1. ACORD Standards
ACORD
March 2006

2. Industry Trends

3. Is it the same old Insurance industry?
Let’s look under the covers
Bar is being raised
Leaders are leading
Fears of being left behind
Talks of “leapfrog”
Technology as an enabler/hurdle
Web-services
BPM & STP
SOA and reusable components
Enterprise Architecture
Standards
Looking at the stats only… tunnel vision –
appears to be a typical recovery….
Same old insurance industry…we say no….
Here is what really is going on.
Competitive landscape
Changing demographics and customers demands
Spitzer…..
Smart legislation…TRIA renewal outstanding
Risk management – Sarbanese Oxley
And the readiness of technology has caught up.
Wesbservcices, SOA, reusable…
Carreirs are proving they can be sustain profitable growth….
Hearing Different conversations
Left behind
Leap frog
Leaders and laggers…. No more followers
Carriers – seeing carriers leveraging/deploying technology to sustain competitive advantage
From a vendor – seize the opportunity…carrier buying software
Carrier
Customers
Vendors
Competitors
Regulatory
Environmental
Economic
Source: Tower Group
Source: TowerGroup

4. Strategy: Run – Grow – Transform?
GROW (Strategic)
TRANSFORM
RUN (Tactical)
THESE ARE ENTERPRISE CROSS - SILO AND FUNCTIONAL ACTIVITIES
THESE ARE ENTERPRISE CROSS - FUNCTIONAL ACTIVITIES
THESE TEND TO BE SILO - BASED ACTIVITIES
Free up investment dollars
Improve business focus
New/quicker business models
Accelerate redesign efforts
Redefine relationships
Change capacity dynamics
Shorten or change the dynamics of life cycles
Resource availability
Reduce or control operating expense
Better capabilities
Create or enter new markets or renewed markets
Functions and tasks are managed
Enable shared risk/reward models
New business models
REACT
TRANSACT
ADAPT
Source: Gartner

5. Business Growth: Strategic Innovation and Transformation
Strategic Flexibility + Operational Adaptability Value Creation
New market demands
New regulatory demands
New customer demands
Exploit strategic opportunities
Sustainable profit and value
Exploit technology (standards, SOA, web services, etc)

6. Data as a Strategic Asset
Risk Data
Pricing
Underwriting
Risk Management
Customer Data
Behavior
Financials
Operational Data
Operational Efficiency
Enterprise Data Model Usage in US Insurance
Do not
need
12%
In Use Currently
25%
Do not have, but need one
32%
Under
Development
31%
Source: Celent’s 2004 US Insurance CIO/CTO Survey

7. “Straight Through Processing”
INPUT
OUTPUT
STEP A
STEP B
STEP C
DECISIONS
PROCESSING
ROUTING
Automation
Keys
Automated decisioning
Automated workflow
Integrated production systems
Integrated external data sources
Integrated internal data
Standards
Benefits
Reduce errors
Improve turn-around time (service imperative)
Improve consistency
Source: Celent

8. Frictionless Communication
Critical element in ease of doing business for insureds and distributors
Key differentiator
Explosive growth of agent portals over last five years
Growth of data standards
Agent/ Broker
Agent/ Broker
Insured
Primary
Insurer
Reinsurer
Claims Service Provider
Requirements
Vendor
Source: Celent

9. Competitive Advantage Via Technology
Service
Risk Mgt.
Efficiency
Frictionless
Communication
Straight Through Processing
Data As A Strategic Asset
Source: Celent

10. Enterprise Architecture: Best Practices
Bridging silos into shared services
Enterprise Architecture
Services D E P O S I T C R A Y M N H I G T E C N O L Y D A T
A P P L I C A T I O N S T A N D R
Traditional Apps
Shared Apps
Common Apps
Bridging the gap between what is perceived to be two disparate institutions
At the end of the day it’s all about the customers and your members needs.
Unique Apps
Guiding Principles
Source: TowerGroup

11. Architectures Break Silo Boundaries
Determine the value of people, process, data and technology
Make IT investment strategic and more responsive
Business
Application
Data
Infrastructure
Outline
the
important
business
functions and
processes
Map the
relationships of
software
applications to
each other
Detail where the
data and
information is
kept and how it
is used
Diagram the
hardware and
networks to
support the
START HERE
Source: TowerGroup

12. Impact of Legacy Systems
Legacy System Effects
67%
Slows new product introduction
78%
Too difficult to integrate with new
56%
systems
67%
33%
Unacceptably high maintenance costs
78%
Inhibits data mastery/business
44%
intelligence
67%
39%
Prohibits workflow improvements
67%
22%
No negative effects
22%
Large
Midsize
Source: Celent 2004 CIO Survey

13. Industry approaches to change
Companies often err by taking a systems-focused approach to solving process problems
Companies tend to look first at what legacy systems they need to modify, update, or replace, but that is a very vertical, siloed focus
vs.
Looking at the problem in terms of what needs to be fixed in the process
It’s all part of not just having process-savvy systems but being a truly process-savvy organization

14. Future Business Perspective: Efficiency & Effectiveness
ACCESS
View of data and control of process
Reduced
Complexity
Better
Decisioning
ENABLING
INFRASTRUCTURE
PROCESS
Once & done data entry
STP & Exception Processing
Predictive Analytics execution
SERVICES
Robust rules engine
Robust workflow/process manager
Smart Forms
DATA
Operational Data
Analytic Data
Third Party Data
Source: TowerGroup

15. Open access to core technology assets
Insurance Value Chain of: Reusable Assets, Services, Process & Data - SOA
STP
ACCESS
DATA
Open access to core technology assets
ENABLING
INFRASTRUCTURE
(interoperability)
Simplistic view insurance value chain as access, process, services, and data - pipes to connect one to the next
Running in pipes are rules, data, and content
Shared and accessed throughout the enterprise – internal & external – sounds simple – my vendor clients would be out of business!
Fundamental:
Data stores are open
Messaging protocols follow standards
Business processes have common engines
Portals offer easy access
Technology is available to drive this effort
Complications of “choke points” – breakdown or backlog of activities – most often it’s either – process, content, or data
Portals, Dashboards
Open & flexible data stores
-data standards-
Role-based view of information and data
Standard messaging protocol
Business Process Mgmt., Content Mgmt., Rating, Analytics, Rules engine
Business components and rules
Reusable services and information access
STP
WORKFLOW
MANAGER
SERVICES
PROCESS
Exhibit #: E1
Source: TowerGroup

16. Current Model of Insurance Underwriting (Simplified View)
Risk Evaluation
Third-
Party
Data
Marketing
Legacy
Analytics
Pricing System
Business Intelligence
Product Development
Legacy
Closed Claim Review
Product Development
Legacy
Policy Admin
System
Product
Creation
Rating Engine
Rating Engine
Policy Admin
System
Policy Admin
System
Policy Admin
System
Third- Party Data
Underwriting
System
Policy Admin
System
Policy Admin
System
Contact
Center
Quote – Rating/Pricing
Policy Admin
Operational Functional Ad Hoc
Source: TowerGroup

17. Future Model of Underwriting Technical Components (Simplified View)
Underwriting Desktop View
Data
Capture
Customer
View
Transaction
View
Exception
View
Portfolio
View
Performance
Scorecards
Market
View
Process Managers
Enterprise Content Management
Business
Trans.
Workflow
Manager
Event
Manager
Process
Manager
Document
Management
Records
Content
Engines and Tools
Product
Configure
Rating
Engine
Business
Rules
Analytics
Data
Integration BI
Tools
Data Layer
Transaction
Legacy
Financial
Data Mines
& Marts
Warehouse
CRM
External
Source: TowerGroup

18. Assessing and Improving Legacy Systems
Addressing the legacy system
Replace?
Re-platform?
Componentize?
Consolidate?
Extend or Wrap?
BPM
Legacy
system
Standardizing data and processes across legacy systems
Rules management?
Data standardization?
Web services?
Enterprise architecture?
Legacy
system
Legacy
system
Standards
Legacy
system
Insurers must take an active role in assessing the legacy system against current and future business requirements.
Each legacy system should be evaluated independently. Based upon its age, source (in-house or vendor-created), size (can it support rating, claims, etc.?), reliability, cost (especially for maintenance), and flexibility for change. The system should then be compared with the corporate enterprise architecture to ensure architectural compliance. Only then can you make a decision regarding the longevity of the system and whether it should be replaced, extended, re-architected, or componentized. Whatever the outcome, you must be sure the system can support business change and be cost efficient to run and maintain. Systems should be consolidated, as appropriate.
Second, enterprise legacy issues should be assessed. Insurers should begin to assess systems management and standardize process and rules across the legacy network. Tools such as Web Services and XML can help leverage legacy system information throughout the enterprise.
Recommendation: Look for flexibility, agility, scalability, efficiency, compatible, standardized and open. Ensure that systems can meet future business requirements.
Source: Gartner

19. Distribution: Enablement Strategic CRM View
Source: Tower Group

20. Distribution: Multi-channel support
Insurers will need to support data interchange with multiple counter-parties
Standard messaging and data formats can reduce burden of custom integration for multiple user interfaces/client systems.
XML Engine
Distributed Transaction Engine
Core System
Agent Extranet
Agency Management Systems
Shared Services
Source: Celent

21. Economic Policymaking
ACORD and XBRL – Interoperability for the corporate reporting supply chain
ACORD
XBRL
Ledger
XBRL
External Reporting
Business
Operations
Internal
Financial
Reporting
External
Financial
Reporting
Investment,
Lending,
Regulation
Economic Policymaking
Processes
Participants
Auditors
Trading
Partners
Investors
Financial
Publishers
and Data
Aggregators
Regulators
Software Vendors
Management
Accountants
Companies
Central
Banks

22. Initiatives Cited As High-Priority For 2005
13%
25%
38%
24%
12%
29%
18% 6%
35%
Point claims solutions
Wireless for sales or other
Transactional agent portal
VRU
Data integration hub
Business rules engine (BRE)
Voice over IP
Voice/data/video convergence
Policy administration system
Underwriting system
Disbursement/payments
Commission mgmt/EIM
Business process management (BPM)
Document/content management
Network security
Web services/service-oriented architectures
E-Billing
Sarbanes-Oxley compliance
Informational agent portal
Interface with agency management systems
Transactional policyholder portal
Contact center mgmt.
Imaging
Single sign-on
HIPAA compliance
ACORD XML
Business intelligence/reporting
security
Electronic signature
L/H
P/C
Red indicates Initiatives Using ACORD Standards

23. Web Services and SOA: Best Practice for Innovation
Source: Insurance CIO/CTO Pressures, Priorities, Projects, and Plans: 2004 Survey Results (Jan 2005)

24. Web Services and SOA: ACORD Standards as the Enabler
Services Are Based On ACORD XML
100%
80%
60%
40%
60%
46%
20%
40%
25% 0%
Large L/H
Midsize L/H
Large P/C
Midsize P/C
Source: Insurance CIO/CTO Pressures, Priorities, Projects, and Plans: 2004 Survey Results (Jan 2005)

25. ACORD Strategy

26. Business Adaptability, Flexibility and Agility
Market
Direction
Corporate
Strategy
Measurement
And Control
Data and Info
Management
Technology
Work Processes
Activities
Tech and App Architecture
Functionality
Embedded Culture
Target Business Scenario
Transformational Tools and Infrastructure
Common Vision
Functional Silos
Operations
Administration
Macro Cross-Functional Process
Change Management
Human Capital
Comp and Review
ACORD Standards
Enable the Adaptability
Doing Work
Supporting Work
Source: Meta Group (now Gartner)

27. Why Standards? Business Issues Proving ROI
Analysts: Celent: $250 million savings per org
Not a Single Quarter Investment
Initially more expensive/time consuming
Ever-decreasing
Incremental Cost
Higher Initial Cost
STANDARDS
Ever-increasing cost
Custom Interfaces
Initial Lower Cost

28. Type of ROI Produced from XML Initiatives at YE03
Percentage of Insurers BY ROI Derived from XML Projects
Source: Gartner
Source: Gartner, April 2004, EMEA Mar 2004

29. Case Study: Manulife Canada Has Used ACORD
Agent desktop integration (1999)
In-force agent policy feeds (2000)
Commission feeds (2001)
Administration system consolidation (2004)
Web Policy Inquiry (2005)

30. Canada: New Business New Business System Financial Planning
Sales Illustration
Electronic Application
ACORD OLifE
Agent Contact Management System
Admin System

31. Japan: New Business Upload
New Universal Life product introduction (ManuFlex)
Very tight schedule
Used two [competing] North American packaged solutions:
Illustration and application system (Navisys)
Life Administration system (Ingenium)
Used ACORD XML as the integration standard
ACORD XML helped us
Reduce the time taken to write interface specifications
Reduce the effort required to get the packages to work together

32. B2B Challenges in China Large number of trading partners
100,000 retail banking branches, 50,000 post saving offices, 50,000 travel agencies, 1,5000 insurance agencies and brokers
High performance required for large volume real time straight through processing (STP) transaction
For instance, ICBC demands for 15,000 transactions per day and maximum request response time must be less than 5 seconds
Various integration requirements
Various networking connections, communication protocols, business protocols, data standards
Full scope of insurance business processes
New business submission, customer information inquiry, policy administration, financial account changes, etc
Legacy system integration
Policy administration, commission management, financial systems, etc
Fast response to market dynamics

33. ACORD Standards in Actions – Pacific Life
Air
Ticketing
Center
Pacific
Life
E-Distribution
Management
System
Policy
Administration
System
Travel
Agency
Internet
Post
Saving
Offices
Commission
Management
Customer
Information
File
Captive
Agents
25,000 captive agents
3,500 travel agencies
500 post saving offices
Pacific Life

34. ACORD Standards: Best Practice ROI
External
Percent Savings
Add one Distribution Channel
20%
Add one Business Partner or Service Provider
50%
Setup one new Distributor
60%
Do not setup a proprietary Interface – rather use ACORD standard message interface
100%
License and appoint one agent
Add one external interface
30%
Internal
Submit and quote one policy
Underwrite one policy
Process one claim
Perform one policy service transaction
Reinsure one policy
Add one internal system interface
Do not add one data dictionary/data model used internally
Conversion of M&A with standards based systems
Compliance violation
Varies
Data Transparency and SOX compliance

35. $ ACORD Standards Framework Expansion Strategic Business Value
Future: Standards for SOA, Web Services and Best Practice Metrics
Use of Industry
Standard Process
Models and
Business Service
Definitions
Strategic Business Value
ACORD XML (P&C, Life, Reinsurance)
Use of Standard
Messages
ACORD Forms
Use of Industry
Standard
forms
ACORD Data Dictionary and Models
Use Standardized
data $
Level of Industry Standards Adoption

36. Business and IT Strategy: Four Pillars of Focus
Business Strategy
Data
Business Applications and Components
Business Process Strategy
Application Integration Strategy
Infrastructure
Strategy
Data Strategy PM
IT Strategy

37. Current ACORD Standards
Life & Annuity
Life
Annuities
Health
Group Lines
Reinsurance
Global
Property & Casualty
Personal Lines
Commercial Lines
Surety
Global
Reinsurance
P&C Reinsurance
Large Commercial Lines
Global
EDI
XML
Forms
Data Model
EDI
XML
Forms
Data Model
XML
Forms
Cross Program Standards
DRI Standard (Document Repository Interoperability)
SOAP Framework

39. Current Challenges Inconsistent deliverables Lack of deliverables
Impacts enterprise implementations
Duplicate support
Impacts interoperability, transparency and consistency
Impacts ability to effectively work with other standards
Lack of core components to work with UN/CEFACT, SWIFT and ISO
Multiple dictionaries
Lack of deliverables
Single business dictionary
Data model for PCS
Common business messages

40. ACORD Standards Framework

41. ACORD Industry Standards Framework expanding to support insurance industry needs
Cross Domain Process Standards
Provides the Business Context or a list of standard business processes
Underwriting
Claims
Channel Management
Product Portfolio Mgmt
Inventory of ACORD Process Service Definitions
Provides the Business Services performed and process inputs and outputs
Supported by a Common Data Architecture comprised of:
Business Term Dictionary
Contextual Data Model =
Listing and definition
Of things that are important
to the business.
User = Business Strategy
Conceptual Data Model
A Semantic Model =
Entity = Business Entity
Relationship = Business
Relationship.
User = Business Owner
Logical Data Model
A System Data Model =
Entity = Data Entity Relationship = Data Relationship.
User = System Designer
Technology Layer supported by XML Messaging and Forms Standards
By separating the technology layer, investments in standards stand the test of time as you swap out the technology but not the standard
Life & Annuity
XML/EDI/Forms
P&C/Surety
RLC
XML/Forms
Plans/Scope not yet defined

42. ACORD Standards: Enable Transformation and Interoperability

43. Enterprise Architecture - Examples
ManuLife
MetLife
NYLife
Allianz - Fireman’s Fund
St Paul Travelers
The Hartford
Swiss Re
XL Re
Aon
Alea

44. Case Study: Fireman’s Fund
SOA Architecture
Turn mainframe apps into set of networked services with real-time transactions to provide:
Standard way for over 3,000 independent agents to interact with them
Modernize the IT infrastructure to be more manageable, flexible and adaptable
Creates Straight through processing (STP) and Single entry multiple company interface (SEMCI)
Functions of multiple legacy policy admin and billing systems into reuseable components using ACORD standards
Create new apps with these components

45. Case Study: MIB – Medical Information Bureau
Web Services Architecture Solution
Convert all legacy systems to web services using ACORD standards
Eliminates batch processing and provides real-time STP
Reduces time for carriers in the issue process
Reduces costs

46. How Manulife Canada Has Used ACORD
Agent desktop integration (1999)
In-force agent policy feeds (2000)
Commission feeds (2001)
Administration system consolidation (2004)
Web Policy Inquiry (2005)

47. ACORD Membership: Leading the Industry
P&C
Forms
1980’s
AL3 (ACORD’s P&C EDI standard)
1998
XML for
L&A and P&C
Life Reinsurance
2001
P&C Reinsurance EDI & XML
L & A Forms
Fillable Forms
1990’s
AL3
Implementation
1996
Life & Annuity
Standards
2005 +
Business Process Services
PCS V2

48. ACORD Member Best Practices
Business and IT strategy to include ACORD standards as core component
ACORD standards as part of IT operating and project management principles
Oversight executive committee actively promote adoption, participation and involvement
Establishment of Standards Officer in the organization
RFI and RFP should include ACORD standards requirements
Solution provider contracts require ACORD standards
Incorporate ACORD standards as part of SLA’s with outsourcers and shared services
Incorporate ACORD standards in data warehouse and enterprise architecture
Trading Partner and third party agreements should include ACORD standards as part of agreement

49. Industry Analyst View
“Maximizing the use of standards is how grown-up organizations operate.” — Marc Cecere, Forrester
“Standards are crucial to enable real-time transactions with internal and external users.”  — Kimberly Harris-Ferrante, Gartner
“Use of ACORD Standards is central to establishing an overall enterprise architecture.” — Deborah M. Smallwood, TowerGroup
“Web services using data standards will have an advantage.” — John Flynn, Gartner
"ACORD Standards are a key tool for insurers to improve their business capabilities" — Matt Josefowicz, Celent
“Without data standards like ACORD, industry improvement efforts will fail.” — Todd Eyler, Gartner

50. ACORD Standards Cartoon

51. World Headquarters: London office: Two Blue Hill Plaza 3rd Floor
Pearl River, NY USA
London office:
LUC - Suite 2/5
3 Minster Court
Mincing Lane
London EC3R 7DD UK
SLIDE 51