Since its founding in 1970, the
Realizing that it’s the insurance community that will ultimately determine and utilize specific line-of-business technology standards, ACORD knows its job and does it well, utilizing insurers, distributors and service providers to help facilitate standards development and implementation. But, according to a new report issued today by
Aite Group’s report, “ACORD and Implementation for Life Insurance: Challenges and Responses,” targets the organization’s efforts in the life and annuities arena, basing its content on some 45 Aite Group discussions over a two-year period with representatives of insurance carriers, distributors, technology vendors and representatives of both ACORD itself, and organizations with which it closely partners.
The report notes that LAH messaging standards, in particular, in recent years have been finding broad adoption within life insurers, but in some regards, have not lived up to the ultimate promise one typically associates with standards, i.e., providing counterparties with the ability to connect with one another and share data with minimal effort.
And while there is broad consensus among stakeholders that standards should benefit life insurance and annuity operations, there is less consensus about the extent to which this aim has been broadly, realistically achieved.
“Messaging standards definitions are huge, complex, and unwieldy, yet fail to define fields and protocols at a sufficient level of granularity to facilitate easy interoperability,” says Clark Troy, the report’s author and research director and head of the life insurance group at Aite.
In addition, notes the report, the messages and data models lack a sufficiently abstracted construct to help information architects design overarching multi-line insurance enterprise plans with standards in mind from the outset.
ACORD is well aware of these issues, and seeks to address them via two key initiatives: the Plug and Play Initiative (PnP) and the ACORD Framework.
The report notes that in the banking industry, standards have made it easy for consumers to interface with each other and the institutions with which they have accounts through ATMs, credit cards, checks, and land lines and cellular phones.
However, this is not so for the insurance world, where there is less horizontal integration between institutions facilitating consumer transactions. “People don’t need to get money out of an insurance company when traveling or at the mall or the movies,” notes Troy. “Rather, insurance demands vertical integration between insurers, distributors, and service providers. Further, the relative lack of horizontal integration in the industry makes it difficult to isolate the 'killer app' standards that will make everyone’s life immeasurably and immediately easier: There is no USB port, TCP/IP protocol, or ATM that will change the game for everyone.”
Adding to the complexity is the sheer volume of opportunity for standardization. “In the LAH sector, there’s no lack of things to be standardized, and plenty of benefit to be derived from doing so, but the drivers for doing so aren’t as clear‐cut as in other domains such as banking,” Troy says. "Complicating this is the limited amount of resources that enterprises typically devote to standardization.
“At the end of the day, businesses wish to differentiate themselves from one another,” he adds. “Figuring out which standards to focus on is no mean feat, particularly in an industry with thousands of participants. ACORD’s staff, together with its members, must continually channel and corral their many collective voices to determine what standards to bet on.”
Organizing the many stakeholders and their efforts to make the complex simple is part of the ACORD mission. Currently, ACORD is focused on helping its members drive standards deeper into their organizations. But this effort, too, presents challenges.
“In some sense, this constitutes an identity crisis for the organization,” Troy says. “Will ACORD remain strictly devoted to providing a context and a forum for the insurance industry to find common ground and determine how to work together, or will it morph into a software and/or services firm? To what extent can it move in the latter direction without coming into competition with the solutions and services vendors that are its members and partners? If it provides solutions or services, does it fall out of alignment with its non‐profit mission and enter into conflicts of interest?”
The report notes that one thing is certain: None of these conundrums are lost upon the staff and leadership of ACORD, who have been in the business of defining and providing standards for many years in aggregate, and have thought about the many wrinkles of its mission and business.
“ACORD will chart its way forward,” Troy says.
