The scheduled presenters are Edith Pula, an industry-models sales executive for North America in the Information Management section of IBM’s Software Group; and Oliver Koernig, an insurance-solution architect in the Software Group’s Industry Solutions section.

Their session, “IBM’s Insurance Industry Model And ACORD: An Update On Progress,” is scheduled for today at 12 noon.

The information model is key to the ACORD Framework, which also includes four other interrelated models. All are designed for use in developing data standards that are not dependent on insurers’ products, lines of business or geography.

The four interrelated models are:

• A business dictionary, which provides standardized definitions of insurance concepts—such as policy, product, party and claims—as well as synonyms, business-line specific usage and references.

• A capability model with process maps. This model identifies the baseline activities that insurers need to perform and includes a list of process maps for some of those capabilities. This model can be used in process engineering, evaluating mergers and divestitures, and analyzing business operations.

• A component model, which consists of a set of reusable components for various data services. The model, organized around the concepts that other models describe, can be used in rationalizing and designing an information-technology portfolio and as the basis in building or buying software.

• A data model, which includes creating data warehouses and validating a company’s own data models.

The information model, which has been developed with the help of several pieces of intellectual property that IBM has donated to the project, defines the relationships among all of the various insurance concepts.

The information model is critical in establishing clear lines of communication between insurance-company executives and technologists, Pula and Koernig explain. Executives want data tools that help them analyze how operations are performing and the interdependencies among operations. The technologists are responsible for providing those tools.

But understanding which information is necessary to build those tools “is where the transaction can break down” without the aid of the information model, Pula says.

A real-life example illustrates the issue, Pula says: Executives for a long-term-care insurer wanted their technologist to build an improved claims-processing tool. At the onset of the project, two claims processors described their duties for the technologist. One processor was far too detailed, and the other too vague, so neither was helpful. But the IBM models provided the technologist the right amount of detail to begin building the tool, Pula says.

Besides continuing to work with ACORD on the information model, IBM in the past year has been demonstrating to insurers how the company’s Industry Models for Insurance could help carriers’ improve operations and develop products. The models define nearly 300 assemblies of data in describing the information that is needed to analyze, among other areas, claims, new business, financial reporting, risk management, underwriting, pricing and operations.

For example, while many tools and applications are available to assist insurers in predicting claims and identifying fraud, they are ineffective without the appropriate data, Pula notes. But data repositories based on the IBM Industry Models for Insurance help define what information insurers need to use the advanced analytics.

Modeling also would allow insurers to improve their holistic understanding of policyholders, according to Pula and Koernig.

“Understanding a customer holistically has high value to an insurer,” Pula says.

For example, many insurers do not recognize when a policyholder has multiple coverages and what opportunities or risks that creates.

“If I'm creating a marketing campaign and I know that a ‘mere’ renter’s policyholder also owns two other homes, has children and owns two vehicles, I can offer that seemingly low-value customer a great cross-sell deal,” she says. “If I know that they are already a customer in my other lines, I can pass a valuable lead to the agent or broker to offer a full financial assessment to fill any insurance gaps.”

This base of knowledge also can work “conversely,” Pula says. “I could find out that I have too much exposure with a particular customer and take steps to mitigate it.”

It also could have claims-handling implications. “I have a better understanding of my entire relationship with that individual. I can identify conflicts of interest. I can service a claim with more comprehension of the claimant's total involvement with me and value to me. An insured who is also among my top-10 producing commercial general agents may warrant a different level of customer service,” Pula says.

For example, Pula recounts one insurer’s experience in cancelling the auto policy of the CEO for a major corporate client due to excessive claims. “There was no way that this individual's personal and commercial relationships were understood together,” she says.

“When the auto cancellation came, the CEO was so upset that he cancelled the commercial insurance. Understanding this could have prevented a rote transaction from becoming a major commercial loss or at least had given the carrier the chance to assess the potential damage beforehand and decide what action to take or how to mitigate the likely response.”