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ACORD XML Approaches Critical Mass

Joe McKendrick May 2004

Unlike previous industry attempts to standardize data exchanges between carriers, agents and third-party partners, it appears that XML is the real deal. Still, the industry has a long way to go before support for ACORD XML turns into widespread adoption.

ACORD's XML specifications-covering property/casualty, life, and reinsurance- were designed for transferring data across firewalls, but some carriers are exploring use of the standards as a cost-effective internal integration tool for extracting data from legacy systems. In addition to controlling costs and opening access, such internal data integration capabilities may also help companies meet growing demands from regulators for increased accountability in internal operations.

After a slow start, support for the ACORD XML standards is now widespread across the industry. Nearly 87% of life carriers and 94% of P&C carriers are investigating and eventually plan to adopt ACORD XML standards in some fashion, according to a survey conducted last year by Stamford, Conn.-based Gartner Research Inc.

And, a study of 20 major U.S. carriers issued last year by Boston-based Celent Communications found that 63% of respondents had live production systems using ACORD XML standards, while a majority of the remaining firms had pilot programs in place.

Experts note that the insurance industry is surpassing other industry groups in agreeing on and adopting data standards.

"We're past the 'why,' now we're just working on the 'how,'" says Lloyd Chumbley, assistant vice president of standards for ACORD, Pearl River, N.Y.

"Two or three years ago, people were struggling with understanding the XML structures. Now, they've moved on to working on communicating messages over the Web and the protocols for getting data out to partners and customers."

Chicken or the egg?

Although XML is proving its mettle in enabling data transfer between applications across networks, insurance executives need to determine which data should be XML-enabled, and who will do the heavy lifting-among agents, brokers, carriers and third-party partners-to see these implementations through.

Developing a trading partner relationship in which XML is the agreed-upon standard is not always an automatic process, industry experts say. At a time when many companies are still tightly watching their IT budgets, early-adopting companies undertake some risk as they put out the initial efforts and assume the initial costs to develop an XML-based linkage.

"It's a chicken or the egg principal," says Sean Kelly, a managing consultant with Blackwell Consulting, Chicago, which recently completed a major ACORD XML rollout between an insurance broker and two carriers.

"Carriers and brokers are asking 'who is going to adopt this first. 'Who is going to be the leader to build an ACORD XML interface?' The risk is the first one out there is going to have to find a partner to do it with to try to get some type of ROI."

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