBRL] as one of several types of open standards we continue towork toward. Obviously, it is difficult for us to commit that weare going to adopt a full standard without seeing exactly what thatmeans and what the regulatory guidelines are attributable toit.

There are limitations to the use of XBRL, Willis says, and mostof those center around implementation and the priorities of theregulators. He suggests insurers will start with their morestreamlined forms and then move toward the more unstructured areas.The limitations would be around the idea of large unstructureddata, he says.

Spencer believes the XBRL concept has been oversold byproponents thus far, but he acknowledges the push has to startsomewhere. It would be hard for carriers to resist some of the hypebehind XBRL: The ability to start company comparisons; the abilityto go to the Internet and pull down information from other sources;the ability to start trending. These features have been difficultto accomplish, so there is considerable excitement about thestandards possibility, but Spencer adds, You still have to have thetools. XBRL tools just are starting to appear, and the data has tobe published for you to use it.

Savings Is the Benefit
The obvious benefit to insurance carriers, Willis asserts, will becost savings. He estimates carriers can lower the cost of theirfinancial reporting by between 20 percent and 50 percent. Thereason for the savings is one of the major expenses in filing formsis the keying in of data. The process typically is a manual processwhere you have employees actually cutting and pasting orkeypunching, he says. The XBRL field would say the company has areporting tool internally. The XBRL model would say to take theregulatory taxonomy and place it in the reporting tool, map thecompanys internal ledger to that taxonomy, and whenever you need toreproduce that report, its file, save-as activity.

Once a carrier has its internal trial balance mapped, Willissays, the report for the regulator is a simple exchange withlimited costs. In other words, the form idea goes away, so theresan incremental benefit to the company in terms of its capability toproduce this, he says.

I think its pretty clear the potential for XBRL is there, saysSpencer. It will make it so easy to push and pull data, but itsgoing to take a while to get there, and I think thats the part wealways seem to miss.

Spencer believes it could be a decade before all the benefits ofXBRL are realized, but Willis doesnt feel it will take that long.In the next year, I think youll see an explosive number ofregulators starting at the structured end of their data requests,he says. In five years, I think youll see a fairly changedmarketplace, both in the regulatory arena and in the publicsector.

Key disagrees with Willis on how XBRL is being seen in theindustry. XBRL has started to receive some attention, but we haventhad a very large outcry from our client base yet, says Key. We seeit as part of the drive toward openness and the commonality ofreporting.

Willis claims it is a market-driven idea that will play out whenthree things are accomplished. We get the tools online, he says. Weget the taxonomies built, and we raise the awareness as to what thereal benefits are to all the supply-chain participants.

Spencer acknowledges the accounting firms are some of the majorplayers pushing XBRL. Since they do many of the reports forinsurance carriers, it is not a surprising detail. He believeshaving a regulatory standard will get insurers started in thedirection of XBRL, though.

Wicklund says one insurer he is familiar with has 150 members onits reporting staff. The company looks at somewhere around 1,000reports, and out of the 1,000, some 250 of them are used to dostatutory reporting, he says. [The insurer] has to key [the data]in to get the reports in the format [the insurer] needs so [thereport] can be filed for regulatory purposes.

There has to be a savings realized through the use of XBRL,Wicklund maintains. If you have the elements tagged, you can takethose tags and put them wherever you want when you do a report, hesays. Once you have the tagged data, you actively can pull it intoan Excel spreadsheet, do analysis of it, reproduce pages, reproducereports.

Fuller believes strongly someone has to push the standardthrough. In this case, that is probably the NAIC. Until theres astrong business reasonmore than just saving a few bucksits got tobe something really compelling, she says. Its the problem weve hadin standards for years.

The Cure
Most financial people will welcome the standards, but Spencerreminds them although XBRL can be valuable, it is not a cure-allfor what ails the reporting process. I think in a lot of casespeople believe its a panaceathat its going to solve all theirproblems, he says. Its really not, but it is going to make aneasier transfer from Point A to Point B.

Financial and Accounting Software Tech Guide
Alphasoft Marketing International
Nevada City, Calif.
530-478-1552
www.ialphasoft.com

AMS Services, Inc.
Windsor, Conn.
800-444-4813
www.ams-services.com

Balance Consulting Inc.
Ann Arbor, Mich.
734-668-1099
www.balanceconsult.com

Captiva Systems, Inc.
Miami, Fla.
800-274-8300
www.captivasystems.com

Document Imaging
Greenwood Village, Colo.
877-732-8278
www.docimag.com

Eagle Technology Management
Marion, Iowa
800-975-3245
www.eagletm.com

Epic Solutions, Inc.
Mesa, Ariz.
480-969-2720
www.epicsol.com

Fiserv FREEDOM
Cedar Rapids, Iowa
800-322-4220
www.freedomgroup.com

Flexi
Shelton, Conn.
203-925-3040
www.flexi.com

Fulcrum InteTech
Napa, Calif.
707-224-7700
www.fulcrumit.com

GAAP Software, Inc.
Burtonsville, Md.
800-438-4227
www.gaapmga.com

Genelco Software Solutions
St. Louis, Mo.
800-983-8114
www.genelco.com

gotoPremiumFinance.com
Woodland Hills, Calif.
800-229-9822
www.gotopremiumfinance.com

IASA
Durham, N.C.
847-823-2868
www.iasa.org

Input 1, LLC
Woodland Hills, Calif.
800-229-9822
www.input1.com

Insight Decision Solutions
Markham, Ontario, Canada
905-475-3282
www.insightdecision.com

Princeton Financial Systems
Princeton, N.J.
609-987-2400
www.pfs.com

Perceptive Vision, Inc.
Shawnee, Kans.
800-941-7460
www.imagenow.com
SAP America, Inc.
Newtown Square, Pa.
610-661-1000
www.sap.com/insurance

SRC Software
Portland, Ore.
800-544-3477
www.srcsoftware.com

SunGard Insurance Systems
Roswell, Ga.
303-283-5452
www.sungardinsurance.com

Systems Union Inc.
Miami, Fla.
416-644-5544
www.sunsystems.com

Tata Consultancy Services
Naperville, Ill.
406-549-5600
www.tcs.com

Terrace
Oakland, Calif.
510-836-3400
www.terrace.com

United Systems & Software
Lake Mary, Fla.
800-522-8774
www.ussincorp.com

Xerox Global Services
Rochester, N.Y.
770-569-5668
www.xerox.com