Copyright © 2003 Business Insurance

"Joule Gives Jolt to Exposure Information" January 6, 2003

by: JOANNE WOJCIK

A group of energy industry risk managers is banking on the use of ACORD data standards in gathering exposure information to make their insurance placements easier and to better manage their companies' risks.

The standardization project, dubbed "The Joule'' in reference to the name of a unit of energy, is a pilot implementation of the use of electronic templates created by the Assn. of Cooperative Operations Research & Development to standardize the exposure information. The ACORD templates are written in extensible markup language, or XML, a programming language that more and more insurers are adopting.

The ACORD Energy Working Group, an association of energy risk managers whose companies also are shareholders of Bermuda-based mutual insurers Oil Insurance Ltd. and Oil Casualty Insurance Ltd., is participating in the project. The insurers are jointly funding the project, which employs technology developed by GRX Technologies, a risk management information system vendor based in Providence, R.I.

Although they have some coverage through OIL and OCIL, the insurers' members also must purchase insurance for their other risks, and this is where the templates should prove especially useful, explained Stefan Veit, risk analyst for Calgary, Alberta-based Nexen Inc., one of Canada's largest oil and gas exploration companies.

OIL provides individual members up to $250 million in property, pollution liability and well control coverage, and OCIL provides excess liability capacity up to $150 million.

The Joule's objective is to standardize the exposure information the 77 energy companies that participate in OIL and OCIL present to their other insurers as part of the underwriting process, according to Mr. Veit.

"Even though we have OIL, and that does cover a big part of our program, we still have to go out and spend a tremendous amount of time getting our business interruption, as well as our casualty and our general liability programs put together. And then you have other ancillary lines like D&O, crime, fiduciary, even your auto, those types of things that you're going out into the market'' to find, he said.

To present comprehensive information to insurers, Mr. Veit spends a considerable amount of time assembling an insurance underwriting information manual-this year's was 450 pages-that outlines all of his company's risks.

In 2002, this effort took Nexen "about 1,000 person-hours. I used all the resources available to me,'' Mr. Veit said.

"We put a good package of information together,'' he said. The manual "is the major key in getting our insurance placed. Underwriters now, especially in this hard market, they're not even going to look at you unless you do have your underwriting information.''

But even with a package as comprehensive as the one that Mr. Veit produces, underwriters still seem to have more questions.

"We put a premier package together, and we're still getting questions,'' he said.

That's where The Joule comes in. The Joule contains electronic templates for each line of coverage programmed with the questions underwriters are most likely to ask. Risk managers can either complete the templates themselves or forward them to other divisions. To ensure that the appropriate information is included, The Joule also provides definitions and prompts.

The Joule was launched in mid-2002, and Mr. Veit will have to wait until his next renewal to see how it works for his company. But he expects it will save him a lot of time and perhaps even provide some negotiating leverage with insurers.

"Having those questions and knowing what to ask in the first place will definitely speed up the process,'' he said. "If you don't, you're kind of out of luck with the insurers, or you're getting charged a premium rate that you might feel is unreasonable because they don't know what the exposure is. They really do pick numbers out of the air then.''

But with the use of ACORD XML standards already having saved insurers money, those efficiencies should translate into lower premiums for buyers, suggested Elizabeth Morrel, senior risk analyst at The Southern Co., an electric utility holding company based in Atlanta that is a member of OIL. Ms. Morrel also is a member of the Technology Advisory Committee of the Risk & Insurance Management Society Inc.

"Insurance is so complex and data-intensive, if you can carve out just those business processes and data elements that are shared and capture them in a flexible, living standard using ACORD XML, the potential impact is significant,'' she said.

For example, a recent study found the potential savings for U.S. insurers at $250 million if ACORD XML standards were implemented across the industry, Ms. Morrel said.

While the templates developed so far are used solely for collecting exposure information, GRX is building templates for claims data using XML, said Joe Underwood, product manager for GRX in Providence.

ACORD also is seeking other implementations of its templates and is working closely with RIMS to raise awareness and interest among risk managers, said Beth Grossman, assistant vp of industry relations at ACORD in Pearl River, N.Y.

"There's a real drive now, post-9/11, within the carriers and the reinsurers to really drive implementation straight from the corporate customer all the way through the insurance and reinsurance at the back end,'' she said.

"You should be able to extract the information in the ACORD format and send it to somebody, and that other person should be able to receive it electronically,'' she added.

Mr. Veit has great expectations for The Joule and recently made a presentation to other OIL/OCIL members in Bermuda about its potential.

The Joule can be used as a risk management home page and browser, providing access to information other than exposure data, such as claims records, e-mail and the stock prices of competing companies, Mr. Veit said.

The Joule can also be used for benchmarking, he said.

"You have all these companies that are together under OIL and OCIL. We are in the same industry. It's just your perfect place for understanding what's really going on in the market,'' he said. "I see The Joule being able to allow risk managers and companies to compare notes and experiences, best practices and just being able to even do surveys, like a RIMS benchmarking survey.''

If The Joule works for the energy industry, then GRX will create other versions of the technology that can be used by other industries, according to Mr. Underwood.

"We can immediately implement what's developed as an insurance standard, or as exposure schedule standards, and risk managers can use it right away,'' he said. "It's actually capturing ACORD XML, and insurance carriers are equipped to receive it.''

"What's great about the system is it's going to evolve,'' said Mr. Veit. Eventually, he said, "The Joule can become like an intranet for information about what's taking place in the insurance and risk management industry.''

© Copyright Business Insurance 2003