Managing growth is often a bigger challenge to organizations than a lack of growth. This is true for both insurers and the Association for Cooperative Operations Research and Development (ACORD), which has been crafting standards for the insurance industry for more than three decades.
In recent years, a slew of regulatory changes and a burgeoning global insurance industry hungry for standards have put new demands on the standards-setting and managing association. In order to gain the agility necessary to meet these demands, the association recently reorganized its ACORD Standards Committee (ASC) to streamline the standards development process, and address the growing and diverse communities that the association serves. In addition to the reorganization, the association also officially added three new programs: Common Services, South Africa and Australia (see below).
Until December 2010, ACORD had one governance structure over every activity that the organization undertook. ACORD President & CEO, Greg Maciag, decided to craft a bifurcated organizational structure that more closely reflects ACORD's two primary areas of endeavor: standards development and standards implementation.
"Greg felt that a relatively quick hit would be to separate standards implementation from development and how we manage ACORD's intellectual capital," says Monique Hesseling, head of personal lines/small commercial segment development for Zurich, who also chairs ASC, which includes both development and maintenance. "We are heavily formalized in our scope, what we do, how we manage changes, updates, who has a say in what, and heavily driven by standard operating procedures in our standards development processes."
Hesseling said much of the development work has been concentrated overseas in countries such as Australia and South Africa. "A goal of the ASC in coordination with the ACORD board is to prioritize initiatives correctly," she says. "We cannot take on the whole world at the same time, so we're looking at different angles, at an opportunistic view: Where do we have an opportunity to assist national standards organizations or the communities of our members?"
Hesseling also points to efforts in China and other markets in Asia as areas where there’s still work to be done. "ACORD does not want to be the one and only standard for insurance in the whole world. What ACORD tends to do is bridge and tie into other countries' standards to make it easier for players in that market to do business across borders."
She says improvements made to one of ACORD's signature achievements, its Framework of five interrelated models, have helped ease its expansion overseas.
"The Framework has helped companies connect standards by providing common definitions of terms used in multiple standards," she says. "The more consistency we can create in how we develop, maintain and publish standards, as well as the tools that support them, the easier it will be for our communities to work with and implement them across programs."
In addition to the tools afforded by the Framework, Hesseling says the new organizational structure has helped overseas communities feel more involved. "South Africa and Australia wanted to have a seat at the decision-making table so they could make their cases better for changes and move things through the process a bit quicker. In the old structure, [South Africa and Australia] didn't always feel like they were being heard."
Nonetheless, challenges can occur in an environment where all parties desire priority and resources are finite. "It feels almost like a family/sibling environment," Hesseling says. "People do lobby for resources, which are limited. As people are very passionate about certain projects or initiatives, there's bound to be a little politics going on, but I don't think that's unhealthy or wrong. We compete to get things out, and there are certain bragging rights attached to it."
PRIORITIZING EFFORTS
ASC meets on a quarterly basis to prioritize the committee's efforts and resources. Members within the organization, or any group initiating an activity or change must present a solid business case and answer questions such as: "Who is going to participate? How much time will it take? What are the deliverables? What is the actual business payoff?" However, Hesseling notes that anything that's being regulated or mandated by a state or another government always gets fast-tracked.
Another initiative on the ASC's agenda is facilitating knowledge transfer between long-standing ACORD volunteers and newer members. "As we have a fair number of new players in the ACORD volunteer space, we are aiming for greater alignment and communication on lessons learned—failures, successes, as a teaching moment."
On the following pages three ACORD volunteers discuss the challenges and benefits of standards initiatives.
Standards Straight From the Sources
INN Recently caught up with the industry's techology standards movers and shakers- insurance executives from the front lines who are entrusted with oversight of ACORD standards development. These designated ACORD committee chairs offer insights into how standards adoption can help insurers keep pace with innovation, workflow and with overall change.
Life & Annuity Chair-Walter Berkowicz, Enterprise Architect, Allstate FInancial
Property & Casualty Chair-Sandi Perillo, Senior Business Consultant, The Hartford
Reinsurance Chair-Ian Summers, Managing Director of e-Business and Market Reform, Aon Benfield
INN: What is the greatest technology challenge faced by carriers in your line of business, and how can ACORD standards help solve that challenge?
Berkowicz: The greatest technology challenge faced by life and health carriers is increasing speed to market with technology solutions that create business value. Carriers can no longer afford long implementation periods, as the business requires shorter cycles. That said, there are several "close seconds." For example, lowering total cost of ownership and being responsive to technology advances.
ACORD standards can help solve the speed-to-market challenge primarily once standard messages have been implemented. It's at that point that use and reuse of the standards decreases time spent in implementations. In addition, getting to more of a plug-and-play implementation will improve efficiency.
Perillo: The management of middle market/large commercial upload for quoting and policy issuance is a challenge. Most large commercial business submissions are via e-mail. An identifier on XML standards to link the materials submitted for a quote or submission came out in 2010. Large commercial workflows were documented earlier this year as part of ACT work; this may help change behaviors.
There are standards to help resolve these issues, but adoption continues to be a slow process. ACORD standards will continue to evolve to take advantage of the latest technologies. ACORD will continue to work to develop a wide range of innovative and effective tools, services and activities to encourage and support the implementation of standards.
Summers: The ever-increasing demand for accurate data to support strategic business decisions and regulatory reporting requirements is high on the agendas of most carriers. Quality data is vital for it to be easily aggregated from multiple sources. The data needs to have a consistent format and definition, and that consistency not only needs to span the specific lines of business, but with the international nature of reinsurance business, it needs to be applicable on a global basis.
INN: How have standards kept apace with the technological changes in the insurance industry?
Berkowicz: As carriers continue automating and further integrating business functions (both externally and internally), the presence of standards and the standard-setting process are providing guidance as well as a "body of knowledge."
Perillo: For the most part, ACORD standards have kept up with the data and regulatory needs of the insurance industry. We continue to enhance the standards with active working groups that identify needs and work together to propose necessary changes. We are actively using XML and associated technologies for transporting and securing data, but it's important to continue to evolve in this area. We're exploring federated identity management. We also support electronic, fillable forms and use of eSignatures. Areas that we need to better understand and utilize include interoperability with mobile technology, social networking/media, cloud computing and improvements to security and data protection.
Summers: The basic underlying technology has kept pace with the insurance industry, although it's worth noting the industry moves at a leisurely pace. Technology has moved from EDI to XML and embracing the Web, which is good news. Also, the Document Repository Interface (DRI) standard has been developed to support the attachment of unstructured data and allows for easy indexation and integration into workflows.
However the increased globalization and number of global players within the industry have introduced a new challenge-interoperability. Global players need global solutions, and at the moment, we have dedicated versions of standards talking to different classes of business, and in some cases, different regions. While it is important to have regional or business-line communities, the underlying standards must be either the same, or be able to talk seamlessly to each other. Is this the challenge for 2012?
INN: What type of work is being conducted in your ACORD "community," and what can the industry expect as a result of this work?
Berkowicz: Currently, there are a number of activities occurring in the life insurance and annuity domain. These activities range from program-level initiatives, such as implementation services support, to a significant number of working groups, such as Plug-and-Play and Automated Vendor Invoicing.
Along with cross-domain activities, the industry should expect to benefit from broader business coverage of a more comprehensive industry standard. In addition, activities are underway that are targeting a more efficient and effective standards process.
Perillo: The P&C community has several active working groups driving the evolution of standards. Some of these working groups include: Commercial Lines Download, Company Unique Codes, Excess and Surplus Lines, Dynamic Forms, among others. Other plans this year include improved implementation guides, toolkits, training materials and communication about these materials and where to find them.
AUGIE and ACT continue to actively promote the Real Time campaign. AUGIE continues to promote Commercial Lines Download and the Power of Change. Power of Change seminars teach agency principals and staffers how new workflows and technologies available today can help their businesses become more efficient and profitable. They have trained more than 60 consultants, virtualized training so it can be done via the Web and are hosting a redesigned presentation at the ACORD conference.
Summers: There is a lot of varied activity in the reinsurance/large commercial community across the full value chain of the reinsurance cycle. Probably the most notable initiative is known as "Rüschlikon," which is led by a number of global market leaders. It seeks to reshape the reinsurance industry through the design and implementation of processes that reduce operational cost and enhance client service.
Rüschlikon's key objectives are to:
* Replace paper closings and statements with ACORD standard structured data messages
* Enhance service, improving the speed, quality and integrity of critical information
* Improve the financial agreement and settlement of premiums and claims
* Ensure operational excellence by agreeing on rules and protocols to deliver business benefits
* Reduce costs through back-office data integration and process automation
INN: Based on your experience, who should drive/own standards initiatives-IT or the business? Why?
Berkowicz: My own experience has shown that drivers for standards initiatives start from business objectives. Eventually, the standards become IT architectural components. Then, through implementation and reuse, IT becomes the owner of the standards within an organization.
Business still drives the prioritization and funding of standards-based initiatives. But, once an implementation occurs, IT owns the resulting assets and makes them available for reuse.
Perillo: Both IT and the business play important roles in driving standards initiatives. IT services the business. The business needs to push for the use of standards and understand the value of standards, so it becomes a priority from an IT standpoint. IT is often under enormous pressure to deliver cost-effective solutions quickly, and may not always be thinking about the value that standards can bring. Also, while standards may initially seem more costly to implement, the value comes from the ability to reuse.
Summers: I feel strongly that there shouldn't be "standards initiatives." Rather, there should be business initiatives to which standards are applied. Thus, standards such as ACORD should be seen as a key piece of infrastructure or an enabler. However, where business involvement is not a given, the IT community has the responsibility to champion the standard. It is important for the business to understand the importance of doing things in a consistent and repeatable way such that time spent integrating to one trading partner can be reused on the next.
The important thing, however, is to focus on is the outcome of the integration-a more efficient, better service to our clients and not the fact that we are putting in a standard.
INN: Within your own organization, where have you seen the most significant benefits of standards use?
Berkowicz: Allstate Financial has been leveraging ACORD standards for more than 10 years. In 2001, ACORD helped Allstate Financial get started in some very specific areas. For example, we looked to ACORD when we were developing our Common Name Space standards. Having the ability to leverage a standard allowed us to move projects forward quickly while we learned and extended our use of standards.
From a data architecture perspective, we also look to ACORD standards to provide information about data semantics and structure. We leverage that information when applicable to our environment, and extend it where necessary.
From an integration perspective, Allstate Financial looks to ACORD standards to provide guidance on interoperability and information exchange. Having access to ACORD standards has been very beneficial in providing coherent internal and external integration architectures.
Finally, Allstate Financial has standardized on ACORD interfaces and transactions within the services layer. We have been able to develop service-oriented architectures and event-driven architectures based on ACORD standards. This has enabled us to evaluate vended solutions based on their ability to support ACORD standards.
Perillo: The Hartford has utilized ACORD standards with our external trading partners for personal and commercial lines quoting and policy issuance, commercial lines first notice of loss and servicing transactions (billing inquiry, policy inquiry, claims inquiry). We also have found benefit in utilizing ACORD standards for internal communication between systems.
Summers: We have seen faster payment of claims. For example, after moving from paper sequential processes to electronic "standard" processes in London, we experienced a 50% faster average payment.
A more technical example is when two distinct businesses came together, both of which electronically traded with partners. The transition of these business units into the new single entity was significantly easier for both the new entity and its trading partners than it would have been had they had differing trading platforms/standards.
INN: What are some best practices your own organization has adopted to avoid standards implementation problems?
Berkowicz: One best practice concerns projects involving data not yet brought into our enterprise model. If a project involves data that has not yet been incorporated into the enterprise model, we first look to what ACORD has done to represent that data. This has the benefit of aligning use to the industry rather than developing unique solutions that later have to be addressed through integration and mapping.
Another best practice we invoke is to certify our ACORD transactions. Typically, we will leverage the Testing and Certification Facility (TCF) provided by ACORD.
Perillo: In the early 1990s, The Hartford made a determination to adopt ACORD electronic standards. Significant investments in ACORD standards supporting core electronic transactions have resulted in ACORD standards being a key component of our P&C infrastructure. Some of the best practices we have adopted and continue include engaging the business community and instituting an internal ACORD Advisory Council. The Council is made up of company professionals working together as a self-managed ACORD group. The group is unified by a shared interest in ACORD and its standards. Some members actively parti-cipate in the ACORD standards development process.
Initially, as we began implementing ACORD standards, we met regularly. As time has gone on and our implementations are now well developed, we meet on an as-needed basis. With the council we want to:
* Provide advice, counsel and direction on the definition, development and implementation of the ACORD data standard
* Bring synergy to internal efforts related to the ACORD standard
* Present a single voice on behalf of The Hartford to the ACORD data standards process
* Build internal subject matter expertise. The Hartford currently has five ACORD Certified Experts (ACE)
* Determine strategic opportunities associated with ACORD and accelerate the company's participation in the ACORD standards process
* Include ACORD standards evaluation as a review point within the project framework so that all projects are examined for optimal utilization of standards
Summers: We aim for active participation in the creation of the standards. The core reference tables we use are either ACORD or mapped to the ACORD standards. Again, this helps when integrating with trading partners.
INN: What can the vendor community do to better support the global standards initiative?
Berkowicz: First, there are a number of vendors that do not provide support for ACORD messaging. A logical first step would be for vendors to consume and emit standards-based messages.
Second, vendors can provide support for current versions of the standards. It is interesting to see how varied vendor implementations are with respect to a standard. Such variations can increase or decrease the total cost of ownership.
Perillo: It's important for vendors to have a clear understanding of their customers' business needs and issues, and the role standards play in solving these issues. Vendors can communicate the value of standards (e.g. speed to market, reusable components).
Vendors need to adopt standards in their products and encourage their trading partners to adopt as well. They also should provide time for their staff to stay up-to-date on standards, and encourage staff members to become ACEs.
Summers: Continue to develop interfaces that are capable of sending and receiving ACORD messages to and from their clients.
3 New Communities and Their Top Priorities
The three chairs of the newly established ACORD Communities share their priorities for the next year.
Common Services
"We hope to synchronize the membership's intra- and inter-domain views on ACORD standards. By pulling shared standards work into a centralized domain, common services and standards can most efficiently further each domain's goals. We also wish to help ACORD actively synchronize its work with the larger standards community. Just as ACORD domains work most efficiently by migrating common components and efforts into a centralized domain, ACORD works most efficiently by building on, rather than reinventing, existing standards community artifacts."
-Jim Brain, Director, Enterprise Architecture, CNA Surety Corp..
South Africa
"The South African ACORD work group has completed the personal and commercial lines messaging standards, and is now starting to test them. The next focus will be to complete the claims message standard and start getting all the insurers, brokers, administrators and solution providers on board. This way, everyone can start realizing the benefits of connectivity just in time for the building of the local, short-term insurance industry 'switch' and the new legislation that is scheduled for promulgation at the end of the year."
-Jan de Klerk, CIO, Santam International
Australia
"Australia's focus in the next 12 months is on execution and implementation. For too long we have had members that are content to talk but not turn that into action. We have a number of new members in the steering committee, and we are all committed to pushing many areas for implementation this year. The market is moving quickly and there is a real need for industry standards that will enable both insurers and intermediaries to better service the needs of our clients more efficiently."
-Troy Filipcevic, Executive Manager of Distribution Technology, Suncorp
