Copyright © 2001 Business Insurance

"Risk Managers, Partners Make Strides On Data Standards" December 4, 2000

by Dave Lenckus

 

After years of bemoaning the lack of a standard for exchanging property/casualty insurance claims data over the Internet, risk managers might see a useable standard within the next year.

That is the projection of a few principals involved in the standard-making effort that blossomed earlier this year and has flourished beyond what any of the participants' said they would have expected.

Indeed, key participants say they envision not just a claims data standard but also a global data standard that also would apply to insurers' and reinsurers' Internet transmissions of premium and accounting data.

Because one of the biggest challenges in fashioning a standard still lies ahead, some other participants suggest that mid- to late 2002 might be a more realistic target date.

But even those who do not expect to finish the standard-making work next year concur that the process is far ahead of where they hoped a year ago that it would be at this point. They also say that they are optimistic that a standard will be developed relatively soon.

Indeed, while getting to this point was a tough, long journey for the industry, many of those involved in developing the standard said the forces now propelling the effort are virtually unstoppable.

Notably, representatives from a wide range of industry segments are participating in the effort. They include:

* The New York-based Risk & Insurance Management Society Inc.

* ACORD Corp., a Pearl River, N.Y.-based insurance and financial industry standards developer. RIMS brought ACORD into the effort earlier this year after RIMS decided to depart from its earlier plan to develop a stop-gap solution and instead focus on developing a claims data standard.

* The New York-based Insurance Data Management Assn., a group of mainly data managers at property/casualty insurance companies that also includes some life/health insurance representatives, claims adjusting vendors, regulators and risk managers. IDMA and ACORD exchanged memberships earlier this year.

* The Worldwide Insurance E-commerce group, or WISe, a non-profit, industry-owned organization based in London that is backed by the world's leading insurers, reinsurers and brokers. WISe was formed in June 1999 through the merger of the Reinsurance & Insurance Network, the London Insurance Market Network and the Worldwide Insurance Network.

* Officials from several large insurers and brokers that are members of ACORD, the IDMA or WISe.

* The New York-based Insurance Services Office Inc., which joined ACORD about two months ago.

In addition, the Public Risk Database Project, which has developed a claims data standard for public entity risk managers, has given the IDMA permission to use the PRDP's work at no cost (see story, page 17).

There have been various efforts in the past few years to devise a claims data standard. But those efforts usually faltered because a standard would have rendered obsolete the proprietary systems in which insurers, TPAs and RMIS vendors had invested so heavily.

Risk management's mounting demand for a standard, though, helped organize the industry behind the current effort.

The lack of a claims data standard presents many problems for risk managers. Insurers and third-party administrators define data in various ways in their proprietary claims-handling systems. As a result, risk managers face a difficult, time-consuming and expensive task of converting supposedly identical data elements that they receive from various claims-handling sources into data that truly match up on an apples-to-apples basis.

``Risk managers want daily data'' so they can keep up more closely with their insurers' and TPAs' claims-handling activity, said Elizabeth M. Morrell, one of the RIMS representatives in the project. Ms. Morrell chairs the RIMS Data Standard Task Force, which is the RIMS Technology Advisory Council subcommittee that put the project on a fast track by bringing in ACORD. She also is the risk management information systems administrator at Atlanta-based Southern Co., an electric utility holding company.

Those same data conversion problems arise when risk managers switch insurers, TPAs and risk management information systems.

Risk managers ``are starting to express frustration,'' said Tom Nowak, the incoming president of the IDMA and a senior vp in New York with AIG Risk Management, a division of American International Group Inc. ``They want to evaluate data no matter who is providing it to them,'' he said.

At the same time, insurers began recognizing how recent improvements in Internet-related technology and an open data standard that cuts across all facets of their business could lead to more business opportunities and greater efficiencies than relying on proprietary standards.

``We can't do e-commerce without any of this groundwork,'' said Richard May, a senior vp in New York at Marsh USA Inc., a subsidiary of Marsh Inc.

``We have to be able to talk the same language to each other,'' said Mr. May, who has been working with Aon Corp., Willis Group P.L.C. and various large insurer members of the IDMA, WISe and ACORD to develop a global insurance data standard.

Leading Marsh's effort in promoting a global data standard is Bill Steiner, a managing director at Guy Carpenter & Co. Inc., Marsh's reinsurance intermediary. Both he and Mr. May described a global data standard as ``very important'' for insurers and reinsurers.

The key technological development in recent years that has energized industrywide involvement in the standard-making effort is the extensible markup language, or XML, format. The XML standard, which the World Wide Web Consortium has approved, is similar to hypertext markup language, or HTML. Unlike HTML, though, XML gives those who want to exchange Web-based data over the Internet the ability to tag data and define it in specific ways.

``The Internet is driving a lot of the carriers now'' to support a standard, said Ken Donnelly, vp of marketing for ABD Insurance & Financial Services Inc., a large regional broker based in Belmont, Calif.

Insurers have concluded that if they do not support a standard, ``they'll be left behind,'' said Mr. Donnelly, who got involved in working on a standard with ACORD to increase ABD's efficiency and improve client satisfaction.

Beth Grossman, director of industry relations at ACORD, concurs. As the opportunities to use the Internet to increase efficiency became evident, ACORD's members ``felt they really needed to respond quickly,'' she said.

In the past, none of the groups that now are working together had the expertise or resources to develop a standard individually, said Chuck Wight, a senior vp and a managing consultant in San Francisco with Marsh Risk Consulting, a division of Marsh Inc. Mr. Wight is a liaison to the broker's Workers Compensation Quality Council, a group composed of scores of employer clients with large workers comp risks that want to see a standard developed.

``This cooperation will move this along faster,'' Mr. Wight said. ``That's why I'm excited about this coming together.''

A year ago, the effort to develop a data standard was much more splintered.

At that time, RIMS was pushing an effort that officials said they hoped would result in valuable stopgap assistance until a claims data standard was developed.

Rather than focusing on how insurers and TPAs collect data, as well as disseminate reports based on the data, the RIMS Data Standards Task Group zeroed in on the reporting process. RIMS, with help from the University of Georgia's management and information sciences departments, hoped to develop a data extraction tool that would serve as a valuable stopgap measure until a claims data standard was developed (BI, Dec. 6, 1999).

After the university completed its work, RIMS held a ``data summit'' in Chicago in mid-April to drum up support for the project among insurers, TPAs and technology vendors.

The summit attendees' support for a data standard was strong-including their willingness to eschew proprietary systems. As a result, RIMS decided to seize the opportunity and use the work it already had completed to jump into the more-ambitious project of developing a standard.

For guidance in developing the data extraction tool, RIMS already had planned to meet with ACORD to tap into the non-profit organization's expertise in developing standards (BI, April 24).

But with its efforts now focused on developing a data standard, RIMS-which could not fund the project -- needed ACORD as well as the IDMA to step up and organize the effort, Ms. Morrell explained.

To date, the effort has resulted in a draft standard that, if adopted, would standardize how risk managers who are seeking policy quotes would submit information over the Internet to property/casualty insurers. That information consists largely of lists of exposures and property locations

ACORD's Ms. Grossman said work had to be completed before a claims data standard could be devised for a couple of reasons.

One reason was to develop a standard that would be ``quickly and easily implementable'' to prove that an XML standard ``would work for larger commercial accounts.''

Another important reason was that if accurate insurance submission information could be sent from risk manager to broker to insurer without problem, ``we will ensure data integrity all of the way through'' the process from policy submission through claim handling, Ms. Grossman said.

Ms. Morrell, the RIMS Data Standard Task Force chair, said a submissions data standard lays the foundation for a claims data standard, because it lays out a uniform way of reporting properties and identifying exposures.

ACORD published a draft implementation guide of the submissions standard in October, but ACORD's board will not vote to sign off on the standard until next June.

In the meantime, at least three ACORD members, whom Ms. Grossman said do not want to be identified at this point, will be conducting pilot projects shortly to test whether they can send to a partner an XML data stream that incorporates the standard.

The tests should begin either this month or in January and wrap up by Feb. 15, said Mele Fuller, chair of ACORD's XML Claims Working Group. Ms. Fuller also works for Seattle-based SAFECO Corp. As SAFECO's interface architect, she is the company's liaison with ACORD and other standards organizations, agency management vendors and software providers.

``It's coming together very nicely,'' Ms. Fuller said.

As the pilot projects involving the submissions standard get under way, ACORD, the IDMA, the groups' members and WISe will press on to develop a claims data standard and a global data standard.

The important and potentially difficult task that has to be completed before a claims standard is possible is reaching a consensus on how data elements should be defined.

Reaching a consensus could be tricky, because risk managers, insurers and TPAs often define key pieces of data -- such as reserves or loss allocations-differently by how they account for various claims-related costs.

But some observers said that the ultimate goal is too important to quibble at length over which definitions should be adopted.

``As a group, we have to'' reach a consensus. ``We can't continue working in the environment we have been,'' said Patrick Miller, a member of ACORD's Standards Committee and an e-business marketing strategist in the strategic development department at Chubb Corp. of Warren, N.J.

Referring to the compromises that will be necessary to reach a consensus on data definitions, Mr. Miller said: ``I can compromise, because I can have my own definitions internally'' to evaluate data in a way that is not possible with standardized data.

Estimates vary about when a claims standard or a global data standard might be useable pending further modifications to address the data definition concerns of large commercial insurance buyers and insurers globally.

Patrick Vice, vp-business development-insurance for technology vendor Zox Technologies Inc. of Toronto and a member of the RIMS Data Standard Task Force, estimated 18 to 24 months.

Ms. Morrell is more optimistic. She estimated that a draft standard might be ready in six to 12 months.

Messrs. Steiner and May of Marsh said a useable global data standard could be ready by the end of the first quarter in 2001. They said that a global standard could be developed that quickly because much of the work already has been pulled together in the IDMA's data dictionary and the standards for which WISe is the secretariat.

The WISe standards, which address insurer/reinsurer data exchanges, have been around since 1993 and were migrated to the XML format last year, noted Lisa Masarek, president of the Newark, N.J.-based U.S. branch of the organization. The standards were developed by The Joint Venture, an industry group made up of many of the same organizations that formed WISe.

Eighteen U.S. insurers and reinsurers and 50 European companies already are using the WISe standards, according to Ms. Masarek.

ACORD's Ms. Grossman is reluctant to estimate when any standard might be ready. She agreed that ACORD should not duplicate any completed efforts to define data. But, the organization still is examining all of the various standards for gaps in required data elements, as well as for instances of conflicting definitions and conflicting tag names of data elements with identical definitions.

For example, Peter Marotta, past president of the IDMA and co-chairman of the organization's Data Standards Committee, said the IDMA's data dictionary would be a good reference document for ACORD as it works on defining data elements for a claims standard.

But the IDMA's data dictionary, which was developed with the insurer/TPA relationship in mind, does not contain all of the claim elements that risk managers would want, said Mr. Marotta, who also is the principal in charge of data management consulting at ISO.

Of course, an industry-sanctioned claims data standard would not, by itself, resolve the data integrity problems that the lack of a standard creates for risk managers, ACORD's and SAFECO's Ms. Fuller pointed out.

``We still have to wait and see how many people implement it and how fast,'' she said.

Ms. Fuller predicted that how quickly insurers and TPAs were likely to implement a standard after one is approved would depend on how hard the major brokers press them for it, as well as whether their legacy systems could accommodate XML data exchanges.

As for future broker demand, Marsh's Mr. Wight noted that some risk managers already are discussing requiring future insurance policies to stipulate that insurers would have to adhere to the claims data standard.

Volume: 34

Publication number: 49

 

 

© Copyright Business Insurance 2000, 2001