But with ROI the biggest factor in most technology implementations, does ACORD understand the expense of adopting standards in the real world? Josefowicz believes that no matter what direction a carrier turns, there are going to be expenses that have to be contained.

Adopting standards is a longer-term play, he says. While adoption increases the cost of the first project done with standards, it decreases the cost of subsequent projects. Adopting standards generally requires at least 12 to 18 months to achieve ROI. However, carriers that are sick of spending money on integration are willing to make that investment.

To Fuller, the most important things going on with ACORD today are the continuing development of the XML standards to meet memberships business requirements and the promotion of implementation of those XML standards. You can write standards to meet peoples specific business needs, she says. Getting them up to the table to actually use them tends to be a much slower process than anyone anticipates.

She believes each company has to examine its business operation to determine what is best. Every organization that participates knows they need good business reasons to take the step forward, Fuller says. You can develop a great number of theoretical business needs, or you can talk to various partners that need [standards], but you need good business reasons to do it.

Partnership Agreements

Those business reasons tend to coincide with the needs of various business partners, but Fuller says there is a vicious circle in the world of insurance standards. Agencies would like all of us to do our interfacing using XML one way, but they dont want to do it that way when they have only a few carriers using it, she says. They want all their carriers using it.

ACORD certainly wouldnt mind if everyone was using its XML standards, but the organization is realistic enough to know that 100 percent compliance is asking for a lot. Still, ACORD is pleased with the progress that has been made. Its membership has more than doubled in the last seven years to over 450 members. Although less than half of ACORDs membership is made up of carriers, brokers, and reinsurers, the membership roster does include 36 of the top 50 property/casualty carriers in the U.S., 23 of the top 50 life/health carriers in America, and 26 of the top 50 global reinsurers.

Ron Dudley, vice president standards for ACORD, believes the organization will continue to grow. One of the reasons is a lot of carriers have very old systems theyre dealing with, and many are replacing those systems, he says. A significant number are building their internal systems to interface directly from one system to another on the ACORD standards. Others are using the ACORD standards to build their outbound interfaces into policy-writing systems, claims systems, etc.

For those reasons, Dudley believes membership will continue to grow. Its going to be a continual process of implementing either individual business messages or the whole suite of business messages that we have if theyre a multiline company, he says.

Plenty of Ways to Use It

Much of the focus on the ACORD XML standards has been the connectivity to business partners, Fuller points out, but she adds Safeco and others have employed the ACORD XML language internally as well. People need to understand there are a variety of ways to implement the ACORD XML standards, she says. A good deal of the publicity to date has focused on a single tool that is provided, but there is a broader applicability for XML.

She feels carriers have discovered ACORD XML is handy for communicating within internal systems. Safeco is using ACORD XML internally as it develops its browser interfaces through a variety of its own servers, the companys automated underwriting system, and eventually back to the mainframe. She describes Safecos use of ACORDs XML standards as a hybrid and feels it is an appropriate use of the standards. It allows us to flatten the hierarchy, if you will, and use it more efficiently and effectively where it is specific to our internal needs, says Fuller.

She warns that internal customization by carriers should go only so far, though, since it can run the risk of defeating the purpose of standardization. What the developers have to do is keep in mind they can play with [XML] internally as long as they can readily turn it back into ACORD XML when they go outside the company, she says. Those are the standard requirements Safeco has had for yearsto interface with multiple partners one way, which is why we all fool with data standards.

Currently, Safecos ACORD XML standards are used internally and with one of its business partners, a one-on-one relationship with a virtual agency. There were a couple of good reasons for doing this, says Fuller of the relationship with the virtual agency. Its an XML real-time interface, it does personal quoting, and it uses ACORD standards. We chose to do it because our business and salespeople felt this was a partner we needed to do business with.

The arrangement has turned out to be beneficial from an IT standpoint as well. This gave us an absolutely superb place to sit down and learn how to do this and practice with it, she says. It was a place to implement something we are probably going to do with many other partners [in the future] and gave us a bed for experimentation.

No one wants failure, but Fuller points out it is better to try and fail with one agency rather than to attempt an implementation with, say, 5,000 independent agencies and then start battling with the issues. Well get all the bugs and idiosyncrasies of the process worked out, so this project will prove to be an advantage to our independent agencies as well, she says.

On the agent front, Fuller notes it is important agencies use the available tools if they and the carriers are to receive any benefit from the system. Instead of logging into a carriers system, agencies will dial up the call center and ask for information that is readily available over the Internet. She concedes it is quicker and easier for some agents to call someone for the information rather than logging into the system on their own. We have a great deal of hope that providing real-time inquiries, however the method, will cut down on the calls to our call centers, says Fuller. Theyre expensive.

Still Evolving

Standards are never complete, and waiting around until the XML standards are at 100 percent of their capabilities would likely mean a carrier would never adopt the ACORD XML standards. Josefowicz believes ACORD XML is at about 70 percent of its maturity, based on his conversations with carriers. Even at this level of development, carriers have achieved significant efficiencies by using the ACORD schema rather than developing their own, he says. Carriers have told me that even if the model only covers 70 percent of their needs, they still find it valuable to use as the basis of their data models.

Standards always have been considered dynamic in nature, Gilman says. It took 20 years for ACORDs EDI standards, known as AL3, to be considered mature, he notes, even though they, too, continue to grow. If you use the AL3 [EDI] standards as a backdrop, the XML standards are growing and will continue to grow and mature as more and more business messages are developed and more and more companies get involved in the standards-setting process, he says.

Dudley points out another aspect of XML is it is a great tool for developers and will open additional processing environments, such as Web services, where ACORD is just beginning to get a footing in the marketplace. That opens a whole new dimension of straight-through processing with multiple things going on at the same time, he says. Thats exciting for us to look at, and were going to be one of the players in that arena.
Todays multiple distribution channels for insurers are one of the major drivers in the market that is impacting the growth and direction of standards, Gilman believes. Companies are evolving from being a direct writer or an independent-agency carrier to the need to get products and service customers anywhere at any time, he says.

Not only are customer expectations growing, but so is the definition of who the customer isthe end insurance buyer or the various distribution channels. Because of the Internet and the flexibility of XML architecture, the broadening of market opportunities also is driving the growth and development, says Gilman.
A great deal of focus in the world of standards is communicating with business partners, and that means more than just independent agencies, according to Fuller. There are people outside the agency/carrier world who are beginning to look at or already have started to use ACORD XML, she says. If you look at claims processing, there are some claims providers that are beginning to look at XML. If you go out to talk to claims providers or other service providers, you can look at them and say you are using a standard that was defined for the insurance industry. This is how I will communicate with you.

The Celent study citing ACORD membership shows half of the members are solution providers. The vendors are realizing this is the direction to head because consultants such as Celent are pointing their insurance customers in that direction. We advise carriers to design new projects to use ACORD XML, if at all possible, says Josefowicz. The potential savings in future additions and integrations are very compelling. Historically, the focus has been on communicating with business partners, but now the industry is starting to look at ACORD XML as a solution to the age-old internal integration problem that has plagued the industry for years. Celent estimates the insurance industry could save as much as $250 million annually in internal integration costs for new projects alone by universally accepting ACORD XML.

If the insurance industry could save $250 million annually by adopting the ACORD XML standards, as the Celent study proclaims, why arent all the major insurers on board with the standards yet? Josefowicz believes it is because there is a fear among insurers of being a first mover. Since ACORD XML was originally positioned primarily for partner-to-partner communication, it has a classic network value problem, he says. It becomes valuable only as there are more and more participants. However, on the internal integration side, this is less of an issue. Nonetheless, insurance carriers are generally a risk-averse group, and most of them are taking a wait-and-see attitude.

Josefowicz points out most top insurers are now ACORD members. We believe within two years, most new major tech projects will involve ACORD standards, he says.

Pressing for more implementation is an interesting problem, according to Fuller. Early adopters of any type rarely get a great return on their investment while the followers wait to see how things turn out. The real return comes when multiple carriers join in. Its an interesting problem, but not a new one, she says. ACORD is doing its best to encourage implementations. The more we implement, the more benefit everybody gets in the long run.

There are plenty of small regional insurers in the U.S. that have no need for XML, according to Fuller. If you look at XML for real-time interfacing for quoting or new business, it doesnt work unless the carrier has an automated underwriting system, she says.

Take a Seat

The growth of ACORD in the technology arena has helped the organization take its seat at the global standards table. Gilman believes when dealing with other international agencies, harmonization has been the most effective strategy. Weve had a presence on the global front for many years, he says. In 1996, ACORD took on the responsibility of the life standards. Thats when we started to have more of a footprint outside the U.S. market, he adds.

In 2001, ACORD took over responsibility for reinsurance large commercial standards, which helps explain why ACORD has been able to attract so many of the top global reinsurers to its membership roster.

Our presence on committees and our involvement with other standards organizations has been one where we look to find where the gaps and overlaps are, says Gilman. Where theres an overlap with an effective local standard, we map to it. We harmonize with it. Where there are gaps across borders, if we can provide the standard to facilitate data sharing across national borders, we provide that.

By sitting on committees with global organizations, ACORD can keep abreast of what is happening in other parts of the world and the rest of the world can see what ACORD is doing.

Dudley points to a benefit received by the ACORD membership from such associations. ACORD and a European standards body, EEG7, signed a memo of understanding to harmonize each of their data dictionaries as well as identify common components. The process is currently under way, and Dudley says, At the end of the day, well be able to say we have a harmonized global data dictionary.

Fuller doesnt believe there should be competition across the globe to establish standards, and she doesnt believe insurers ought to ignore standards being established on a generic basis. One such example is ebXML, an international standard that is being sponsored by UN/CEFACT and OASIS. Its not specific to any industry, but I dont think such groups are competition, she says. As we put up a new version of [ACORD] standards, well be looking closely at what theyre doing to see if we could become more international in our ACORD definitions. Dudley feels the same way about the technology side. ACORD works with both the W3C and WSI for things such as XML and Web services. Were participating very heavily, says Dudley. We want to make sure as we move forward were adopting the right technology so standards can be implemented on a global basis.

Most Commonly Cited Hurdles to Adoption of ACORD Standards

Business partners not yet using standards
Using standards adds unnecessary layer of complexity
Have already developed internal schema
Standards are not comprehensive
Standards are immature

Source: Celent Communications