Spencer traces the NAICs interest in making life easier for carriers back to the groups earlier formation of SERFF, an electronic system of rates and forms filing. The theory is, companies can go to this one place, put together a filing, and it all gets distributed to the states they need to file forms in, he explains.

The problem with such systems is there are 50 different states, and there always seems to be some conflict as to what data the different states want. The more you can standardize, the easier it gets for everybody, says Spencer. But its been difficult. We [North Carolina] have had trouble in creating an interface between SERFF and our back-end system. If we were moving the data back and forth in XBRL, these issues wouldnt be nearly as large.

The issues between the regulators and the carriers have been compounded in recent years by a number of insolvencies among carriers. The NAIC moved to tighten down regulations to help prevent insolvencies, says Spencer. Now weve got a lot of companies grumbling about slowness of processing, inconsistencies, and a lot of stuff that really shouldnt happen.
This has caused the regulators to reexamine their own processes. Theres been a big effort to standardize, says Spencer. In some cases, thats difficult because we have 50 states. I think XBRL will help that whole issue. For example, he points out it shouldnt matter if North Carolina wants something different in its forms than South Carolina. What you want to look at is the speed of the processing, not the information requested to process, he says.

For XBRL to be successful, Fuller believes there has to be the proverbial 800-pound gorilla behind it. Somebody with a lot of force who decides this is going to save us a lot of money, she says. Such an organization as the NAIC, she adds, eventually could say, Weve got these people who have to talk to us, and were going to tell them to do it this way.

XBRL Goal
Mike Willis, partner in audit business and advisory services with Pricewater-houseCoopers, has been involved in the development of XBRL since its inception back in 1998. The goal is to promulgate the market adoption and implementation of XBRL as a tool to enhance what we call the business reporting supply chain, which really is to enhance business reporting both inside companies and between companies and their stakeholders, he says. As with any technology development, XBRL International, the not-for-profit organization spurring the business languages development, realizes it has to create a demand for the standard as well as encourage development of a companys ability to use the standard internally.

Willis sees three benefits to insurance carriers using XBRL: production of information, consumption of information, and management of information. The financial services sector actually [can realize] all three of those benefits, he asserts. That is greater than any other [business] sector because [financial services companies] consume a lot of business information as part of what Ill call their transaction activities. Because of those benefits, he says, financial services have been a target of XBRL Internationals efforts from a market-adoption perspective.

For insurers, Willis adds, the idea of enhancing internal reporting has caught their attention. In the insurance sector, the idea of transaction-level data typically is articulated by the ACORD standards. XBRL International and ACORD, he says, have developed an interoperability agreement and are working to integrate not only specifications but also definitions that might be overlapping.

XBRL has caught the attention of industry organizations such as IASA, as well. [Standards] are important for the industry to get a common exchange mechanism, says Sill. Its important [to IASA] because [XBRL] is going to be an industry standard. We want to make sure we can get our members information on a timely basis on how to comply with it.

Having vendors that are XBRL compliant is not going to convince insurers to take the step to XBRL. Fuller believes many of them are looking to sell a product, not necessarily advance the industry. Until the NAIC tells all the carriers this is the only way we will receive your data, people arent going to use it, even if it is optional, she says. Carriers believe if the old way still works, why spend the money?

Regulators
Getting the NAIC to endorse the standard was a major step for XBRL. Sill reports that Security National Life has yet to use the standard, but after learning of the NAICs actions, he says, This will affect all insurance companies. Its something well have to take up with our software people.

Gary Wicklund, vice president industry relations with Eagle Technology Management, a service provider for insurers working to file quarterly and annual reports, believes regulators were satisfied with the way things were done with PDF files but have accepted the fact they need to be more responsive to their constituents. Its not easy to get data out of a PDF, he says. Somebody literally has to sit there and key it in.

Since state and NAIC reports are public documents, insurers are curious to see how their peers are performing, so there is a great demand for the reports. Acquiring comparison data for companies is not easy, though. Most insurance carriers pay for such a service through an outfit such as A.M. Best, which analyzes the data the insurer requests and then sells its reports back to the carriers.

Willis agrees the NAIC decision was important for the future of XBRL. Regulators have the ability to enhance awareness, he says. It begins to open the companies eyes to the application of XML and Web services in terms of their own data management concepts.

Regulators will be able to take advantage of this standard as well, he points out, particularly through the validation of the data that is submitted. In todays regulatory process, the validation process is on the regulators shoulders. Through some of the XBRL concepts, we are able to put that responsibility on the preparer of the information where it rightly belongs.

There are two other benefits for insurers, though, according to Willis. He points to the idea of speed and accuracy in the information exchange and the idea of embedding business rules. I then could look at a thousand regulatory reports, and those reports might tell me which didnt meet certain business rules, he says. Today, that concept is built into an application. Im suggesting the business rules actually could be built into the taxonomies used for reporting.

Will It All Work?
It is too early in the game to say everyone is going to jump on the XBRL bandwagon. Michael Key, president of the Freedom Group, a unit of Fiserv, says his company supports standards but adds, We see [XBRL] as one of several types of open standards we continue to work toward. Obviously, it is difficult for us to commit that we are going to adopt a full standard without seeing exactly what that means and what the regulatory guidelines are attributable to it.

There are limitations to the use of XBRL, Willis says, and most of those center around implementation and the priorities of the regulators. He suggests insurers will start with their more streamlined forms and then move toward the more unstructured areas. The limitations would be around the idea of large unstructured data, he says.

Spencer believes the XBRL concept has been oversold by proponents thus far, but he acknowledges the push has to start somewhere. It would be hard for carriers to resist some of the hype behind XBRL: The ability to start company comparisons; the ability to go to the Internet and pull down information from other sources; the ability to start trending. These features have been difficult to accomplish, so there is considerable excitement about the standards possibility, but Spencer adds, You still have to have the tools. XBRL tools just are starting to appear, and the data has to be published for you to use it.

Savings Is the Benefit
The obvious benefit to insurance carriers, Willis asserts, will be cost savings. He estimates carriers can lower the cost of their financial reporting by between 20 percent and 50 percent. The reason for the savings is one of the major expenses in filing forms is the keying in of data. The process typically is a manual process where you have employees actually cutting and pasting or keypunching, he says. The XBRL field would say the company has a reporting tool internally. The XBRL model would say to take the regulatory taxonomy and place it in the reporting tool, map the companys internal ledger to that taxonomy, and whenever you need to reproduce that report, its file, save-as activity.

Once a carrier has its internal trial balance mapped, Willis says, the report for the regulator is a simple exchange with limited costs. In other words, the form idea goes away, so theres an incremental benefit to the company in terms of its capability to produce this, he says.

I think its pretty clear the potential for XBRL is there, says Spencer. It will make it so easy to push and pull data, but its going to take a while to get there, and I think thats the part we always seem to miss.

Spencer believes it could be a decade before all the benefits of XBRL are realized, but Willis doesnt feel it will take that long. In the next year, I think youll see an explosive number of regulators starting at the structured end of their data requests, he says. In five years, I think youll see a fairly changed marketplace, both in the regulatory arena and in the public sector.

Key disagrees with Willis on how XBRL is being seen in the industry. XBRL has started to receive some attention, but we havent had a very large outcry from our client base yet, says Key. We see it as part of the drive toward openness and the commonality of reporting.

Willis claims it is a market-driven idea that will play out when three things are accomplished. We get the tools online, he says. We get the taxonomies built, and we raise the awareness as to what the real benefits are to all the supply-chain participants.

Spencer acknowledges the accounting firms are some of the major players pushing XBRL. Since they do many of the reports for insurance carriers, it is not a surprising detail. He believes having a regulatory standard will get insurers started in the direction of XBRL, though.

Wicklund says one insurer he is familiar with has 150 members on its reporting staff. The company looks at somewhere around 1,000 reports, and out of the 1,000, some 250 of them are used to do statutory reporting, he says. [The insurer] has to key [the data] in to get the reports in the format [the insurer] needs so [the report] can be filed for regulatory purposes.

There has to be a savings realized through the use of XBRL, Wicklund maintains. If you have the elements tagged, you can take those tags and put them wherever you want when you do a report, he says. Once you have the tagged data, you actively can pull it into an Excel spreadsheet, do analysis of it, reproduce pages, reproduce reports.

Fuller believes strongly someone has to push the standard through. In this case, that is probably the NAIC. Until theres a strong business reasonmore than just saving a few bucksits got to be something really compelling, she says. Its the problem weve had in standards for years.

The Cure
Most financial people will welcome the standards, but Spencer reminds them although XBRL can be valuable, it is not a cure-all for what ails the reporting process. I think in a lot of cases people believe its a panaceathat its going to solve all their problems, he says. Its really not, but it is going to make an easier transfer from Point A to Point B.

Financial and Accounting Software Tech Guide
Alphasoft Marketing International
Nevada City, Calif.
530-478-1552
www.ialphasoft.com

AMS Services, Inc.
Windsor, Conn.
800-444-4813
www.ams-services.com

Balance Consulting Inc.
Ann Arbor, Mich.
734-668-1099
www.balanceconsult.com

Captiva Systems, Inc.
Miami, Fla.
800-274-8300
www.captivasystems.com

Document Imaging
Greenwood Village, Colo.
877-732-8278
www.docimag.com

Eagle Technology Management
Marion, Iowa
800-975-3245
www.eagletm.com

Epic Solutions, Inc.
Mesa, Ariz.
480-969-2720
www.epicsol.com

Fiserv FREEDOM
Cedar Rapids, Iowa
800-322-4220
www.freedomgroup.com

Flexi
Shelton, Conn.
203-925-3040
www.flexi.com

Fulcrum InteTech
Napa, Calif.
707-224-7700
www.fulcrumit.com

GAAP Software, Inc.
Burtonsville, Md.
800-438-4227
www.gaapmga.com

Genelco Software Solutions
St. Louis, Mo.
800-983-8114
www.genelco.com

gotoPremiumFinance.com
Woodland Hills, Calif.
800-229-9822
www.gotopremiumfinance.com

IASA
Durham, N.C.
847-823-2868
www.iasa.org

Input 1, LLC
Woodland Hills, Calif.
800-229-9822
www.input1.com

Insight Decision Solutions
Markham, Ontario, Canada
905-475-3282
www.insightdecision.com

Princeton Financial Systems
Princeton, N.J.
609-987-2400
www.pfs.com

Perceptive Vision, Inc.
Shawnee, Kans.
800-941-7460
www.imagenow.com
SAP America, Inc.
Newtown Square, Pa.
610-661-1000
www.sap.com/insurance

SRC Software
Portland, Ore.
800-544-3477
www.srcsoftware.com

SunGard Insurance Systems
Roswell, Ga.
303-283-5452
www.sungardinsurance.com

Systems Union Inc.
Miami, Fla.
416-644-5544
www.sunsystems.com

Tata Consultancy Services
Naperville, Ill.
406-549-5600
www.tcs.com

Terrace
Oakland, Calif.
510-836-3400
www.terrace.com

United Systems & Software
Lake Mary, Fla.
800-522-8774
www.ussincorp.com

Xerox Global Services
Rochester, N.Y.
770-569-5668
www.xerox.com