Is the Cure Worse Than the Illness?

Brian Bartosh, the president of Top O' Michigan Insurance, believes agencies ought to bring standards into their own offices in order to grasp the technology needed to transfer data. Bartosh, who also is chairman of the industry's solutions committee for ASCnet, says: "Downloads for personal and commercial lines are sent in standards, but if agencies are not working with applications themselves in a standards format, they have a lot of inconsistencies within their agency."

However, according to Karen Pauli, research director in the insurance practice at TowerGroup, the debate is dying down. "The agents certainly have a sense of urgency with the issue of standards, but in my view, it is all about the maturity of technology," she says. "The debate is going to decrease because there are so many more vendors stepping into the middle integration layers, so carriers still can have their competitive advantages and differentiation and still allow the agents to get significant value out of standardization through their agency management system."

"It's a vicious cycle right now," comments Deb Smallwood, founder of consulting firm SMA. Carriers are better equipped, have more sophistication, understand standards, and spend more money, maintains Smallwood, but they need the agencies to do the same. "The challenge is there are a lot of agents who are using older agency management systems," she says. "Given the soft market, there is a reluctance to spend any money, and these old systems are not using the new standards and still are perpetuating the paper, fax, and PDF way of doing business. It's really messy and complex when it should be very simple."

Carolyn Durland points out it is important to include vendors in the discussion, as well, comparing the arrangement to what she calls "three legs of the stool." As ACORD's manager, agent relations, and AUGIE facilitator, Durland believes all three are working to increase the level of activity around standards.

She describes the present state as an uncomfortable and a fun time in the standards business. "People are starting to talk about [standards], and we are uncovering all sorts of things that need to be worked on," she says. "I can't say one is leading the charge over another. The passion from all three legs is exciting."

Perhaps finding internal uses for standards will spark some agencies the way it has sparked usage by such carriers as ICW Group, which found value through standards in its internal communication as well as its work with independent agents. The carrier created a transactional data store for internal users known as XboX (not to be confused with the Microsoft game system of the same name).

The carrier built the data store using ACORD standards, explains Kevin Harris, senior vice president and CIO of ICW. "Within our service-oriented architecture, every interface we build that touches any piece of data goes through this XboX and is structured in ACORD XML," he says. "The ACORD standards have provided a guiding light in how to work in a consistent manner across all interfaces."

LOOKING FOR DATA STANDARDS

Standards in agencies have yet to reach the level of "has to be," admits Bartosh, but he predicts standards will achieve that stage in the next three to five years. "I look at other industries around us, and to be efficient without any standard method of exchanging data will not work," he says.

Data standards have surpassed the ACORD forms in terms of importance, Bartosh asserts. "The data fields in each form need to be handled in a consistent way, and that allows us to exchange data," he says. "I'm not just thinking on the download side where companies send us information, but when we make an electronic submission to a company, if we are not using standards, [the carrier] has a hard time interpreting [the submission] and getting that into its systems."

By putting standards on the agency side and having the agency's customer service representatives use them regularly, Bartosh feels data submissions to carriers will become more consistent and easier to work with in getting rates back from the carriers.

When Bartosh speaks with agents around the country about SEMCI-type products, the discussion usually centers on standards, he explains. But, he points out, agencies in the last 20 years rarely talked about setting up their own consistent standard entry of information. "That's just starting to come out with commercial download," he says.

When agencies received a commercial download, Bartosh contends the agencies didn't always understand why data fields were being used in certain ways. He believes agents have finally realized they weren't using the forms correctly with their own agency standards. "They always thought the ACORD form was the standard, but it's really the fields within the ACORD form that have the standards," he says. "The form itself was simply a presentation method and one of many. They all thought of a submission as a form filled out and sent to a company, and now we are thinking of a submission being data we transfer over. That's why I think the situation will change in three to five years–because industries around us have changed very aggressively, particularly the travel and the banking industries."

Smallwood also notes things could begin to change for the better if there were a common and shared P&C data model. Karen Furtado, a partner with Smallwood at SMA, agrees. "If a data model was agreed on, ease of doing business would improve dramatically," she says.

MORE WORK NEEDED

From the agents' perspective, most of ICW's integration happens through the agency management systems. The carrier continues to integrate with all the agency systems on the market so it can make life easier for agents by directly integrating into their workflow–uploading and downloading information from their systems.

But not all management systems are using ACORD standards. "As much as we prefer agents use ACORD standards, the agent is our number-one customer, and we would never dictate what standards to use," says Harris. "It's a balance as to what makes us most efficient and cost-effective in serving our agent customers and what makes their lives better. If they already have selected an agency management system that might not be ACORD compliant, we are not going to tell them we are not going to work with them. In fact, we will work closely with them, and hopefully over time, we can mutually progress to the same place and look for their vendor to arrive there, as well."

From his discussions, Harris feels agents care most about strengthening their client relationships, which is what ICW focuses on helping them achieve. "Agents care about their lives being easier and about being elevated in the eyes of their customers. They want to be viewed as trusted advisors," he says. "[Agents] want their interaction with carriers to be easy and frictionless, and they want us to help them better service their customers."

Agents, for the most part, are customer focused, not technology focused, Harris adds. "In the meetings I have had with agents, no one has mentioned how ACORD can make their lives better," says Harris. "What they mostly say is they want an agency management system and a carrier system to integrate so they don't have to rekey information multiple times. To the extent we can use the ACORD standards behind the scenes and provide them that ease of use, they don't care if it is an ACORD standard or anything else. They just care that it makes their lives easier."

As for the carrier side, when Bartosh hears insurance carriers brag about the quality of their Web sites, he enjoys countering that today's best Web sites often are obsolete tomorrow. "It's hard [for carriers] to compete only with a proprietary Web site," he says. "I've watched and can name many that were on the top of the wave and now are on the bottom. It's something you can't rest your laurels on."

Still, Bartosh contends carriers are doing more with standards than his fellow agents, because when carriers issue downloads, most try to follow the electronic standards. "Carriers have a hand up on agencies," he says.

Bartosh also believes if carriers are going to download information to agencies, the carriers need to make sure they can receive submissions in a similar manner from the agencies. "Agencies, I have found, are just starting to learn how an ACORD form works," he indicates.

User group sessions for ASCnet have been well attended on topics such as how to complete an ACORD form, and agents only now are realizing what some of the fields are for. "It's a standard form, but they didn't understand the data sets that belong on each of those fields," says Bartosh. "Once [agents] grasp the downloads are just a given, and they understand how each field works and what data elements are transmitted back and forth, they break away from an agency standard to more of an industry standard."

THOSE WITHOUT AMS

Agencies that don't use agency management systems still are working with standards in some way because without a management system they likely are going to a company's proprietary system to quote business. "I can grab several carriers' proprietary Web sites and see the ACORD codes coming up they are using internally," says Bartosh.

The problem arises, though, when a carrier misinterprets the standards. "I worked with a carrier on business auto download, and there were some coverage areas it was misinterpreting," says Bartosh. "I asked the carrier where it got its information, and it said its underwriter told the carrier this was the way it was supposed to be used."

Bartosh gave the carrier the standards and the forms instruction guide to show the carrier the underwriter was wrong. "It came up with its own standard that almost became the company's download standard except we caught it and gave the carrier the proper interpretation," he says. "There's not a lot of enforcement of standards, unfortunately. They are optional to use."

Smaller agents who do not employ an agency management system are going to find themselves in a difficult position in the future, Pauli believes. There already is some acknowledgement of that in terms of agent aggregators and MGAs attracting the small agencies that don't want to invest in technology but still want to sell insurance. "The carrier Web sites are good, but the carriers understand you can't drive agents to Web sites," says Pauli.

FEWER AGENCIES

In the not-too-distant future, Pauli anticipates the issue of whether carriers can work seamlessly with agency management systems or not is going to begin making a difference in carrier results. "By that I mean you have a lot more consolidation in the agent ranks," she says. "You are starting to see more big agencies, and agents will have more economic clout. If a carrier is difficult to do business with and the agents can't do real-time upload/download, the big agents are going to take their book of business and give it to carriers that can [do those things]. Carriers that still are debating these issues and not using integration technology will start to see a real adverse selection going on. Agents will go to where the carriers understand that."

Pauli continually surveys agents about which carriers the agents feel understand the technology available and are making things easy for the agents. "Everybody thinks it is the big carriers that make a difference, but it's not," she says. "There are some very good super-regional and regional carriers and sometimes individual-state carriers that are very aggressive about technology and make it easy for their agents to do business," she says.

AGENCY VENDORS

Even though there are agreements on standards, Furtado points out, the agency side of the world is complicated by different versions of management systems. "The standards are important and one way to communicate," she says. "There is no disagreement on the standards, but the disagreement on the versioning creates some challenges."

Two agency management vendors–Applied and AMS Services–have 80 percent of the market share of agency management systems, according to Smallwood. But it's unwise to assume the customers have the latest version of the systems. She estimates half of the agencies using agency management systems are using older versions. "The primary communication vehicle between agencies and carriers for quoting is TransactNow [from AMS Services] or Transformation Station [from IVANS] for uploading and downloading quotes," she says. "Those work only with the latest agency management systems."

Agency management systems vendors have put in more ACORD look-ups and ISO look-ups within the latest versions of their management systems, Bartosh indicates, but the system's usage is dependent upon the agency setting it up correctly and embracing standards on its side. "What we need to do is all participate in the ACORD standard–both the agency side (the user) and the company side (the manufacturer)," he says.

Carriers have to connect to the agency management systems to eliminate the rekeying of data for agencies, notes Smallwood. "ACORD and the messaging between agencies and carriers is where standards are really taking off," she says. "Where available, insurers will use standards."

The comparative raters have helped clear up things on the personal lines side of the business, Smallwood contends, which is far more mature in the use of standards and technology. "There is talk about having comparative raters on the commercial side, so something such as that would be a game-changer," she says. "It could be done. A lot of the pieces are there."

WHY ACORD

Before ICW embarked on its integration project, the carrier's back-end data had become fragmented over time and was what Harris describes as "a giant bowl of spaghetti," with many point-to-point connections. "There were some real deficiencies in process, methodologies, and rigor in how we did things," says Harris. "Our whole goal was efficiency and effectiveness. Everything that is ineffective impacts our pricing. Price is a key component of our focus as we always want to remain competitive in that area. It certainly is where the market is competing right now."

ICW sought to create a solution that positioned the company for the future and made operations more maintainable, reduced total cost of ownership as the company integrated with other vendors and agency management systems, and created a solution that was cost-effective.

When Harris joined ICW three years ago, the carrier didn't have an architecture team and had challenges leveraging the business intelligence buried within its information. "As we've worked to strengthen these areas, we've actually come into the grounding on these standards," he says.

Two key pieces of technology ICW has built are the XboX and the enterprise service cloud, hosted on its virtualized infrastructure cloud. Harris explains this is the foundation for the carrier's service-oriented architecture. "Between those two major components we are exposing interfaces to our vendors and partners," he says. "Having standards made the conversations with vendors significantly easier. They are happy to tie into our interfaces, especially when they see we have adopted standards. The more carriers that adopt standards, the easier it is for the vendors to sell and integrate their products."

THREESOME

Agents want a system that gives them functionality and lets them succeed at selling and servicing customers, remarks Durland. "They don't all necessarily understand ACORD forms are helping them do that or downloads from companies are using AL3 standards, and they shouldn't have to care about that," she says. "The agents who are engaged are hearing more about what is under the covers to make their systems better, but it's not on the top of their lists."

Still, agents need to understand there have to be standards to create a consistent workflow. "We have to start talking more about data fields and get the industry to agree on consistent data fields with definitions if we are going to get to the ultimate goal, which is real time with the round trip for the data coming back to the systems as a download," says Durland. "We have to change some of our terminology to help agents understand it's a business thing going on."

One of the problems facing carriers is their data remains in silos. Durland points out when an agent wants to do a real-time quote, the request goes from the online rating system to policy issuance and often these are different systems. "Sometimes what comes back [to the agent] is different because it comes from a different system," she says. "Until we get all these pain points on the table, we can't help fix them. We have a lot of people talking right now, and because we are talking, the opportunity is there to fix things."

Vendors have to deal with hundreds of carriers, so Durland asserts if a vendor had to do one-off with every partner, it is evident that would be a disastrous situation. "More and more we are hearing [vendors say] if you base [systems] on ACORD standards, we can help you a lot quicker and it helps with the maintenance down the line," she says. "More of the vendors are saying you have to use ACORD standards."

WORK TOGETHER

As for the future, Smallwood is unsure how to break the communication cycle. "It's probably something as simple as everyone agreeing or it becomes mandatory from a regulatory perspective like you would see in the banking and investment space," she says.

Durland is excited about the direction being taken by the industry. "The technology is there and the business reasons are there," she says. "It's been a positive push for us."

Bartosh just wants to see an effort from both sides. When a carrier expresses interest in working with Top O' Michigan, Bartosh explains he tries to make sure he understands the carrier's long- and short- term IT goals before going through the appointment process.

"As long as a carrier is committing resources and providing a core amount of real-time capability, we'll work with it at that point," says Bartosh. "You don't have to have all this stuff today, but we are watching where our business gravitates, and those carriers that are supporting us in data exchange and download are the ones that are getting the business."