Introducing Standards: How to Ease the Pain
Insurance Networking News, March 1, 2010
An insurer's IT systems can communicate among themselves only if they're speaking the same language. Accordingly, carriers are looking to ensure the data from various systems conform to the same standards and models.
With insurers pressed to respond rapidly to market opportunities, competitive threats and regulatory changes, much hinges on the smooth flow of data among departments, says Mark Lewis, GM of the IBM Global Insurance Industry, Armonk, N.Y. "This is about business as much as it's about IT."
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The free flow of information throughout the enterprise can improve the performance of individual business units, says Rich Maynard, assistant VP and chief architect of property/casualty technology for The Hartford Financial Services Group, Hartford, Conn.
"We need to go beyond our silos and leverage each other's information to make our products better," says Maynard. A workers' comp executive, for example, can learn from the way colleagues handle small-business policies. "The only way we're going to achieve the benefits of trying to cross-sell everybody is to bring them together through a common model," he says.
Updating standards and models also adds years to the useful lives of aging IT systems, consultants say. Keeping those systems in operation postpones the need to spend millions of dollars to replace hardware and commit countless hours of development time, they point out. Therefore, it's up to the IT staff to respond to business side demands, even if it entails teasing a 25-year-old legacy system that speaks "underwriting English" into meshing with a relatively new system that's fluent only in "claims English," says Mike Freel, a bureau statistics manager at Des Moines, Iowa-based EMC Insurance Group Inc.
THE DIFFICULTIES
In addition to bridging that cultural divide within a single company, after a merger or acquisition carriers can find themselves integrating data and definitions that are even further out of sync. Freel provides an example: "Company A may consider a claim closed when they make the last payment. But company B may hold the claim file open longer because they're anticipating recoveries coming in."
The huge storage capacity of today's IT systems also has widened the disparities between legacy data and recently produced data. In the old days, with storage at a premium, IT staffs saved space by stripping down field sizes, and using fields for multiple meanings, depending on other details, Freel says. Now, technical advances have eliminated the need to save space.
"When I started 30 years ago, some of our main company records were 80 and 180 characters in length. Now the records that serve those same purposes are 500 or 1,000 characters in length," he says. "So we've seen a huge increase in main data files that are serving exactly the same purpose."
Some systems still in use are so old, they were created before standards existed, says Karen Pauli, a research director in the insurance practice of Needham, Mass.-based TowerGroup. "People stuck data in odd, empty, little buckets," Pauli says. "When they try to integrate it, it's a huge problem."
Meanwhile, automated interpretation of data has eliminated or changed the jobs of people who used to look at pieces of paper and easily reconcile differing sets of data. Machines cannot understand how a dollar amount with no punctuation jibes with a dollar amount adorned with a dollar sign, comma and decimal point, Freel says.
IMPROVING DATA
Carriers that want to improve the consistency of their data could begin by making that mission a priority - a task that's not always easy, Pauli says. Getting executives to modify an antiquated technology stack, or change their familiar ways of doing business can take some doing, she maintains.
"They'll dig in and defend their positions," Pauli says of those staff members. She recommends bringing all of the interested parties into a room, mapping out their tasks, and determining where the data is located. "Then, when we get it on one huge, gigantic, hideous spreadsheet, we say to them: 'You can't get to Point Z, which is fully integrated, transparent data that you can transact against, in this spaghetti mess.' "
Once that realization takes hold, IT can begin to persuade executives on the business side to embrace a data standards project, says The Hartford's Maynard. Twice during his 31 years at The Hartford, Maynard has seen standards efforts fail because IT neglected to include business executives in the creation of definitions, he says.
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