Copyright © 2002 Business Insurance

Spotlight -- Risk Management:  New Technology & Online Solutions "Agreement on Standards to Ease Data Sharing:  Pact on XML Expected to Help Risk Managers" December 3, 2001

by Michael Bradford

 

Risk managers have taken a big first step toward data standards that will make sharing information with their insurers and other service providers much easier.

The Risk & Insurance Management Society Inc. and the Assn. of Cooperative Operations Research & Development in November adopted standards that will allow first notices of loss and loss-run data to be transmitted in extensible markup language, known as XML. New York-based RIMS and ACORD of Pearl River, N.Y., plan to continue working together to develop standards for other transactions.

The standards adopted last month "are like the door-opener," said Benita Gayton, program manager, commercial and specialty lines at ACORD. "We expect it will snowball."

"It's exciting," agreed Elizabeth Morrell, vice chair of the RIMS Technology Advisory Council and senior risk analyst at Southern Co. in Atlanta. "It's a great place to begin if you are going to standardize." The standards, she added, serve as the "first step to straight-through claims processing," a long-sought industry goal that would involve converting claims information to a single data format that could be read by all parties handling the information.

The first-notice-of-loss standard will be included in the next version of ACORD's XML specifications, which will be released by the end of the year. The loss-run standard is expected to be incorporated into the specifications after a pilot implementation ends next summer.

An XML data standard will cure some major headaches for risk managers and insurers. Lacking a standard, insurers and third-party administrators have defined data in various ways on their proprietary systems. Consequently, some risk managers historically have faced the cumbersome and expensive task of converting various claims data into a format that is compatible with their risk management information systems. Others have had to wait for their RMIS vendors to make the conversions.

The lack of a single standard has been a "huge problem" for many risk managers, said Christopher E. Mandel, assistant vp-enterprise risk management with USAA Group in San Antonio. For insurance buyers who use several insurers or who move their programs, the conversion of data "became a nightmare," he noted.

A single data standard is most useful to midsize and large companies that rely on traditional insurance coverage and that use more than one insurer. Large, self-insured risks that administer their own claims or that rely on just a few service providers don't have as much need for transmitting or receiving data in a single format.

XML is particularly useful to risk managers that have put together their own risk management information systems and must convert data sent directly from insurers or service providers. Insurance buyers who depend on a RMIS vendor to provide their systems are not likely to see much change when XML standards are implemented. That's because the vendor will communicate with insurers and other service providers in XML, but will convert that data to its own proprietary standard before sending it on to the risk manager.

A single standard has long been sought by agents and brokers, who have worked for years to secure a single-entry data system that would eliminate the need to convert data from various insurers. Implementing XML standards is an important step that would improve the service insurance buyers receive from their intermediaries and insurers, producers say.

"Just like agents, buyers will find (XML standards) very useful," said Jeff Yates, executive director of the Agents Council for Technology, an industry group that is part of the Independent Insurance Agents of America Inc. in Alexandria, Va. "One of the things that we see is that more and more buyers want to deal electronically with the agent and company. XML will facilitate that. Whether it's risk managers or the financial guy at a company, it just makes it easier to improve service."

A single standard moves intermediaries closer to "real-time processing, which allows the industry to be more responsive to risk managers and other clients," Mr. Yates said.

Risk managers began their aggressive pursuit of a common standard last year by partnering with ACORD. In March of this year, four organizations-RIMS, ACORD, the Insurance Data Management Assn. and the Insurance Services Office Inc.-agreed on the first-notice-of-loss standard and began to tackle the more complicated loss-run standard before voting to adopt both last month.

Now that the groups have settled on a standard, it's time for insurers to step up to the plate and implement it, advocates of XML say.

"Implementation depends on the insurance companies and third-party administrators," said Ms. Morrell, noting that the standard will become widespread only if those groups agree to put it in place.

Ms. Gayton of ACORD said that "some leading risk managers are speaking up to their carriers and saying, `You need to use XML,"' as a way to spur implementation.

Doug Johnson, executive vp with systems vendor Applied Systems Inc. in University Park, Ill., said it could take some time for the XML standard to be widely used among insurance buyers. Agents and insurers are slowly embracing XML and need to become comfortable with the format before it is extended to the consumer, he said.

"Once it gets working smoothly within the industry, it will be extremely easy to extend that out to the buyer," Mr. Johnson said. "The work going on today is very important" as a first step toward a widely used standard, he added.

Ms. Morrell pointed out that risk managers who begin using the standard needn't worry about scrapping their current systems and making a large investment in reprogramming.

While some conversion will be necessary at those companies that operate their own risk management information systems, it does not have to be an expensive overhaul, Ms. Morrell said. And for risk managers who rely on an RMIS vendor, the conversion should be transparent, she said.

"The nice thing about the XML format is that you can continue to track claims in your legacy system," Ms. Morrell said. "Carriers and TPAs don't have to spend millions to replace the technology they have, as long as they can pull claims information from those systems into an XML file."

She suggested that risk managers with in-house risk management information systems should find out whether the company's technology staff can make adjustments that will allow the system to read the XML format. Otherwise, some outside help may be needed.

 

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