Ever since God confounded the languages of humankind at the Tower of Babel, people have struggled to find a common means by which to communicate. This struggle is reflected in the systems insurers use to conduct business where, even though the benefits of standards are well understood, international development and adoption of standards for data and messaging has been a slow and difficult process.
"We have very limited use of standards internationally right now; however, our plan is to target data management and messaging strategies that leverage the benefits we are achieving within the U.S. through the use of standards across the enterprise," says Jack Simpson, Jr., vice president in IT enterprise data management at MetLife. MetLife has operations outside the U.S. that span from Asia to Europe to South America. "Reusability [based on standards] drives down cost, increases our speed to market, and improves data quality–all benefits we could gain by enhancing our use of standards on an international level."
The campaign to promote standards for data and messaging in the insurance business is being conducted on several fronts and by several constituencies. The first front involves domestic carriers with a global presence.
"Because we have international members with international needs, international adoption of standards always has impacted us. However, we have had increased interest recently from companies with international operations that are looking at how standards can be used from an enterprise perspective, including catastrophe modeling, underwriting, and taking best practices and solutions and applying them on an international basis," says Denise Garth, vice president of membership and standards at ACORD.
One project Simpson points to as an example of standards success is MetLife's customer information file (CIF). The insurer first began building the CIF in 2002 to support customer service, operational processing, and marketing efforts. Today, all the MetLife's strategic administrative platforms have been integrated to the CIF.
"With our CIF, we essentially have built a hub around the ACORD [XML for life insurance] standards," Simpson explains. "This allows us to use a common language to communicate across different business areas within MetLife."
On one hand, MetLife's experience using messaging standards for connection to the CIF is laying the groundwork for other standards-related work both domestically and internationally. "We are looking at taking the messaging standards down further toward the data level and coming up with standard data definitions that can be mapped more easily to the messaging standards," Simpson relates. "We are working very closely with ACORD and its framework initiatives to build out a common data model with the common business vocabulary it has. Mapping the data model to the transactions themselves is where we spend a lot of time right now, so if we achieve that [standard] integration between data and transactions across the enterprise, it would be a big win for us."
On the other hand, MetLife is hoping the CIF and other standards-driven initiatives will help bolster the case for standards adoption, ACORD or otherwise, across its international enterprise. "We have significantly increased our international presence in recent years, particularly with the acquisition of Travelers Life & Annuity Company [in 2005]," Simpson says. "So, we are trying to provide direction and influence by talking to people in different locations internationally about the benefits of using standards for information exchange."
Simpson sees standards playing a role internationally in a policy administration platform replacement initiative for the company's life business, which is slated to begin this year. "We are hoping to develop common business process models and start, to the degree possible, to share those models across international boundaries so that we are not doing the same thing 20 different ways," he notes.
Although MetLife believes in the ultimate benefits of standards on an enterprise level, Simpson points out the company needs to plan carefully to avoid backlash from international constituencies by pushing too hard. "If we go too fast, we could cause more problems than we anticipate. Some of the things we are trying to deal with are individual countries' regulatory and privacy environments, the language barriers that exist across countries, the business process models that are different across different countries, even the cultures that are different. At times it is difficult even to see where the common threads are," he says.
The types of cultural challenges Simpson identifies are common, says Beth Grossman, assistant vice president of industry relations at ACORD. "Someone in the UK always will call a flat a flat, and someone in the U.S. will call it an apartment. We are hoping our data dictionary could one day be looked at as a global dictionary. We are not there yet, but we're getting there."
Companies that first use standards domestically and then attempt to take them to operations in other countries also must work to avoid conveying the impression they are imposing U.S.-centric methodologies. "Companies need to show standards not only provide return on investment for the organization but, importantly, can be used to support global operations," asserts Kimberly Harris-Ferrante, vice president of research at Gartner.
"I would anticipate some of the standards will take hold [across the enterprise] first in the back-office functions, such as HR or financial, because they are less customer specific," Simpson illustrates. "Where we have to aggregate [companywide] financial information, we really can make the case of benefiting from a common standard."
Another front in the campaign involves the interest of foreign insurers in the value of data standards. "There definitely has been an increase in interest by both companies and insurance commissioners in how foreign markets can adopt data standards," observes Matthew Josefowicz, manager of Celent's global insurance group. "The primary concern isn't for a 'universal global standard' as much as it is for how those markets can develop by using standards."
When it comes to interest in and adoption of standards, particularly ACORD standards, Harris-Ferrante identifies two market segments: emerging and mature. "Emerging markets include countries such as China and Russia that are undergoing massive technological transformation," she says. "Existing insurers in those regions are facing challenges to compete and support growth and are being forced to refresh their systems and technologies.
"Mature markets consist of those that are technologically advanced and those that are moderate in their use of new technical platforms and approaches. The UK has made major inroads into standards adoption and the rebuilding of its technical infrastructure. Countries such as France and Germany, while advanced in technology use, still are young in regard to adoption of standards," claims Harris-Ferrante.
In general, the interest of foreign insurers in data standards mirrors that of U.S. insurers: internal integration first, external communication second.
"The internal use [of standards] is very interesting in the sense it was not ACORD's original mission. The original mission was to enable communication between companies, agents, reinsurers, and other third parties in the value chain," Josefowicz points out. "But companies realize their biggest [communication] challenges are internal, and data standards can help them address internal issues in a way that ultimately will position them to enable more external data sharing."
"Internal standards projects provide quantifiable return on investment for insurers and are a good starting point," Harris-Ferrante adds. "It often is difficult to implement standards with external partners, since you have little to no control over the systems they are using."
Helping fuel the internal adoption of standards both internationally and domestically has been the explosion of XML-driven SOA initiatives. "As insurers embrace SOA and reusable components for system integration, there is an advantage to using XML message standards and data dictionaries, rather than proprietary ones," explains Josefowicz.
"SOA is not a technology; it is a strategy that relies upon the use of standards such as XML in order to support fast and efficient data exchange from system to system," Harris-Ferrante says. "As insurers undergo infrastructure transformation and shift to the use of SOA, it only promotes and encourages the use of industry standards, which ultimately will drive increased adoption in the future."
For instance, even though Penn National does not have international operations, ACORD standards are a key component of a current SOA initiative that includes replacing the company's entire suite of legacy policy administration systems. "One of our operating principles in IT is we will utilize ACORD standards wherever feasible," says William Jenkins, CIO at Penn National.
Another front in the standards campaign, both international and domestic, is the adoption of standards by software vendors. For instance, one of the first companies in China to become a member of ACORD was Siebre Systems.
"Part of the transformation [in emerging markets] is implementing new core systems, such as policy administration, from global vendors that support industry standards," reports Harris-Ferrante.
Vendor adoption of standards can lead to the "standards by default" scenario at carriers. "Even domestically, there are insurers that never made the decision consciously to use standards but have purchased new applications that support standards," Harris-Ferrante continues. "Over time they start to question whether they should begin to use that capability to support [additional] messaging."
The final front involves the efforts of standards organizations themselves. Although ACORD doesn't have a monopoly on the standards business, it has been the most visible when it comes to insurance-specific data and messaging standards in the international marketplace. "ACORD is actively marketing its standards around the globe and trying to drive interest," says Harris-Ferrrante.
For its part, ACORD has been very active in China for the past four years, but that isn't the only foreign market that is interested. "On the life side in particular, we have had increased interest and participation from our members in South Africa," Garth notes. "In the last couple of years, the South African members have re-engaged and participated in making additions to the life standard that are unique for their market [vs. the U.S.]. That has enabled other companies in other geographies with similar needs [to those of South Africa] to use those extended standards in constructing systems."
Despite the quickening pace of interest from emerging markets, the biggest international push for ACORD continues to be in the UK. "The most significant efforts over the last year have been the London market, particularly with the market reform taking place," Garth says.
Reform efforts, governed by the Market Reform Group, were designed to speed and standardize the London market's traditionally slow back-office processes. Some of the ultimate goals of the Market Reform Group are that all risk submissions, claim processing, and accounting and settlement of risks be performed electronically using standards for data messages and documents. Benchmarks for meeting those goals included a system for "contract certainty" (a mechanism that would help ensure the complete and final agreement of all terms between the insured and insurers before inception) be established by the end of 2006 and claims be managed electronically by year-end 2007.
One of the key components of contract certainty was the creation of a standardized contract placement "slip," the form used to start the underwriting process. The Market Reform Group plans in 2007 to roll out an electronic slip using ACORD messaging standards to support the placing process for large commercial accounts and reinsurance.
"The key to achieving speed and efficiency in the market is to map slip data to the electronic standards so that data doesn't need to be rekeyed," Grossman says.
Beyond market reform efforts, much of the push to adopt data messaging standards in recent months has been driven by the G6, a group of Lloyd's syndicates, Garth reports. "They want to do peer-to-peer communication and were interested in using ACORD standards," she says. Last year, ACORD devised a "Roadmap for London," outlining stages of adoption for syndicates and companies looking to implement its RLC (Reinsurance and Large Commercial) XML message standards.
But what of domestic insurers that don't have international operations or the frequent need to place business in the London markets? "When it comes to reinsurance, every single carrier in the U.S. is impacted because all of them deal with reinsurance, and reinsurance is international," Garth argues.
However, for most noninternational carriers, the impact is indirect. International development and adoption of standards has "lent additional weight to the concept of standards in general, particularly for messaging," says Josefowicz.
As far as Jenkins is concerned, any developments, international or otherwise, that promote the maturation and development of standards is welcome. In particular, he is interested in any developments that will drive the industry to build out and adopt a standard property/casualty data model faster. Twelve months ago, Jenkins says he was frustrated with the pace of development as the efforts by ACORD to develop such a model were diverted to the development of its overall data strategy after IBM had made its contribution of process models and model definitions to ACORD in 2005.
"We had continued to work on putting a data model together, working with other carriers and a couple of major vendors as to what that should look like," he says. "Ultimately, however, [the lack of an industry standard data model] concerns us because we will be pulling information from a lot of different external data sources into the organization and want to minimize the mapping of the data we would need to do."
Now, however, Jenkins says he is optimistic about the developments he has seen take place. "More carriers are expressing interest in the standard data model, and ACORD has doubled back and begun to talk with carriers and vendors about putting this industrywide model together in a more immediate time frame. So, there have been some positive steps taken along those lines, particularly in the past few months," he claims.
While progress will continue, both domestically and internationally, on the standards front, Josefowicz foresees no disruptive developments that will propel the effort beyond a steady state of evolution. "There has been a gradual maturation, and the adoption rate has moved gradually forward. There hasn't been a game-changing event in the past 12 months, and I don't anticipate any in the next year, either," he says.
"Standards are not fully defined, and the adoption of standards in some of our geographies has been pretty slow," remarks Simpson, adding, "We have a lot of work to do." TD
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