ACORD Standards
ACORD
March 2006
Industry Trends
Is it the same old Insurance industry?
Let’s look under the covers
 Bar is being raised
 Leaders are leading
 Fears of being left behind
 Talks of “leapfrog”
Customers
Technology as an enabler/hurdle
 Web-services
 BPM & STP
 SOA and reusable components
 Enterprise Architecture
 Standards
Carrier
Regulatory
Source: Tower Group
Source: TowerGroup
Strategy: Run – Grow – Transform?
RUN (Tactical)

THESE TEND TO BE SILO BASED ACTIVITIES
Free up investment
dollars
GROW (Strategic)

TRANSFORM

THESE ARE ENTERPRISE CROSS - THESE ARE ENTERPRISE
SILO AND FUNCTIONAL
CROSS - FUNCTIONAL
ACTIVITIES
ACTIVITIES
Improve business focus
New/quicker business
models
Accelerate redesign efforts Redefine relationships
Resource availability
Change capacity
dynamics
Shorten or change the
dynamics of life cycles
Reduce or control
operating expense
Better capabilities
Create or enter new
markets or renewed
markets
Functions and tasks
are managed
REACT

Enable shared
risk/reward models
TRANSACT

New business models
ADAPT

Source: Gartner
Business Growth:
Strategic Innovation and Transformation
Strategic Flexibility + Operational Adaptability
Value Creation






New market demands
New regulatory demands
New customer demands
Exploit strategic opportunities
Sustainable profit and value
Exploit technology (standards, SOA, web
services, etc)
Data as a Strategic Asset

Risk Data
 Pricing
 Underwriting
 Risk Management

Customer Data
 Behavior
 Financials

Enterprise Data Model Usage in US Insurance
Do not
need
12%
Do not
have, but
need one
32%
In Use
Currently
25%
Under
Development
31%
Operational Data
 Financials
 Operational
Efficiency
Source: Celent’s 2004 US Insurance CIO/CTO Survey
“Straight Through Processing”
DECISIONS
INPUT
STEP A
PROCESSING
DECISIONS
STEP B PROCESSING STEP C
ROUTING
OUTPUT
ROUTING
Automation
Keys






Benefits
Automated decisioning
Automated workflow
Integrated production
systems
Integrated external data
sources
Integrated internal data
Standards



Source: Celent
Reduce errors
Improve turn-around time
(service imperative)
Improve consistency
Frictionless Communication




Critical element in ease
of doing business for
insureds and distributors
Key differentiator
Explosive growth of
agent portals over last
five years
Growth of data
standards
Agent/
Broker
Primary
Insurer
Insured
Source: Celent
Agent/
Broker
Requirements
Vendor
Reinsurer
Claims
Service Provider
Competitive Advantage Via Technology
Efficiency
Risk Mgt.
Service
Advantage
Frictionless
Communication
Straight Through Processing
Data As A Strategic Asset
Source: Celent
Enterprise Architecture: Best Practices
Bridging silos into shared services
Enterprise Architecture
S
T
A D
N A
D T
A A
R
D
S
D Services
P
C
E
A Apps
Common
R
P
Y
E
Shared
O
MApps
D
SUniqueEApps
I
I
N
T
Traditional
T
T Apps
A
P
P
H
L
II
C
G
A
TH
I
O
N
Guiding Principles
Source: TowerGroup
T
E
C
H
N
O
L
O
G
Y
Architectures Break Silo Boundaries
Determine the value of people, process, data and
technology
Make IT investment strategic and more responsive
Business
Outline the
important
business
functions and
processes
Application
Data
Infrastructure
Map the
relationships of
software
applications to
each other
Detail where the
data and
information is
kept and how it
is used
Diagram the
hardware and
networks to
support the
business
START HERE
Source: TowerGroup
Impact of Legacy Systems
Legacy System Effects
67%
78%
Slows new product introduction
Too difficult to integrate with new
systems
Unacceptably high maintenance costs
56%
67%
33%
78%
Inhibits data mastery/business
intelligence
44%
67%
39%
Prohibits workflow improvements
No negative effects
22%
22%
Large Midsize
Source: Celent 2004 CIO Survey
67%
Industry approaches to change


Companies often err by taking a systems-focused
approach to solving process problems
Companies tend to look first at what legacy systems
they need to modify, update, or replace, but that is a
very vertical, siloed focus
vs.


Looking at the problem in terms of what needs to be
fixed in the process
It’s all part of not just having process-savvy systems but
being a truly process-savvy organization
Future Business Perspective:
Efficiency & Effectiveness
ACCESS
View of data
and control of
process
Reduced
Complexity
Better
Decisioning
ENABLING
INFRASTRUCTURE
PROCESS
SERVICES
DATA
Once & done data entry
Robust rules engine
Operational Data
STP & Exception
Processing
Robust workflow/process
manager
Analytic Data
Predictive Analytics
execution
Smart Forms
Third Party Data
Source: TowerGroup
Insurance Value Chain of:
Reusable Assets, Services, Process & Data - SOA
STP
ACCESS
ENABLING
INFRASTRUCTURE
(interoperability)
Portals,
Dashboards
Role-based
view of
information
and data
DATA
Open access
to core
technology
assets
Open & flexible data
stores
-data standards-
Business Process Mgmt.,
Content Mgmt., Rating,
Analytics, Rules engine
Standard
messaging protocol
Business
components
and rules
PROCESS
STP
WORKFLOW
MANAGER
Reusable
services and
information
access
SERVICES
Exhibit #: E1
Source: TowerGroup
Current Model of Insurance Underwriting
(Simplified View)
ThirdParty
Data
Marketing
Legacy
Pricing System
Risk Evaluation
Analytics
Business Intelligence
Product Development
Legacy
Closed Claim Review
Product Development
Legacy
Rating
Engine
Product
Creation
ThirdParty
Data
Underwriting
System
Quote – Rating/Pricing
Operational
Rating
Engine
Policy Admin
System
Policy Admin
System
Policy Admin
System
Functional
Policy Admin
System
Policy Admin
System
Policy Admin
System
Contact
Center
Policy Admin
Ad Hoc
Source: TowerGroup
Future Model of Underwriting Technical
Components (Simplified View)
Underwriting Desktop View
Data
Capture
Customer
View
Transaction
View
Exception
View
Process Managers
Business
Trans.
Workflow
Manager
Event
Manager
Portfolio
View
Performance
Scorecards
Market
View
Enterprise Content Management
Process
Manager
Document
Management
Records
Management
Content
Management
Engines and Tools
Product
Configure
Rating
Engine
Business
Rules
Engine
Analytics
Engine
Data
Integration
BI
Tools
Data Layer
Transaction
Legacy
Financial
Data Mines
& Marts
Warehouse
CRM
Source: TowerGroup
External
Assessing and Improving Legacy Systems
• Addressing the legacy system
•Replace?
•Re-platform?
•Componentize?
•Consolidate?
•Extend or Wrap?
BPM
Legacy
system
• Standardizing data and
processes across legacy
systems
•Rules management?
•Data standardization?
•Web services?
•Enterprise architecture?
Legacy
system
Standards
Legacy
system
Legacy
system
Recommendation: Look for flexibility, agility, scalability, efficiency, compatible,
standardized and open. Ensure that systems can meet future business requirements.
Source: Gartner
Distribution:
Enablement Strategic CRM View
O
P
E
Direct
Marketing
Captive
Agents
R
I
O
Segmented
Mailing
Proactive
Sales
Dialog
Scripting
N
World Wide
Web
Dynamic
Personalization
Targeted
Advertising
CRM Decisioning
A
L
I
Call
Center
Channel-centric CRM Functions
A
T
Independent
Agents
Campaign
Management
Customer
Profile
Contact
Management
N
Customer
Information
System
Product
Servicing
DDA, TDA, Loan
F
O
R
CRM Decisioning
Profitability
Engine
M
A
T
I
O
N
Decision Support
Marketing
Data Mart
Data
Warehouse
A
L
Source: Tower Group
Third-Party
Data
Distribution:
Multi-channel support


Insurers will need to support data interchange with multiple counter-parties
Standard messaging and data formats can reduce burden of custom integration
for multiple user interfaces/client systems.
Core System
Core System
Core System
Core System
XML Engine
XML Engine
XML Engine
XML Engine
Distributed Transaction Engine
Agent Extranet
Agency
Management
Systems
Shared Services
Source: Celent
ACORD and XBRL – Interoperability for the
corporate reporting supply chain
ACORD
Processes
Business
Operations
XBRL
Ledger
Internal
Financi
al
Reporti
ng
XBRL
External Reporting
External
Financia
l
Reportin
g
Financial
Publishers
and Data
Aggregators
Companies
Participants
Trading
Partners
Management
Accountants
Investme
nt,
Lending,
Regulatio
n
Auditors
Software Vendors
Economic
Policymak
ing
Investors
Regulators
Central
Banks
Initiatives Cited As High-Priority For 2005
Electronic signature
Email security
Business intelligence/reporting
ACORD XML
HIPAA compliance
Single sign-on
Imaging
Contact center mgmt.
Transactional policyholder portal
Interface with agency management systems
Informational agent portal
Sarbanes-Oxley compliance
E-Billing
Web services/service-oriented architectures
Network security
Document/content management
Business process management (BPM)
Commission mgmt/EIM
Disbursement/payments
Underwriting system
Policy administration system
Voice/data/video convergence
Voice over IP
Business rules engine (BRE)
Data integration hub
VRU
Transactional agent portal
Wireless for sales or other
Point claims solutions
25%
25%
25%
24%
18%
18%
13%
29%
38%
25%
25%
25%
25%
25%
25%
12%
12%
12%
12%
12%
12%
13%
24%
35%
25%
13%
13%
13%
13%
13%
13%
13%
6%
18%
18%
18%
18%
18%
18%
18%
29%
29%
13%
13%
13%
13%
12%
12%
12%
12%
24%
24%
L/H
P/C
Red indicates Initiatives Using ACORD Standards
Web Services and SOA:
Best Practice for Innovation
Web Services And SOA
100%
100%
80%
80%
80%
75% 75%
62%
60%
50%
50%
40%
40% 40%
38%
40%
25%
23%
15%15%
20%
0%
Large L/H
Midsize L/H
Large P/C
Live, mission-critical
Live, ancillary systems
Critical integration method
In pilot
Midsize P/C
Under consideration
Source: Insurance CIO/CTO Pressures, Priorities, Projects, and Plans: 2004 Survey Results (Jan 2005)
Web Services and SOA:
ACORD Standards as the Enabler
Services Are Based On ACORD XML
100%
80%
60%
40%
60%
20%
40%
46%
25%
0%
Large L/H
Midsize L/H
Large P/C
Midsize P/C
Source: Insurance CIO/CTO Pressures, Priorities, Projects, and Plans: 2004 Survey Results (Jan 2005)
ACORD Strategy
Business Adaptability, Flexibility and Agility
Market
Direction
Target Business Scenario
Corporate
Strategy
Corporate
Measurement
And Control
ACORD Standards
Common Vision
Enable the Adaptability
Functional Silos
Operations
Administration
Macro Cross-Functional Process
Transformational Tools
and Infrastructure
Macro Cross-Functional Process
Change Management
Work Processes
Tech and App Architecture
Activities
Functionality
Doing Work
Supporting Work
Embedded Culture
Source: Meta Group (now Gartner)
Why Standards?
Business Issues

Proving ROI
 Analysts: Celent: $250 million savings per org

Not a Single Quarter Investment
 Initially more expensive/time consuming
STANDARDS
Ever-increasing cost
Higher Initial Cost
Custom
Interfaces
Initial Lower
Cost
Ever-decreasing
Incremental Cost
Type of ROI Produced from XML Initiatives
at YE03
Percentage of Insurers BY ROI Derived from XML Projects
67%
80%
Increased
Productivity
50%
54%
67%
Increased
Efficiency
87%
70%
77%
Ease of
Application
Integration
Cost Savings
78%
87%
70%
100%
EMEA General
US P&C
EMEA Life/Pensions
US Life/Health
78%
20%
48%
Speed of
Information
Exchange
80%
78%
70%
83%
100%
Source: Gartner
Source: Gartner, April 2004, EMEA Mar 2004
Case Study: Manulife Canada Has Used ACORD





Agent desktop integration (1999)
In-force agent policy feeds (2000)
Commission feeds (2001)
Administration system consolidation (2004)
Web Policy Inquiry (2005)
Canada: New Business
Financial
Planning
Sales
Illustration
Electronic
Application
New
Business
System
ACORD OLifE
Agent Contact
Management
System
Admin System
Japan: New Business Upload



New Universal Life product introduction (ManuFlex)
Very tight schedule
Used two [competing] North American packaged
solutions:
 Illustration and application system (Navisys)
 Life Administration system (Ingenium)


Used ACORD XML as the integration standard
ACORD XML helped us
 Reduce the time taken to write interface specifications
 Reduce the effort required to get the packages to work
together
B2B Challenges in China

Large number of trading partners
 100,000 retail banking branches, 50,000 post saving offices,
50,000 travel agencies, 1,5000 insurance agencies and
brokers

High performance required for large volume real time
straight through processing (STP) transaction
 For instance, ICBC demands for 15,000 transactions per day
and maximum request response time must be less than 5
seconds

Various integration requirements
 Various networking connections, communication protocols,
business protocols, data standards

Full scope of insurance business processes
 New business submission, customer information inquiry, policy
administration, financial account changes, etc

Legacy system integration
 Policy administration, commission management, financial
systems, etc

Fast response to market dynamics
ACORD Standards in Actions – Pacific Life
Air
Ticketing
Center
Policy
Administration
System
Travel
Agency
Post
Saving
Offices
Internet
Pacific
Life
E-Distribution
Management
System
Commission
Management
Customer
Information
File
Captive
Agents
25,000 captive agents
3,500 travel agencies
500 post saving offices
Pacific Life
ACORD Standards:
Best Practice ROI
External
Percent Savings
Add one Distribution Channel
20%
Add one Business Partner or Service Provider
50%
Setup one new Distributor
60%



Do not setup a proprietary Interface – rather use ACORD standard message
interface

100%
License and appoint one agent
60%
Add one external interface
30%


Internal
Submit and quote one policy
20%
Underwrite one policy
20%
Process one claim
20%
Perform one policy service transaction
20%
Reinsure one policy
20%
Add one internal system interface
30%
Do not add one data dictionary/data model used internally
50%
Conversion of M&A with standards based systems
30%
Compliance violation
Varies
Data Transparency and SOX compliance
Varies










Strategic Business Value
ACORD Standards Framework Expansion
Future:
Standards for
SOA, Web
Services and
Best Practice
Metrics
Use of Industry
Standard Process
Models and
Business Service
Definitions
Use of Standard
Messages
ACORD
Forms
$
Use of Industry
Standard
forms
Use Standardized
data
ACORD XML
(P&C, Life,
Reinsurance)
ACORD
Data
Dictionary
and
Models
Level of Industry Standards Adoption
Business and IT Strategy: Four Pillars of Focus
Business Strategy
Data
IT Strategy
Infrastructure
Strategy
Data Strategy
Application
Integration
Strategy
Business Process
Strategy
Business Applications and Components
Current ACORD Standards
 Life & Annuity
• Life

Property &
Casualty
• Annuities
 Personal Lines
• Health
 Commercial
• Group Lines
Lines
• Reinsurance
 Surety
• Global
 Global
Data Model
XML
Forms
EDI
XML
Forms

Reinsurance
 P&C Reinsurance
 Large
Commercial
Lines
 Global
Data Model
Cross Program Standards
•DRI Standard (Document Repository Interoperability)
•SOAP Framework
EDI
XML
Forms
Current Challenges

Inconsistent deliverables
 Impacts enterprise implementations
 Duplicate support
 Impacts interoperability, transparency and consistency
 Impacts ability to effectively work with other standards
 Lack of core components to work with UN/CEFACT,
SWIFT and ISO
 Multiple dictionaries

Lack of deliverables
 Single business dictionary
 Data model for PCS
 Common business messages
ACORD Standards Framework
ACORD Industry Standards Framework expanding to support
insurance industry needs
Cross Domain Process Standards
Provides the Business
Context or a list of
standard business
processes
Underwriting
Claims
Channel Management
Product Portfolio Mgmt
Inventory of ACORD Process Service Definitions
Provides the Business
Services performed and
process inputs and
outputs
Supported by a Common Data Architecture comprised of:
Business Term Dictionary
Conceptual Data Model
Logical Data Model
Contextual Data Model =
Listing and definition
Of things that are important
to the business.
User = Business Strategy
A Semantic Model =
Entity = Business Entity
Relationship = Business
Relationship.
User = Business Owner
A System Data Model =
Entity = Data Entity
Relationship = Data
Relationship.
User = System Designer
Technology Layer supported by XML Messaging and Forms Standards
Life & Annuity
XML/EDI/Forms
P&C/Surety
XML/EDI/Forms
RLC
XML/Forms
By separating the technology
layer, investments in standards
stand the test of time as you swap
out the technology but not the
standard
Plans/Scope not yet defined
ACORD Standards:
Enable Transformation and Interoperability
Enterprise Architecture - Examples










ManuLife
MetLife
NYLife
Allianz - Fireman’s Fund
St Paul Travelers
The Hartford
Swiss Re
XL Re
Aon
Alea
Case Study: Fireman’s Fund

SOA Architecture
 Turn mainframe apps into set of networked
services with real-time transactions to provide:
Standard way for over 3,000 independent
agents to interact with them
Modernize the IT infrastructure to be more
manageable, flexible and adaptable
Creates Straight through processing (STP) and
Single entry multiple company interface (SEMCI)
 Functions of multiple legacy policy admin and
billing systems into reuseable components
using ACORD standards
 Create new apps with these components
Case Study: MIB – Medical Information Bureau

Web Services Architecture Solution
 Convert all legacy systems to web services
using ACORD standards
 Eliminates batch processing and provides
real-time STP
 Reduces time for carriers in the issue process
 Reduces costs
How Manulife Canada Has Used ACORD





Agent desktop integration (1999)
In-force agent policy feeds (2000)
Commission feeds (2001)
Administration system consolidation (2004)
Web Policy Inquiry (2005)
ACORD Membership: Leading the Industry
1970’s
P&C
Forms
1980’s
1990’s
1996
1998
AL3 (ACORD’s
Life & Annuity
XML for
P&C EDI
Standards L&A and P&C
AL3
standard) Implementation
Life
Reinsurance
2001
P&C
Reinsurance
EDI & XML
L & A Forms
Fillable
Forms
2005 +
Business
Process
Services
PCS V2
ACORD Member Best Practices









Business and IT strategy to include ACORD standards
as core component
ACORD standards as part of IT operating and project
management principles
Oversight executive committee actively promote
adoption, participation and involvement
Establishment of Standards Officer in the organization
RFI and RFP should include ACORD standards
requirements
Solution provider contracts require ACORD standards
Incorporate ACORD standards as part of SLA’s with
outsourcers and shared services
Incorporate ACORD standards in data warehouse and
enterprise architecture
Trading Partner and third party agreements should
include ACORD standards as part of agreement
Industry Analyst View
“Maximizing the use of standards is how grown-up organizations operate.” —
Marc Cecere, Forrester
“Standards are crucial to enable real-time transactions with internal and
external users.” — Kimberly Harris-Ferrante, Gartner
“Use of ACORD Standards is central to establishing an overall enterprise
architecture.” — Deborah M. Smallwood, TowerGroup
“Web services using data standards will have an advantage.” — John Flynn,
Gartner
"ACORD Standards are a key tool for insurers to improve their business
capabilities" — Matt Josefowicz, Celent
“Without data standards like ACORD, industry improvement efforts will fail.” —
Todd Eyler, Gartner
ACORD Standards Cartoon
World Headquarters:
Two Blue Hill Plaza
3rd Floor
Pearl River, NY 10965 USA
+1 845 620 1700
London office:
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Mincing Lane
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