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XML is Helping Insurers Bring Order Out of Babel
Insurance Networking News, May 1, 2008
Even in the case of technological standards, it seems there can be too much of a good thing. So it goes with XML, which, a decade following its inception, is now entrenched as the lingua franca of B2B and intra-company communications not just for the insurance industry, but also for the digital universe as a whole.
Insurance technologists, who have always needed to move information around in a way that was standard and convenient, can hardly be faulted for falling hard for the open standard. Indeed, the data-intensive nature of the industry coupled with the ever-widening array of agents, vendors and regulators the typical insurers digitally interacts with, have made communication standards a necessity both internally and externally.
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“Standardization was the primary driver for our adoption of XML,” says Peggy Scott, AVP for agency services, Liberty Mutual Agency Markets, a business unit of Boston-based Liberty Mutual Group. “Consistency across various applications reduces cost and time to market. The key driver for Agency Markets’ companies is quality and improving agents’ ease of doing business, allowing them to conduct much of their day-to-day business from within their agency management system. It also affords them the freedom of choice in selecting vendor partners for multi-carrier quoting options.”
Yet, the convergence around XML is hardly the industry’s first attempt at standardization. Many past attempts to standardize failed to gain widespread acceptance, due largely to the rigid, inflexible nature of the standards themselves. Not so with XML, which works across multiple languages and output formats, and is loosely-coupled, permitting insurers to mix and match applications of their choice. Moreover, XML is easily customizable, enabling companies to add information and alter code without affecting processes already in place.
“XML provides a way for companies to read the information easily, as well as add to it,” says Tana Sabatino, president of San Francisco-based Vallue Consulting Inc., who formerly headed up XML development efforts for ACORD, the Pearl River, N.Y.-based insurance association. “What we’ve seen is that instead of XML being phased out, it is being used a base for everything else, such as SOA and Web services. XML as a base language has really held its ground across all industries, not just insurance.”
EASY DOES IT
XML’s ease of use, versatility and ability to overlay sundry computer languages and data standards, makes it a natural choice for insurers, especially those burdened by a tangle of legacy applications. Thus, XML has become the tactical weapon of choice for insurers in their quest to achieve strategic aims such as straight-through processing and service-oriented architecture.
A joint survey conducted by ACORD and Stamford, Conn.-based Gartner Inc. bears this out, finding that XML adoption continues to rise year-over-year among insurers and reinsurers. The survey, conducted in the third quarter of 2007 with a global sample of 176 respondents representing life insurance, property/casualty insurance and reinsurance, found XML is becoming a core technological component for both supporting application integration and interactions with external partners.
“As an industry, we need to start implementing standards from the very core of our systems and processes to achieve our overall strategic and operational objectives,” says Denise Garth, VP, membership and standards, ACORD. “The true benefits of standards can be best achieved when companies organize their efforts strategically with a governance structure that guides development and implementation of standards, which are a core component of projects and enterprise architectures. This ensures that standards are woven into all the business functions and systems across the enterprise, which will help achieve greatest value to organizations.”
GOVERN THYSELF
Yet ubiquity is not an unalloyed positive. The study found that although adoption rates continue to rise annually, many insurers pursuing XML do not follow best practices in XML governance, funding or oversight. It also found that many companies lack the governance and management structure to optimize XML use. Specifically, the study found that only 42% of life insurers, 33% of P&C insurers and 38% of reinsurers currently have a corporate strategy in place to guide their XML projects and investments. Also, less than half of respondents with XML projects in place have a corporate XML strategy to guide investments and project plans. Additionally, few insurers or reinsurers had dedicated leadership for their XML projects. Both of these are considered key governance best practices for promoting business and technical benefits from XML use.
Adherence to a well-designed data model, such as ACORD XML is another prerequisite for good XML governance. “The essence of governance is managing and understating how XML is being used across all the systems, and to promote the use of standards—whether its an external standard such as ACORD or an internal one,” Sabatino says.
Obviously, governance needs vary widely with the size and type of insurer. The XML governance challenges of a large multi-line insurer with 25 departments and 300 systems will exceed those of an small or monoline carrier. Few know this better than Gary Plotkin, VP and CIO of The Hartford. At an SOA summit held by Insurance Networking News in January, Plotkin said his company was adopting ACORD XML standards for internal usage as part of a larger enterprise wide SOA undertaking. “We can’t afford to do things different ways for every line of business,” Plotkin said.
Whether big or small, proper XML governance may require a change in IT culture, Sabatino says. “It’s an organizational challenge but, in order to make it happen, there are technology needs,” she says, noting while three years ago there wasn’t much technology available to aid in XML governance, solutions are now entering the marketplace. “When we were doing flat file data exchange, it was all system-to-system and nobody oversaw it. However, with XML, companies are seeing that they do need to oversee it because there are many advantages to be gained when they all start calling things the same way.”
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