The winds of technological change are not subsiding, and neither are the efforts of the Association for Cooperative Operations Research and Development (ACORD) in its response to deliver value to the insurance industry. The phrase "think globally, act locally" applies to so many situations, but based on recent activities, truly fits the bill at ACORD.
In an exclusive interview, key members of ACORD's leadership, Lloyd Chumbley, VP, Standards and Shane McCullough, chief enterprise architect, explain how the standards organization's vision of delivering game-changing technology components that enable true global data interoperability is becoming a reality, and what those changes will mean for the insurance industry.
INN: What's the current state of standards internationally?
Chumbley: Internationally, we're finding that there are two things driving standards development-placing new business and regulatory reporting. While every country is different in the way it does business, in reality, the global community has the exact same worry across the board: efficiency and transparency. So, every standard that we develop today is really targeting one of those two areas. How can we be more efficient? How can we be more transparent?
INN: What are some of the region-specific concerns you're seeing?
Chumbley: Every country has an interesting dichotomy. In South Africa, it is really about transparency of information between trading partners. The insurers and agents are sharing information about the insured and the unit of risk. In the past, that information has been owned by one or the other. In Australia, insurers are concerned about efficiency and placing new business. They're focusing on the business owners' insurance, what we would call BOP (business owner policy) in the United States.
If you look into the other markets, it's about money settlement. In Europe, especially the London market, insurers are trying to make sure that the money that is exchanged between trading partners is exchanged in an efficient manner, and that sort of thing. The United States is still dealing with many of the same issues. Priorities are being set by agents in the P&C world, and in the life and annuity world right now they're being set by a lot of the insurance companies. But in the future, it'll become much more agent driven.
Asia is an interesting area for us. In Asia, the question is, "What is the role of standards?" We're doing a lot of work in China and in Japan, but the issue there is where standards are important. [That market] wants us to come in and help them develop these interactions or transactions, but it kind of ends there. It's more of an implementation drive and less about publicizing or publishing a standard.
It's different. In the United States the focus has been on standards development for 40 years. In the last three to five years implementation has garnered more focus. Asia is starting the other way around. They're saying they want to see that value in implementation and whether it's a publicized document that's on a shared site. Intellectual property is a whole different issue over there.
INN: So, what does this mean for insurers domestically?
Chumbley: We often talk about insurers domestically, as opposed to domestic insurers. And ACORD used to-when we first started doing global work-talk about domestic insurers. Today there's just not that many. Most of them are part of a larger global corporation, but every one of them has to act domestically.
Insurers that we work with in South Africa, Australia, China and Europe need to focus on their domestic markets. But they need to do it in such a way that they know somebody has their back globally. And that's what we're doing through things such as the framework-we're providing that global connectivity to the data, so they're not sitting in a vacuum in their implementation. What's important for them is that not only to be able to protect their data, but the vendors that they're working with are able to reconcile that data for the issues such as transparency in the global market.
INN: You mention the Framework, an enterprise architecture developed by ACORD to streamline standards creation and development; share a little more about the status of the Framework.
McCullough: The Framework has now been around for a few years. But the past 18 months has been the most exciting part of it. Initially through donations and member interaction, we were able to produce our initial versions of most of the models. And we got those out to the members. After those initial releases, we had some additional large donations from companies such as IBM and Deloitte that came to us and said, "We have assets somewhat like this. It doesn't make sense for us to continue to maintain these. Why not let an insurance standards organization do that?"
Through those donations and many member companies that have been eager to mature the models and build them out in the last 12 months, we've released two major versions-one of the information model and one of the capability model. We're now looking at 2012, when we're going to release major versions of the business glossary and the first version of the component model, which is the final piece of the puzzle. It's in that component model where you're going to see a major game changer in the industry. The component model provides a blueprint for the insurance industry on how to plug and play applications, and how to build true data interoperability into the infrastructure or enterprise.
We at ACORD can take our global footprint, get that type of input, really mature these reference models and hand that back to the industry.
INN: What does ACORD's global footprint look like in regards to the Framework?
McCullough: It's actually being used quite a bit globally. In fact, I was just on a conference call with a company in Japan last week, who just recently became members and we had our initial kickoff meeting about their what their specific plans were...what their roadmap was going to be for the next 12 months on the usage of the Framework. I've been to Australia, South Africa, France and London numerous times. We're continuing to use the Framework as that opportunity to also help us into the international community.
Chumbley: It's really interesting, because in the past, we had many insurers that joined ACORD in a domestic environment. When you have a company doing business in the United States, they use the ACORD standard to exchange data. But they don't have to do anything internally with that. Now when they bubble that up into an internal architecture that often is not just a U.S. architecture. It's a global architecture. And the Framework applies there at that level.
INN: So globally then, what is the role of the XML standard?
Chumbley: Our Life XML and our P&C XML were developed in the 90s. They've been updated significantly over the years, but when a country such as Australia comes along and wants to use a standard, is it absolutely critical that they adopt the exact same XML? Or do they have freedom to do some improvements if they want? The reality is, XML data will never be consistent worldwide, because we're dealing with regulatory, local regulatory issues and local ways of doing business. However, it is critical that that data be rationalized globally. So ACORD acts locally with the XML standards to exchange data.
The framework is about rationalizing it globally. Making sure that XML standards meet the local regulatory and process flows and are rationalized to the Framework globally is a very important piece of the attack that Shane and I are putting in place.
McCullough: We see a big push for that. Our members, particularly our global members, are heavily influencing us as a global standards organization to help move that along. What's nice about what we have now is we not only have the tools and the artifacts in place, we're continuing to mature those. But as Lloyd mentioned earlier, we're also internally restructuring the way that we do our business. We're restructuring the way we do our processes. We're changing the face of ACORD in order to be able to do exactly what was just described-to support our global members that have to operate in multiple geographies.
Chumbley: Cliff [Chaney, senior architect], Rick [Heil, director of standards], Shane and I have really worked very closely on changing the way in which ACORD acts formally. Not changing what we do, because we've been implementing for years, but the way in which we engage and the tools that we deliver to do that engagement is all going through a revolution.
INN: What kind of transformation have the ACORD communities undergone?
Chumbley: Historically, ACORD has had three communities-Life, P&C and RLC. But as we've moved forward, we're finding that communities developing standards have more specific focuses. For example, we're not just talking about life and annuity; we're talking about medical information or change of beneficiary for a life underwriting contract. Most of our communities are becoming much, much smaller and the role that ACORD is playing in driving implementation is really targeted toward that particular group.
If you looked at standards development 10 years ago, it centered around finding all the data elements that we needed for life and annuity. Now we focus on the need to exchange information, such as a medical condition. How do I find out the specifics of that matter or condition? That conversation becomes much more technical. It becomes more about interoperability and less about identifying every possible data element. In fact, it almost is the antithesis of that. It really is about what is it exactly that is needed for this activity.
Specifically, in the United States, P&C has always been agent-priority-driven. Life insurance has always been driven from the side of back-office automation and making sure that the interactions between like medical requirements or underwriting requirements are gathered. And in the reinsurance community, it's always been about efficient movement of money.
But now we're seeing a drive toward having all of those across all lines: more focus on the front end, the agent in the life and community, more interest around accounting and settlement in the P&C community. We were able to leverage that, but do it in a way that creates the environment of plug and play.
INN: As these priorities change quickly, ACORD has to respond even more quickly. Is this where ACORD's Agile Standards Development Organization (SDO) initiative comes into play?
McCullough: The whole goal of Agile is to provide an asset to test standards when it's needed, not six months later, not six months ago. And Agile demands almost on the fly development. It really breaks down into re-establishing the way we produce and develop standards, how we interact with our working groups, how we interact with those communities.
So first, we re-identify the roles and responsibilities of our volunteers. We focus on the people and what levels of expertise they can bring to the table. Once those roles and responsibilities are nailed down, we're changing the entire way in which we actually gather business requirements. It was to facilitate quicker turnaround for how new standards and how change requests come in and get modified and then that gets back into the membership's hands. From that, you start to produce better, richer and more detailed deliverables.
INN: It sounds like this fits into the ACORD 2020 initiative.
Chumbley: Two ways of doing things in standards is bad. It always has been. You want one way of doing things. And in the past, because of the way that the SDO is run, everybody thought their way was unique. The business architecture team now owns that definition and is becoming much more aggressive in harmonizing those definitions.
ACORD has been doing implementations for years, but this concept of changing the way in which we act began several years ago with the Framework. At the beginning of 2011, the Board of Directors created ACORD 2020. Its primary focus is based on what we can do to further implementations in the industry. We spent quite a bit of time last year talking through that. And at the beginning of this year we actually segmented the departments.
We created a new department at ACORD called Relationship & Implementation Services. And Relationship & Implementation Services is a direct result of the feedback from ACORD 2020 and the things that they discovered and it's about us acting differently in the way that we help with those implementations. It's about us identifying barriers of implementation and then addressing them not just for one line of business, but across all lines of business. Things like e-signatures and non-repudiation. It's a global problem. Now it may be implemented very differently in one locale or another, but the reality is we need to solve that problem globally and so, that's what ACORD is doing.
Greg [Maciag, ACORD president and CEO] believes that in the next five years, ACORD will change its services to the industry. And, I think it's a credit to him to put together the team that we have.
McCullough: A lot of our focus internally is on architecture but we've established an entirely new part of our organization that focuses on the business architecture aspect of how we develop standards. And that gives us that continuity and consistency that we had lacked-that notion of "well what are the lines of business that you're focused on and let's not really worry about what's happening in another area."
We now have an entire competency that's built within the organization around that notion of business architecture. They're the ones who actually take in what is now the requirements from our industry on things that need to be identified. Now that can be socialized with our entire membership globally. As a result, you won't see a lot of one-offs on how some of these changes get into our standards. We have an entirely new way in which we're processing the business. It's just another way in which I believe ACORD is really taking a positive step in how we organize our business. And it ties directly into not only what I'm involved with in regards to tooling and Framework, but also about the change to the SDO process, and then that funnels right into the implementation. It's just a very exciting time because we're changing what we're doing.
The industry is changing. We can't be reactionary; we have to be proactive. And the team that we put together is made up of forward thinkers who are willing and able to do that very thing.
