Stretching out: global data standards are slashing tech costs and allowing insurers and reinsurers to communicate with global business partners in a common language.

Many insurers and reinsurers say it's hard to remember what life was like before data standards. For Manulife Financial, use of various global standards across its technologies to communicate with agents, brokers and business partners has meant not only that it doesn't have to "reinvent the wheel" ha developing standards that already exist, but also that software integration costs have been significantly lowered.

"And faster software package integration equals faster time to market," said Guy Mills, associate vice president of Manulife Japan.

Manulife is one of many insurers that rely on different global data standards, or a set of rules or guidelines, to provide a common framework for communication. And as more carriers expand operations overseas, global standards are breaking down walls to allow companies to enter untapped markets and communicate with new trading partners.

In the Beginning

Although data standards have been around for some time, the demand for a common framework to store, consolidate and transmit data is driving the development of several new standards each year.

Nearly 35 years ago, the Association for Cooperative Operations Research and Development, one of the most widely known standards bodies for the insurance, reinsurance and related financial-services industries, recognized agents' and carriers' need for an easier and uniform data storage and transmission process. In addition, carriers were looking for uniform standard forms to meet the requirements of industry and government regulators. ACORD's impetus for developing and maintaining standards began with the property/casualty industry through a relationship with the Independent Insurance Agents of California. "Because independent agents had to deal with different forms from the companies with whom they conducted business, ACORD was formed to address the issue of standardizing those forms across the industry," said Denise Garth, vice president of member services. "Instead of an industry having to deal with tens of thousands of proprietary forms as in the past, we've been able to narrow that down to around 530 standard forms."

Over the past two decades, the move to an electronic data interchange with batch, store and forward workflow; growth of the Internet, and the increasing popularity of extensible markup language all heightened the need for data standards. While ACORD's standards were first designed exclusively to move information between independent agents and insurers, they later evolved into other areas, such as linking policy administration systems, management systems, claims and rating systems.

ACORD has partnered with other worldwide standards bodies and industry associations throughout the years to collaboratively provide and maintain standards across the industry. For instance, its collaboration with the Canadian Life Insurance EDI Standards allows both organizations to jointly develop, promote and implement global life insurance standards in Canada. ACORD's move to bring reinsurance into its portfolio of standards came in 2001 through a merger with WISe, an industry-owned organization that developed and promoted e-commerce for the global insurance community. Today ACORD develops and maintains data standards for the life and annuity, property/casualty and reinsurance segments.

Circling the Globe

One of the biggest benefits of global standards is the opportunity for companies to communicate more easily with worldwide operations and business partners in a uniform framework.

ACORD's recently introduced data standard that was developed to make it simpler for the surplus lines market in the United States to exchange policy information with London underwriters is one example of how global insurers benefit from platform-neutral foundations for data exchange. ACORD, which collaboratively developed the standard with the National Association of Professional Surplus Lines Offices Ltd. and several other groups, anticipates the standard will speed up the way nonadmitted business is handled in London. In addition, it will allow risk managers, brokers and carriers to seamlessly provide their data to one another, while also preventing the re-keying of the same data each time it passes through each of these points on the insurance value chain, said Phil Brown, standards manager for ACORD.

"It all comes down to doing business easier," said Alan Stitzer, assistant vice president of Marsh's Global Technology Services. "Global standards open doorways to new markets without having to reinvent the wheel, making it more efficient to conduct business on a worldwide basis."

Many overseas companies are also experiencing this value first hand. "Because many London companies normally have multiple offices worldwide, with the parent companies often located outside of London, global standards help them communicate with colleagues and clients in a common language," said David Matcham, director of operations for the International Underwriting Association of London, an association for international and wholesale insurers and reinsurers.

Worldwide reliance on the Internet is also spearheading a global communication network while diminishing national borders. EMarketer, which provides research and analysis on the Internet, e-business and emerging technologies, anticipates that Internet usage in Europe has recently surpassed North America's usage, and by next year, Asia will surpass North America as well.

Global standards also enhance internal activities to help companies move into a global data environment, said Robert Wiest, head of Swiss Re Business Group Property & Casualty's e-solutions. "Most major companies' top management want global information, but there are a lot of local requirements to deal with. So it" you want to have sound reporting within a company, you must have constant discussions about how much concession needs to be made for local units and how many of management's requirements must be imposed on a global effort, and ACORD standards help also to speed up those internal discussions"

The growing globalization of U.S. and Canadian companies, and the merger with WISe, influenced ACORD's decision to go global with its standards. "The standards are very much the same with some variation, such as taxation or regulatory ... it differs in different economies and product structures, and many products are just slight variations of each other between different countries," said ACORD's Garth. Needing only a few additions to accommodate regional differences and support cross-border trading allows companies to have a standard they can use internally regardless of which location they're operating from, she added. ACORD's global reach extends into a number of markets, with heavy concentration in North America, London, Europe, Asia, South Africa and Australia.

Growing reliance on XML across the industry is spurring growth of ACORD's XML global standards. The standards allow insurers to communicate data across borders and to combine data and content for potentially delivering correct, consistent information. ACORD's XML standards address the real-time requirement by defining business transactions to support the life and annuity, reinsurance and property/casualty lines. XML is a standard computer language that allows users to create tags for each piece of information.

Why Standards?

Standards increase process efficiency and data quality, said Swiss Re's Wiest.

Standards translate into a smoother information hand-over in general, Wiest said. Fewer media interruptions in transferring information allow for improved data quality, and the possibility of errors also diminishes because re-keying of information is greatly eliminated. "And while increased data quality alone doesn't help very much in pushing a business forward, it definitely is the basis for a better steering of the company, including people, capital and--at the end--the entire company" he said.

Global reinsurance e-commerce standards have been a big part of CNA Re's operations since 1998. The company was the first U.S. reinsurer to adopt such standards and implement them in a paperless environment. "CNA Re initiated the implementation of reinsurance e-commerce standards to enhance the speed, quality and compatibility of data exchange between reinsurers, brokers and cedent companies," Bill Adamson, chief executive officer, said in a case study posted on ACORD's Web site (www.acord.org). Within one year, CNA Re converted its systems and began paperless transactions using the standards. The current ACORD Standards for Reinsurance resulted from a joint venture started in 1992 with European, U.K. and U.S. standard bodies. ACORD assumed responsibility for management of the standards in 2001 when it took over the operations of WISe.

Manulife's reasons to move to global data standards were three-fold. "In some cases we decided to use ACORD standards instead of inventing our own standards; in some situations we specifically promoted the use of standards because we believe some of our distribution partners-independent agents, for example-want this; and in other cases the marketplace basically requires the use of a specific standard, such as The Depository Trust and Clearing Corp. in the United States and FundSERV in Canada," said Mills. Manulife currently uses local EDI standards particularly for mutual-fund and banking transactions and ACORD XML standards in Canada, the United States and Japan.

Manulife commonly takes technologies from one operating region and reuses them at another. For instance, success with a particular life insurance administration system in one jurisdiction often leads to a similar project when the same product type is launched in another jurisdiction, said Mills. "ACORD standards in particular allow us to integrate packaged solutions more easily, allowing us to integrate imported solutions with domestic solutions." Mills also believes insurance vertical software vendors have been successful and profitable as a result. "Global standards help create a larger market for these vendors and gain some scale. Insurance software vendors have typically been small 'xenophobic' enterprises."

Standards are not only increasing efficiency and speeding up information flow but help reduce Manulife's information technology costs. "We're able to 'connect up' with new distributors, and standard interfaces decrease the time it takes to set up trade electronically with a new partner," said Mills.

Overseas markets am finding Similar value. "Many companies and clients currently don't come to London because standards and processes aren't standardized and are written specifically for London, but if we use global standards, there's a greater likelihood that brokers will move business or operations here because of similar platforms they are already using," said Matcham of the International Underwriting Association of London.

Brokers and underwriters, for example, who have daily interaction with multiple parties throughout the transaction process are finding standardizing data elements enables the industry to drive costs out of the equation, said Stephen Wyckoff, managing director of Global Broking for Marsh. "Standards are not only beneficial economically for our clients but also in terms of responsiveness, timeliness and data accuracy," he said. Marsh recently completed a pilot program with three middle-market property/casualty carriers transmitting exposure schedules directly from Marsh's system to carriers' systems through the use of ACORD XML data standards.

For some, implementing standards around existing legacy systems can cause problems, but most carriers continue to enthusiastically embrace the framework for a common language, said Isabella Stengele, vice president in Marsh's Global Technology Services.

In addition, insurers' increasing recognition of the value data plays in their overall company functionality will drive growth of standards. "During the last three to five years, the insurance industry has finally begun to understand that technology is really an enabler. However, it's ultimately about the data and having good quality data that you have a common view on so that you can share both internally and externally to make good business decisions," said ACORD's Garth, noting data is the "blood" of the whole system.

Onward Bound

Insurers and industry groups continue to propose new global industry standard ideas that go beyond proprietary systems.

"Interest in standards continues to grow, mad it's preferable not to write your own standard when there's one out there that everyone can understand:' said Matcham of the International Underwriting Association of London,

"Thirty years ago who would have thought the fiercely competitive securities industry would have to come together and collaborate--something they eventually benefitted from. Now we as an industry have to find those similar opportunities, and standards are one of those opportunities because they're not something we should compete on," said ACORD's Garth.

A rebound in the U.S. economy will likely spark greater interest in data standardization. "We've seen this before in previous cycles, such as the high-interest-rate boom of the early '80s and era spurts of new products," said Garth. "Over the next couple of years, we'll likely see companies step back and ask what they strategically have to do to compete on a going-forward basis." Cost efficiencies and having standards in place will open the doors for them to do just that so they can use new business models and new trading partners, and consider outsourcers and shared services, she added.

A Look at Standards

The Association for Cooperative Operations Research mad Development, a global, nonprofit insurance association, offers and facilitates a variety of global data standards in the life and annuity, property/casualty mad reinsurance areas. The following is a look at some of ACORD's standards:

ACORD Forms--standardized forms for the property/casualty and life and annuity insurance industries.

AL3 (property/casualty)--electronic data interchange standards used by more than 80,000 agency-company pairs that focus on data exchange between property/casualty insurers, agents and other trading partners.

ACORD Standards for Reinsurance (for both property/casualty mad life reinsurance)--designed to provide seamless transfer of information among insurers, reinsurance brokers and reinsurers. The standards are developed for all parts of the reinsurance business cycle, from placement to accounting, claims and settlement.

ACORD XML for Property/Casualty Insurance--created in extensible markup language to address real-time requirements by defining property/casualty

transactions that include both request and response messages for personal lines, specialty lines, surety, commercial lines, claims and accounting transactions.

ACORD XML for Life and Annuity Insurance--similar to the XML standard for the property/casualty sector, fills standard supports the life, annuity and health businesses and is based on the ACORD Life Data Model.

Life Data Model--defines the data life, annuity and health insurance industries need to communicate, giving users the benefits of reusability, consistency, expandability and interoperability.

OLifE/JLife--defines the middleware pieces needed to allow applications in a life insurance system to share data that is common between them. The implementation of the Life Data Model is in the Microsoft COM Architecture and the JLife Standard is the Java implementation.