In recent years, as organizations have grown more interconnected both internally and externally, commercial lines carriers have been confronted with a particularly critical challenge: How do they consolidate or upgrade the policy administration systems they have invested so much money in over the years? Additionally, how do they move the functionality and data locked within these systems out to other back office core systems technologies, as well as front office transactions and communications across disparate distribution channels?

As is the case across the industry, commercial lines carriers have been hard at work to make this integration happen. While there are modular suites emerging on the market, a recent study of 20 carriers by Novarica found that most carriers prefer to build on their existing solutions to better integrate them into other operational parts of their businesses.

But there is no single magic bullet for policy admin systems integration - for every 10 companies, there are 10 different approaches to integration. Jeff Goldberg, a senior analyst with Boston-based Celent, says he is seeing a myriad of strategies being employed toward addressing these challenges - from gradual approaches to take-no-prisoners implementations. "There are companies that have taken really technologically advanced approaches to integrating their systems into the rest of the infrastructure," he says. "Then there are companies that have really gotten it done though brute-force integration. And there are some others who have really done it by working with vendors that provide end-to-end components for them."


In many instances, within the walls of individual carriers, what's called for is a mixture of all possible approaches. For example, at Canal Insurance Co., a variety of systems and interfaces - from SAP modules to .NET-based systems - each demand their own flavor of integration.

"The biggest thing comes down to interoperability," says Adrian Brown, CIO of Greenville, S.C.-based Canal. "We've got to pass information to SAP on the financial side; we've got a billing system to which we pass information, and we've got a mainframe statistical reporting system. We're an insurance company, so we report to everybody. So we have to pass information, and we have to make sure everything reconciles between it."

Graphic-based files are another integration point, and Canal also passes image files between its own ImageRight system from Bothell, Wash.-based Vertafore Inc., and those maintained by agents.

When more than one policy administration system is involved, things get really interesting. At San Diego-based Arrowhead Insurance, which acts as a general agency between numerous partners, the ability to interface with both inside and outside systems is critical, says CIO Steve Boyd. The company maintains six separate policy administration systems - soon to be consolidated down to three - for servicing personal lines, commercial lines and specialty lines businesses, "with different models in each," he explains. "In probably about 60% to 70% of our business, we're controlling really the full end-to-end solution. We distribute through independent agents, and have policy admin systems in-house."

In fact, it's rare to see a one-size-fits-all approach - even if its widely agreed-upon standards - actually work smoothly among carriers. "The carriers that I have seen approach this in the best way have adopted their own standards," Goldberg says.

Chad Hersh, principal with New York-based Novarica's insurance practice, concurs that many carriers have had to deploy their own flavors of standards to cobble systems together. "ACORD standards have helped, but a lot of the key integration points for commercial lines, such as reinsurers, ceded reinsurance systems, loss control systems, site inspection tools and case management, are often either older, homegrown, or older homegrown systems, or in some cases not even systems at all," he says.


The exceptional situations created by proprietary or older-format systems are the most time-consuming challenge for carriers' integration efforts.

"Which standard is not the critical factor?" Hersh asks. "Creating interoperability between standards isn't that challenging. It's one-off integration that's hard. So while XBRL for financial reporting will likely eventually be a standard, it's important not to get stuck on what standards will prevail. Web services, ACORD XML, XBRL and even semi-proprietary standards, such as IAA, all interact on a regular basis at carriers across the country and even around the globe. But it's when you have to directly integrate using those standards to proprietary carrier systems that things get messy."

Canal invokes its own brand of Web services to move data between its policy administration system, other back-end systems and partners. The problem with ACORD XML standards is that they are subject to versioning, Brown says. "The XML's going to help, but still, they're going to version it - it's going to be the same mess."

Canal extends its Web services to exchange data with agents. "We would create an XML file, and it would be ACORD-like, but very understandable," Brown says. "And we would give it to them as a Web service that they could invoke and bring down all the transactions. That includes policy coverage, accounting information and all the images." This also includes passing on flat files to the company's system from Newtown Square, Pa.-based SAP, he adds. "We interface with ISO through Web services from our policy and claims side as well. It doesn't really matter. Web services makes it all very easy."

At Arrowhead, ACORD XML serves as a "starting point" for integration between the company's systems and more than 4,000 independent agents, Boyd says. The company builds interfaces with these partners on a case-by-case basis. "Many trading partners, and even our own internal systems, have their own proprietary interfaces," he says. "Not all of them are Web services. Sometimes it's a flat file or something else being pushed. It would be great if we had one big standard for everybody. But it seems in many cases, ACORD is the starting point, and people just go their own directions from there."

Joe McKendrick is an author and consultant specializing in information technology, based in Doylestown, Pa., and a regular blogger for

(c) 2009 Insurance Networking News and SourceMedia, Inc. All Rights Reserved.

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