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ACORD Standards

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  1. ACORD Standards ACORD March 2006

  2. Industry Trends

  3. Environmental Customers Economic Carrier Vendors Competitors Regulatory 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 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 • Financials • 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. 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 STEP A STEP B STEP C DECISIONS PROCESSING ROUTING DECISIONS PROCESSING ROUTING INPUT OUTPUT Automation “Straight Through Processing” Source: Celent

  8. 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 Frictionless Communication Agent/Broker Agent/Broker Insured Primary Insurer Reinsurer ClaimsService Provider Requirements Vendor Source: Celent

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

  10. D E P O S I T C R E D I T P A Y M E N T • T • E • C • H • N • O • L • O • G • Y Common Apps Shared Apps H I G H Traditional Apps Enterprise Architecture: Best Practices Bridging silos into shared services Enterprise Architecture Services APPLICATION D A T A S T A N D A R D S Unique Apps Guiding Principles Source: TowerGroup

  11. Business Application Data Infrastructure Outline the Map the Detail where the Diagram the important relationships of data and hardware and business software information is networks to functions and applications to kept and how it support the processes each other is used business Architectures Break Silo Boundaries Determine the value of people, process, data and technology Make IT investment strategic and more responsive 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% 67% systems 33% Unacceptably high maintenance costs 78% Inhibits data mastery/business 44% 67% intelligence 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. DATA PROCESS SERVICES Operational Data Analytic Data Third Party Data Once & done data entry STP & Exception Processing Predictive Analytics execution Robust rules engine Robust workflow/process manager Smart Forms Future Business Perspective: Efficiency & Effectiveness ACCESS View of data and control of process Reduced Complexity Better Decisioning ENABLING INFRASTRUCTURE Source: TowerGroup

  15. Open & flexible data stores -data standards- Standard messaging protocol Insurance Value Chain of:Reusable Assets, Services, Process & Data - SOA STP ACCESS DATA Open access to core technology assets ENABLING INFRASTRUCTURE (interoperability) Portals, Dashboards Role-based view of information and data 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 RatingEngine RatingEngine Product Creation Policy Admin System Policy Admin System Policy Admin System Third-PartyData Underwriting System Policy Admin System Policy Admin System Contact Center Quote – Rating/Pricing Policy Admin Operational Functional Ad Hoc Source: TowerGroup

  17. Document Management Records Management Content Management Product Configure Rating Engine Business Rules Engine Analytics Engine Data Integration BI Tools 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 Engines and 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 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. Core System Core System Core System Core System XML Engine XML Engine XML Engine XML Engine Distributed Transaction Engine Agent Extranet Agency Management Systems Shared Services 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. Source: Celent

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

  22. Initiatives Cited As High-Priority For 2005 25% 24% Electronic signature 25% 18% Email security 25% 18% Business intelligence/reporting 13% 29% ACORD XML 38% HIPAA compliance 25% 12% Single sign-on 25% 12% Imaging 25% 12% Contact center mgmt. 25% 12% Transactional policyholder portal 12% 25% Interface with agency management systems 25% 12% Informational agent portal 13% 24% Sarbanes-Oxley compliance 35% E-Billing 25% 6% Web services/service-oriented architectures 13% 18% Network security 13% 18% Document/content management 13% 18% Business process management (BPM) 13% 18% Commission mgmt/EIM 13% 18% Disbursement/payments 13% 18% Underwriting system 13% 18% Policy administration system 29% Voice/data/video convergence 29% Voice over IP 13% 12% Business rules engine (BRE) 13% 12% Data integration hub 13% 12% VRU 13% 12% Transactional agent portal 24% Wireless for sales or other 24% Point claims solutions 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. Market Direction Target Business Scenario Corporate Strategy Corporate Measurement And Control Common Vision Transformational Tools and Infrastructure Functional Silos Technology Data and Info Management Administration Operations Human Capital Comp and Review Macro Cross-Functional Process Macro Cross-Functional Process Change Management Work Processes Tech and App Architecture Embedded Culture Activities Functionality Business Adaptability, Flexibility and Agility ACORD Standards Enable the Adaptability Doing Work Supporting Work Source: Meta Group (now Gartner)

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

  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 SalesIllustration Electronic Application ACORD OLifE Agent ContactManagementSystem 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 Commission Management Post Saving Offices 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

  35. ACORD Standards Framework Expansion 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 Infrastructure Strategy Application Integration Strategy Data Strategy 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

  38. 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

  39. ACORD Standards Framework

  40. 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 Underwriting Claims Channel Management Product Portfolio Mgmt Life & Annuity XML/EDI/Forms P&C/Surety XML/EDI/Forms RLC XML/Forms 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 Inventory of ACORD Process Service Definitions Provides the Business Services performed and process inputs and outputs Supported by a Common Data Architecture comprised of: 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 Plans/Scope not yet defined

  41. ACORD Standards: Enable Transformation and Interoperability

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

  43. 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

  44. 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

  45. 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)

  46. 1970’s P&C Forms 1980’s AL3 (ACORD’s P&C EDI standard) 1990’s AL3 Implementation 1996 Life & Annuity Standards 1998 XML for L&A and P&C Life Reinsurance 2001 P&C Reinsurance EDI & XML L & A Forms Fillable Forms 2005 + Business Process Services PCS V2 ACORD Membership: Leading the Industry

  47. 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

  48. 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

  49. ACORD Standards Cartoon