The past several years have been financially devastating to the insurance industry. Flagging interest rates, a volatile economy and continued growth stagnation across insurance segments have forced many insurers to shelve new productivity initiatives and cut costs to achieve financial targets.On top of these economic challenges, business and regulatory reporting requirements are increasingly complex. In addition, partner and customer demands are multiplying, and legacy systems are aging and failing.
As a result, the ability of insurers to effectively and efficiently develop, distribute and manage their products while meeting an ever-increasing set of compliance demands is increasingly difficult.
Business transformation
Insurers should look at the banking and securities industries to learn telling lessons about business transformation.
From the creation of the global ATM network, to the development of electronic securities processing, to the explosion of online banking, standards have been pivotal to creating tremendous growth.
By using a single standard, insurers, partners, and vendors will finally speak the same language, minimizing disruption associated with constantly building and testing connections to old systems.
XML-based standards, such as those developed by ACORD, enable insurers to reuse legacy investments as they migrate to a common model and link rapidly and seamlessly to partners and vendors.
Insurers that use ACORD XML standards should achieve integration efficiencies of approximately 20% to 30%, according to a report by Celent Communications Inc., a Boston-based research and consulting firm.
Here's how ACORD XML-based standards can serve as a change agent and revolutionize the industry:
- Regulatory Compliance: Insurers must comply with a bewildering array of legislation. Standards such as ACORD XML enable insurers to improve their ability to meet federal and state legislation, while creating evolutionary flexibility to meet future regulatory demands.
- An Agile Enterprise: As insurers build straight-through processing, they can use enterprise data to enter new markets, innovate products and provide top producers with value-added resources. Equally important, insurers can mitigate future costs by improving risk assessment, streamlining distribution networks, and reusing XML transactions and technology components in subsequent initiatives.
- Market Focus: As data-transparent enterprises, insurers should wield a new power with partners and vendors, winning their allegiance with data, tools, and resources that focus marketing efforts, reduce administration and streamline costs.
- Transformed Processes: As straight-through processing becomes more important, each part of the value chain and cost infrastructure can be targeted with dramatically improved data standards. Although achieving systems interoperability and data transparency through ACORD standards is not an immediate goal, it is an achievable one.
Insurers should create a roadmap that aligns their technology future state with their business strategy, and then assess their business processes for opportunities to create value.
Internally, insurers should see large payoffs by simplifying and streamlining connections between complex systems that currently maintain multiple point-to-point interfaces. Externally, they should speed up integration with partners and vendors.
Insurers should consider these 10 strategies for successful implementation of ACORD data standards:
- Identify and prioritize the biggest pain points in your business processes and opportunities for value creation.
- Map your strategy to a technology future state, and test it against cost, flexibility, leverage and visibility criteria. Break it down into a series of discrete projects that will be connected via standards.
- Define your business strategy around standards usage and create an incremental rollout that pairs standards initiatives with business objectives.
- Secure C-level sponsorship and gain internal consensus around using ACORD XML standards as an accelerator for achieving business goals.
- Develop a business case that maps processes and provides an information architecture.
- Create a roadmap that phases the implementation and provides quick wins.
- Rationalize legacy systems to a common model using the path of least resistance.
- Build toward straight-through processing and an enterprise view of data.
- Demand that partners and vendors adopt standards.
- * Take a leadership role in the industry, sharing best practices.
Competitive and regulatory pressure for insurers to transform themselves is increasing, and a manageable, incremental approach to accomplishing such transformation is here: enterprisewide data transparency based on XML standards, imposed in a structured, measured way that minimizes risk and focuses on highest priorities first.
Marc Zimmerman is a partner in the global insurance practice at Unisys Corp., Blue Bell, Pa.
