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ACORD 2005. ACORD Standards ACORD March 2006. SLIDE 2 Industry Trends.

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Presentation on theme: "ACORD 2005. ACORD Standards ACORD March 2006. SLIDE 2 Industry Trends."— Presentation transcript:

1 ACORD ACORD Standards ACORD March 2006

2 SLIDE 2 Industry Trends

3 SLIDE 3 Is it the same old Insurance industry? Carrier Customers Vendors Competitors Regulatory Environmental Economic Lets 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 Source: TowerGroup

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

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

7 SLIDE 7 Straight Through Processing 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 INPUTOUTPUT STEP A STEP B STEP C DECISIONS PROCESSING ROUTING DECISIONS PROCESSING ROUTING Automation Source: Celent

8 SLIDE 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 Primary Insurer ReinsurerInsured Agent/ Broker Requirements Vendor Claims Service Provider Source: Celent

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

10 SLIDE 10 Enterprise Architecture: Best Practices Bridging silos into shared services DEPOSITDEPOSIT CREDITCREDIT PAYMENTPAYMENT Traditional Apps Shared Apps Common Apps Services HIGHHIGH TECHNOLOGYTECHNOLOGY APPLICATIONAPPLICATION DATADATA Guiding Principles Unique Apps Enterprise Architecture STANDARDSSTANDARDS Source: TowerGroup

11 SLIDE 11 Architectures Break Silo Boundaries Determine the value of people, process, data and technology Make IT investment strategic and more responsive Source: TowerGroup START HERE

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

13 SLIDE 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 Its all part of not just having process-savvy systems but being a truly process-savvy organization

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

15 SLIDE 15 Insurance Value Chain of: Reusable Assets, Services, Process & Data - SOA SERVICES PROCESS ACCESS DATA Role-based view of information and data Open access to core technology assets Reusable services and information access Business components and rules ENABLING INFRASTRUCTURE (interoperability) Business Process Mgmt., Content Mgmt., Rating, Analytics, Rules engine Open & flexible data stores -data standards- Standard messaging protocol Portals, Dashboards Exhibit #: E1 Source: TowerGroup STP WORKFLOW MANAGER STP

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

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

18 SLIDE 18 Legacy system Addressing the legacy system Replace? Re-platform? Componentize? Consolidate? Extend or Wrap? Assessing and Improving Legacy Systems Standardizing data and processes across legacy systems Rules management? Data standardization? Web services? Enterprise architecture? Legacy system Legacy system Legacy system BPM Standards Recommendation: Look for flexibility, agility, scalability, efficiency, compatible, standardized and open. Ensure that systems can meet future business requirements. Source: Gartner

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

20 SLIDE 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 SLIDE 21 ACORD and XBRL – Interoperability for the corporate reporting supply chain External Financia l Reportin g Business Operations Internal Financi al Reporti ng Investme nt, Lending, Regulatio n Processes Economic Policymak ing Participants Auditors Trading Partners Investors Financial Publishers and Data Aggregators Regulators Software Vendors Management Accountants Companies Central Banks XBRL Ledger XBRL External Reporting ACORD

22 SLIDE 22 Red indicates Initiatives Using ACORD Standards

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

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

25 SLIDE 25 ACORD Strategy

26 SLIDE 26 Business Adaptability, Flexibility and Agility Doing WorkSupporting Work Market Direction Corporate Strategy Corporate 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 Source: Meta Group (now Gartner)

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

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

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

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

34 SLIDE 34 ACORD Standards: Best Practice ROI External Percent Savings Add one Distribution Channel20% Add one Business Partner or Service Provider50% Setup one new Distributor60% Do not setup a proprietary Interface – rather use ACORD standard message interface 100% License and appoint one agent60% Add one external interface30% Internal Submit and quote one policy20% Underwrite one policy20% Process one claim20% Perform one policy service transaction20% Reinsure one policy20% Add one internal system interface30% Do not add one data dictionary/data model used internally50% Conversion of M&A with standards based systems30% Compliance violationVaries Data Transparency and SOX complianceVaries

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

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

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

38 SLIDE 38

39 SLIDE 39 Current Challenges Inconsistent 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 SLIDE 40 ACORD Standards Framework

41 SLIDE 41 ACORD Industry Standards Framework expanding to support insurance industry needs Cross Domain Process Standards Inventory of ACORD Process Service Definitions Supported by a Common Data Architecture comprised of: UnderwritingClaimsChannel ManagementProduct Portfolio Mgmt Provides the Business Context or a list of standard business processes Provides the Business Services performed and process inputs and outputs 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 Life & Annuity XML/EDI/Forms Life & Annuity XML/EDI/Forms P&C/Surety XML/EDI/Forms P&C/Surety XML/EDI/Forms RLC XML/Forms RLC XML/Forms By separating the technology layer, investments in standards stand the test of time as you swap out the technology but not the standard Plans/Scope not yet defined

42 SLIDE 42 ACORD Standards: Enable Transformation and Interoperability

43 SLIDE 43 Enterprise Architecture - Examples ManuLife MetLife NYLife Allianz - Firemans Fund St Paul Travelers The Hartford Swiss Re XL Re Aon Alea

44 SLIDE 44 Case Study: Firemans 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 SLIDE 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 SLIDE 46 Agent desktop integration (1999) In-force agent policy feeds (2000) Commission feeds (2001) Administration system consolidation (2004) Web Policy Inquiry (2005) How Manulife Canada Has Used ACORD

47 ACORD Membership: Leading the Industry 1970s P&C Forms 1980s AL3 (ACORDs 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 1990s AL3 Implementation 1996 Life & Annuity Standards Business Process Services PCS V2

48 SLIDE 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 SLAs 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 SLIDE 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 SLIDE 50 ACORD Standards Cartoon

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

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