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Leveraging_Technology_Standards__ACORD_

VIEWS: 7 PAGES: 51

									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                                       Carrier
   BPM & STP
   SOA and reusable components
   Enterprise Architecture
   Standards
                                                  Regulatory



                                 Source: Tower Group
                                                                 Source: TowerGroup
 Strategy: Run – Grow – Transform?
 RUN (Tactical)              GROW (Strategic)          TRANSFORM
THESE TEND TO BE SILO -   THESE ARE ENTERPRISE CROSS - THESE ARE ENTERPRISE
BASED ACTIVITIES          SILO AND FUNCTIONAL          CROSS - FUNCTIONAL
                          ACTIVITIES                   ACTIVITIES

 Free up investment       Improve business focus      New/quicker business
 dollars                                              models
                          Accelerate redesign efforts Redefine relationships

Resource availability     Change capacity                 Shorten or change the
                          dynamics                        dynamics of life cycles

Reduce or control         Better capabilities             Create or enter new
operating expense                                         markets or renewed
                                                          markets

 Functions and tasks       Enable shared                  New business models
 are managed               risk/reward models

    REACT                 TRANSACT                         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                Enterprise Data Model Usage in US Insurance

     Underwriting
     Risk Management
                                              Do not
                                              need
                                              12%
                                                          In Use

   Customer Data                                         Currently
                                                          25%


     Behavior
                                        Do not
                                       have, but
                                       need one          Under

     Financials
                                         32%           Development
                                                          31%


   Operational Data
     Financials        Source: Celent’s 2004 US Insurance CIO/CTO Survey

     Operational
       Efficiency
“Straight Through Processing”

                         DECISIONS              DECISIONS
    INPUT       STEP A   PROCESSING   STEP B PROCESSING STEP C         OUTPUT
                         ROUTING                ROUTING




                              Automation
             Keys                                           Benefits
   Automated decisioning                      Reduce errors
   Automated workflow                         Improve turn-around time
   Integrated production                       (service imperative)
    systems                                    Improve consistency
   Integrated external data
    sources
   Integrated internal data
   Standards
                               Source: Celent
Frictionless Communication
   Critical element in ease
    of doing business for
    insureds and distributors                 Agent/
                                              Broker
                                                                        Agent/
                                                                        Broker

   Key differentiator
   Explosive growth of
    agent portals over last
                                                            Primary
                                   Insured                                           Reinsurer
                                                            Insurer

    five years
   Growth of data
    standards                                Requirements                 Claims
                                                                      Service Provider
                                               Vendor




                        Source: Celent
Competitive Advantage Via Technology



                            Advantage




                                             Efficiency
                                 Risk Mgt.
                Service
                           Frictionless
                          Communication

            Straight Through Processing

             Data As A Strategic Asset



                          Source: Celent
Enterprise Architecture: Best Practices


         Bridging silos into shared services


                                    Enterprise Architecture
                                   S                           A    T
                                   T      D Services
                                                  P            P    E
                                                                    C
                                   A D       C                 H
                                                               P
                                   N A
                                          E       A
                                          Common Apps          L    H
                                             R                 II   N
                                   D T    P       Y                 O
                                             E
                                           Shared Apps         G
                                                               C
                                   A A    O      M             A    L
                                   R         D                 H    O
                                          S       E
                                           Unique Apps
                                                               T
                                                                    G
                                   D          I                I
                                   S      I       N            O    Y
                                              T
                                         Traditional Apps
                                          T       T            N

                                         Guiding Principles

                                          Source: TowerGroup
Architectures Break Silo Boundaries

  Determine the value of people, process, data and
    technology
           Make IT investment strategic and more responsive

   Business        Application           Data           Infrastructure

    Outline the       Map the        Detail where the    Diagram the
     important    relationships of       data and       hardware and
     business         software        information is     networks to
  functions and    applications to   kept and how it     support the
     processes       each other           is used         business

   START HERE




                                                           Source: TowerGroup
Impact of Legacy Systems


                                      Legacy System Effects


            Slows new product introduction                          67%
                                                                       78%

          Too difficult to integrate with new                    56%
                                      systems                       67%

     Unacceptably high maintenance costs                 33%
                                                                      78%

             Inhibits data mastery/business                   44%
                                intelligence                        67%

          Prohibits workflow improvements                  39%
                                                                    67%

                        No negative effects          22%
                                                     22%

                                                    Large Midsize

     Source: Celent 2004 CIO Survey
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                                                               Better
    Complexity                                                           Decisioning
                            ENABLING
                         INFRASTRUCTURE




     PROCESS                  SERVICES                                DATA
Once & done data entry     Robust rules engine                    Operational Data

   STP & Exception       Robust workflow/process                   Analytic Data
     Processing                 manager                           Third Party Data
 Predictive Analytics         Smart Forms
      execution                                          Source: TowerGroup
Insurance Value Chain of:
Reusable Assets, Services, Process & Data - SOA


        ACCESS           STP                                            DATA
                                                                                          Open access
                                                                                             to core
                                                                                           technology
                                      ENABLING                                               assets
  Portals,                       INFRASTRUCTURE
Dashboards
                                   (interoperability)           Open & flexible data
 Role-based                                                           stores
   view of                                                       -data standards-
 information      Business Process Mgmt.,
  and data                                             Standard
                   Content Mgmt., Rating,          messaging protocol
                   Analytics, Rules engine



 Business                                                                                   Reusable
components                                                                                services and
 and rules                                                                                 information
                                                                                              access
                                             STP                    SERVICES
               PROCESS                WORKFLOW
                                       MANAGER                            Exhibit #: E1
                                                                  Source: TowerGroup
Current Model of Insurance Underwriting
(Simplified View)

                                                                              Risk Evaluation
              Marketing                                          Third-
                                               Legacy            Party                   Analytics
            Pricing System                                        Data
                                                                                Business Intelligence
      Product Development
                                                            Legacy
                                                                                    Closed Claim Review

                           Product Development
                                                                                           Policy Admin
                                                             Legacy                          System
 Product                                    Rating                         Rating           Policy Admin
                                            Engine                         Engine              System
 Creation                                               Policy Admin                         Policy Admin
                                                          System                                System
                             Underwriting                Policy Admin
            Third-
                               System                       System
            Party                                         Policy Admin                            Contact
             Data                                            System                               Center
                          Quote – Rating/Pricing                              Policy Admin


               Operational                    Functional                  Ad Hoc

                                                                          Source: TowerGroup
Future Model of Underwriting Technical
Components (Simplified View)


                                        Underwriting Desktop View

    Data          Customer      Transaction      Exception       Portfolio     Performance     Market
   Capture          View           View            View           View         Scorecards       View


               Process Managers                               Enterprise Content Management

  Business     Workflow       Event       Process        Document             Records          Content
   Trans.      Manager       Manager      Manager       Management           Management      Management


                                             Engines and Tools
                                             Business
                 Product       Rating                   Analytics        Data         BI
                                              Rules
                Configure      Engine                    Engine       Integration    Tools
                                              Engine

                                              Data Layer

                                                 Data Mines
 Transaction      Legacy         Financial                     Warehouse            CRM        External
                                                  & Marts


                                                                     Source: TowerGroup
     Assessing and Improving Legacy Systems
 • Addressing the legacy system
     •Replace?
     •Re-platform?
     •Componentize?                                     BPM
     •Consolidate?
     •Extend or Wrap?                                  Legacy
                                                       system
• Standardizing data and
processes across legacy                   Legacy                       Legacy
systems                                   system       Standards       system
    •Rules management?
    •Data standardization?                             Legacy
    •Web services?                                     system
    •Enterprise architecture?
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     Direct        Captive      Independent          Call         World Wide
  P
  E
       Marketing      Agents          Agents           Center          Web
  R
  A                         Channel-centric CRM Functions
   T
         Segmented     Proactive    Dialog           Dynamic           Targeted
   I
           Mailing       Sales     Scripting      Personalization     Advertising
  O
  N                                  CRM Decisioning
  A
   L
                                                    Customer           Product
        Campaign       Customer        Contact
   I                                               Information        Servicing
       Management       Profile      Management
  N                                                  System         DDA, TDA, Loan
  F
  O
  R                CRM Decisioning
  M                                        Profitability
  A                                          Engine
  T
   I
       Decision Support        Marketing                 Data
  O
                               Data Mart               Warehouse         Third-Party
  N
                                                                            Data
  A
  L

                                                  Source: Tower Group
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




                                         Agency
              Agent Extranet           Management               Shared Services
                                        Systems




                                                                     Source: Celent
    ACORD and XBRL – Interoperability for the
    corporate reporting supply chain


               ACORD              XBRL                 XBRL
                                  Ledger         External Reporting
                              Internal       External         Investme
                              Financi        Financia            nt,             Economic
Processes       Business
                                 al              l            Lending,           Policymak
               Operations
                              Reporti        Reportin         Regulatio              ing
                                 ng             g                 n




                                                          Financial
                                                          Publishers                  Central
                            Companies                                     Investors
Participants                                              and Data                    Banks
                                                         Aggregators

                Trading     Management     Auditors                 Regulators
                Partners    Accountants


                                           Software Vendors
                                           Initiatives Cited As High-Priority For 2005

                         Electronic signature                25%                               24%
                                Email security               25%                            18%
              Business intelligence/reporting                25%                            18%
                                 ACORD XML           13%                         29%
                          HIPAA compliance                               38%
                                Single sign-on               25%                          12%
                                      Imaging                25%                          12%
                       Contact center mgmt.                  25%                          12%
            Transactional policyholder portal                25%                          12%
Interface with agency management systems                     25%                           12%
                   Informational agent portal                25%                          12%
                Sarbanes-Oxley compliance            13%                       24%
                                      E-Billing                      35%
Web services/service-oriented architectures                  25%                     6%
                             Network security        13%                   18%
             Document/content management             13%                   18%
      Business process management (BPM)              13%                   18%
                     Commission mgmt/EIM             13%                   18%
                    Disbursement/payments            13%                   18%
                        Underwriting system          13%                   18%
                Policy administration system         13%                   18%
               Voice/data/video convergence                    29%
                                 Voice over IP                 29%
                Business rules engine (BRE)          13%                 12%
                         Data integration hub        13%                 12%
                                          VRU        13%                 12%
                   Transactional agent portal        13%                 12%
                   Wireless for sales or other               24%
                       Point claims solutions                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%
                20%                                                                             15%15%



                 0%
                            Large L/H           Midsize L/H              Large P/C       Midsize P/C

                            Live, mission-critical            Live, ancillary systems
                            Critical integration method       In pilot
                            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
                                     Corporate        Target Business Scenario
                                      Strategy

                                     Corporate
                                   Measurement
                                    And Control
    ACORD Standards         Common Vision
Enable the Adaptability
                               Functional Silos                  Transformational Tools
                           Operations   Administration
                                                                 and Infrastructure
                           Macro Cross-Functional Process
                           Macro Cross-Functional Process


                          Change Management
                Work Processes             Tech and App Architecture
                                                                        Embedded Culture
                  Activities                     Functionality
                Doing Work                Supporting Work

                                                                 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                               Ever-decreasing
      Interfaces
                                            Incremental Cost
     Initial Lower
          Cost
      Type of ROI Produced from XML Initiatives
      at YE03
    Percentage of Insurers BY ROI Derived from XML Projects

                                             67%
          Increased                             80%
         Productivity                  50%
                                        54%

                                             67%
           Increased                              87%
           Efficiency                         70%
                                                77%
                                                              EMEA General
            Ease of                             78%
                                                  87%         US P&C
          Application                         70%
          Integration                                100%     EMEA Life/Pensions
                                                              US Life/Health
                                               78%
        Cost Savings          20%
                                                80%
                                      48%

            Speed of                           78%
          Information                                  100%
                                              70%
           Exchange                              83%
                                                                   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

                                                     New
 Financial              Sales      Electronic      Business
 Planning           Illustration   Application      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
Travel                                                       Administration
Agency                                                         System
                                         Pacific
                                          Life
  Post
                      Internet                               Commission
 Saving
 Offices                              E-Distribution         Management
                                      Management
                                         System
                                                               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   100%
interface
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
ACORD Standards Framework Expansion
Strategic Business Value

                                                      Future:
                                                                                   Use of Industry
                                                   Standards for
                                                    SOA, Web                      Standard Process
                                                   Services and                      Models and
                                                   Best Practice                  Business Service
                                                      Metrics                        Definitions


                                                                Use of Standard
                                                                                          ACORD XML
                                                                  Messages
                                                                                           (P&C, Life,
                               ACORD          Use of Industry                             Reinsurance)
                               Forms             Standard
                                                  forms
                                                                      ACORD
                                                                        Data
                               Use Standardized
                                                                     Dictionary
                                     data
                           $                                            and
                                                                      Models

                                       Level of Industry Standards Adoption
Business and IT Strategy: Four Pillars of Focus


                                 Business Strategy

                                              Data
                          Business Applications and Components
       Business Process




                                                                     Infrastructure
                                Application
                                Integration




                                                     Data Strategy




                                                                        Strategy
           Strategy




                                  Strategy




                                     IT Strategy
 Current ACORD Standards

 Life & Annuity              Property &                   Reinsurance
   • Life                      Casualty                       P&C Reinsurance
   • Annuities                  Personal Lines               Large
   • Health                     Commercial                    Commercial
   • Group Lines                 Lines                         Lines
                                Surety                       Global
   • Reinsurance
   • Global                     Global

                                          EDI                   Data Model
       Data Model
                                          XML                         EDI
          XML
                                         Forms                        XML
         Forms
                                                                     Forms
                          Cross Program Standards
              •DRI Standard (Document Repository Interoperability)
                                •SOAP Framework
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 =                   A Semantic Model =
                                                                                             A System Data Model =
                     Listing and definition               Entity = Business Entity
                                                                                               Entity = Data Entity
                 Of things that are important             Relationship = Business              Relationship = Data
                        to the business.                        Relationship.                     Relationship.
                   User = Business Strategy               User = Business Owner              User = System Designer

                    Technology Layer supported by XML Messaging and Forms Standards
                                                                                              By separating the technology
                                                                                              layer, investments in standards
                       Life & Annuity               P&C/Surety                    RLC         stand the test of time as you swap
                      XML/EDI/Forms                XML/EDI/Forms                XML/Forms     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      1980’s      1990’s       1996          1998           2001       2005 +
P&C      AL3 (ACORD’s             Life & Annuity   XML for         P&C
            P&C EDI                                            Reinsurance   Business
Forms                     AL3        Standards L&A and P&C
           standard) Implementation                             EDI & XML    Process
                                                     Life                    Services
                                                               L & A Forms
                                                 Reinsurance
                                                                             PCS V2
                                                                 Fillable
                                                                  Forms
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:         London office:
Two Blue Hill Plaza          LUC - Suite 2/5
3rd Floor                    3 Minster Court
Pearl River, NY 10965 USA    Mincing Lane
                             London EC3R 7DD UK
+1 845 620 1700             +44 207 617 6400

								
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