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Electronic placement of insurance needs common data standards

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The interaction between buyer, intermediary and insurer necessary to place insurance electronically is impossible without common data standards.

“There's always a continuum of capability on all three levels,” said Jeff Yates, Arlington, Va.-based-based executive director of the Agents Council for Technology for the Independent Insurance Agents & Brokers of America.

Much as players in the larger technology arena have worked through nonprofit organizations such as the World Wide Web Consortium to craft standards such as XML, or extensible markup language, the insurance industry has crafted industry-specific electronic data standards.

“To further adoption and efficiency for the entire industry, standards are really the way to go,” said Christopher Gagnon, director of strategic technology for the Washington-based Council of Insurance Agents & Brokers.

Much of this insurance-specific electronic placement standards development takes place under the auspices of the Pearl River, N.Y.-based Assn. for Cooperative Operations Research and Development. In addition to associations, ACORD members include hundreds of insurance and reinsurance companies, agents and brokers, software providers worldwide.

ACORD messaging standards facilitate a vast array of interactions in the insurance ecosystem, such as communications between an insurer's underwriting system and an intermediary's agency management system.

Yet the size and complexity of the insurance market, not to mention the size and diversity of ACORD membership, creates challenges when it comes time to develop standards.

“Standards development is pretty challenging in and of itself because every company is a little different under the hood,” Mr. Gagnon said. “However, everybody realizes the benefits (of standards), so the real question is what does it take to get from here to there?”

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Lloyd Chumbley, vp of standards at ACORD, acknowledged that while effective, the historical “top-down” standards development process became unwieldy in recent years amid rapidly changing insurance industry dynamics.

“Standards development is changing,” he said. “In the past if we needed a standard, we would get the entire community together in a room, hash out standards and publish things. What you are seeing now is smaller groups of people take the initiative, build something, and have it validated by the industry and have it validated by the group.”

Mr. Chumbley said that while one possible downside to such community-driven development is the perception of the standard not being neutral, the change was necessary to keep pace with demand for standards.

“We want to build on existing work being done and hand it back to industry,” he said. “It's quite a change and a whole lot faster.”

Shane McCullough, chief enterprise architect for ACORD, agreed that the top-down approach needed to change.

“In order to meet the demands of our industry and members, we knew we needed to produce tighter, more well-defined standards, quicker,” he said, adding that ACORD reorganized its staff last year and changed internal processes to facilitate the new development methodology. “We had to do a lot of things internally from a development and tooling perspective to accommodate the faster response time.”

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The new methodology comes on the heels of another profound shift from the standards organization, the completion of the ACORD Framework. Conceived in 2007, the framework was rolled out in stages over the past few years to bring order to the complex array of data relationships between clients, insurers and intermediaries. The framework contains five separate facets, including a glossary that contains standardized definitions of insurance concepts, and a capability model that defines a baseline of the things insurers need to do to operate effectively.

Standardizing a common business vocabulary and technology architecture for common business processes such as insurance placement and claims is important as the insurance industry expands internationally, Mr. McCullough said, noting that the organization recently aided the development of electronic data insurance standards in South Africa, Australia and India.

“At ACORD, we've changed our focus to have a global standards base,” he said. “As we've built a model that is not specific to a given line of business, it gives us that platform to expand easier into global markets. We're seeing a real uptick in wanting to embrace these models.”

In addition to new geographies, new technology is driving standards development. Mr. Chumbley said the embrace of mobile technologies by the insurance industry is spurring action, even causing the organization to evaluate the future usefulness of XML and Web-based standards in a mobile-centric world.

“When you look at mobile devices, they want something more concise than XML and they tend to use different protocols than Web services,” he said. “What do we need to do as an industry to deliver these transactions in a more mobile device-friendly environment?”

The future of the technologies that catalyze the business of insurance and standards development are linked, Mr. Chumbley said.

“Looking at the dramatic technology shifts of the last five years, we have to be ready for the next big change, even if we don't yet know what it is,” he said. “Standards are going to need to be involved” and craft quicker. “We are very mindful of that,” he said.

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