The term “Web services,” however, is a little misleading, as it refers to both the development tools used to build easily integrated Web-based applications and the underlying technology protocols and standards required to run and support these applications over the Internet.

“Web services” also refers to the resulting component applications that run on the Web. These self-contained modules can describe themselves (their functions and services) to one another and automatically link together without the traditional challenges involved in system integration.

However, running and connecting applications over the Internet is obviously not new, so how are Web services built to be a “better” mouse trap? And how can organizations avoid being financial casualties of misguided Web services projects?

Web services have already begun to creep into many organizations. IT departments have already begun working on Web services projects or have plans to begin. These organizations recognize the many benefits of jumping on the Web services bandwagon.

What should excite insurance organizations is how easy new applications will be to build, modify and integrate using Web services. IT departments will be able to snap together modular components or services like Lego blocks, allowing developers to build complex applications on the fly.

At one time, it would have taken a large number of IT professionals working a number of years to build an enterprise application. Today, Web services can conceivably cut this work down to weeks. The modular and shareable nature of Web services enables organizations to easily enhance the functionality of applications, leverage investments in legacy systems, and make additional system improvements.

Web services will also do away with the whole compatibility problem, as these services are interoperable, meaning they will work with other programs without special integration efforts. Interoperability is critical, especially as the “browser revolution” and “Internet as computer” concepts become realities. By adhering to established protocols and standards, Web services by their very design improve interoperability between diverse development platforms, such as J2EE and .NET.

The fundamental goal of interoperability is to eliminate the boundaries between various platforms and development environments. Developers won't have to worry about what language or operating system Web services are hosted on. Instead, interoperability allows them to all work together.

In addition, Web services provide several layers of cost efficiency. First, IT development and improvement initiatives will be more cost-effective. The addition of Web services allows for increased efficiency and streamlined workflow, significantly reducing administrative costs. With increased connectivity, insurance professionals have access to the information they need to improve decision-making at vital points of the insurance process, including underwriting, claims management, investigation, litigation and settlement. All these factors allow organizations to control their costs at multiple junctures.

Claims management and risk management involves the collaboration of many different parties, processes and technologies. In today's high-tech world, collaboration and connectivity are two sides of the same coin, and Web services help achieve both.

Web services provide a means for disparate systems to talk to each other, facilitating seamless transfer of information. Traditional methods of connecting point solutions via an interface can be cumbersome and time-consuming. Web services simplify these connections, acting as an inherent collaboration tool that vastly improves communication and compatibility of applications, while also enhancing cooperation between various entities.

To avoid squandering resources on misguided projects, insurance organizations should focus on designing a low-risk implementation plan by applying Web services to core business processes and objectives.

For instance, many carriers process a high volume of claims. Insurers are struggling to cut claims costs and improve processing efficiency. The claims process has traditionally been very disjointed, requiring input from various stakeholders. As such, any efficiency and connectivity gains achieved via Web services would greatly improve costs, collaboration and outcomes.

Web services allow organizations to integrate additional claims functions and capabilities into their current claims systems. For instance, an organization might utilize Web services to integrate applications that automatically validate claimant employment, connect to outside databases that check for potential fraud, estimate property damage, or set appropriate loss reserves.

Rather than relying on disparate systems, Web services bring together many applications in an interoperable environment. This allows organizations to more easily implement claims best-practices. For instance, they may easily incorporate an online injury-reporting module to enable prompt reporting of claims, a well-known best practice.

Going back to the initial question of whether or not Web Services is a better mouse trap, operating behind the scenes, Web services will be the “unseen” cheese in a new and more effective trap.

Traditionally, the insurance industry has had to share information by exchanging mountains of paper, performing labor-intensive data entry at multiple points of the insurance process, and relying on outdated legacy systems. With Web services, organizations will be able to update these systems to exchange data and services in ways that were previously not possible.

Web services will revolutionize traditional labor-intensive, manual processes, and enhance communication and the exchange of information, as well as speed up transaction processing. It is still relatively new, however, and its benefits and business uses are just beginning to be realized.

Randy Wheeler is founder and CEO of Valley Oak Systems Inc., a provider of claims administration and risk management systems, headquartered in San Ramon, Calif. He can be reached at [email protected].

Reproduced from National Underwriter Edition, June 18, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.