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The Goals Are Clear; How To Get There?

A shared vision, the ability to demonstrate ROI and deliverables, and technical expertise all factor into an ability to take advantage of standards, according to participants.

If insurers want to succeed and profit in today's competitive, cost-conscious financial services arena, they are going to have to transform the ways they do business. Industry-specific standards are a key aspect of any strategy for getting closer to customers and becoming more efficient, but deploying them has been a challenge. Strategies for standards success were revealed at last month's Insurance Standards Leadership Forum in New York City, co-produced by Insurance & Technology and ACORD.

"A shared vision is important," warned keynote speaker Richmond Waller, executive vice president of e-business, Zurich North America (Schaumburg, IL). That vision includes a "shared business mind-set, shared logic, shared language, shared processes, and shared measurement of your business value."

According to Waller, insurers need to "build the vision and work backwards to understand the implementation path" when it comes to standards initiatives. He also urged attendees to "put yourself in the shoes" of business partners such as distributors: "Competitive points of view are good."

Increase Transparency

When it comes to collaboration within the insurance industry among different parties, "if we don't change, we are in trouble," says speaker Chris Milton, vice president and reinsurance officer at AIG (New York)—referring to the insurance industry's need to adopt Internet standards to increase transparency.

A "new economy" and "new business models for self service" require that carriers adopt Internet standards, such as ACORD's XML standards, in order to improve efficiency, create strategic partnerships, improve customerretention, expand into new markets and increase transparency—"which is vital for future success," Milton told the conference attendees.

Also, open standards are important, added Daniel Schutzer, vice president and director of external standards, Citigroup (New York), because "they are available for everyone to use" and "are not controlled by one party to the exclusion of others," ultimately fostering a transparent marketplace where competition is encouraged.

However, Milton added, true industry collaboration is not yet a reality for a number of reasons. Carriers have not yet "completely moved from legacy applications to new architectures," a transition that will take time but will also give greater capabilities to the marketplace, he says. For instance, legacy applications are not usually meant to interact with other Internet-based systems, and transforming them into interactive systems is a long process.

Central to overcoming some of the obstacles, Milton says, are XML standards, which will allow carriers to first create transparency in their internal business silos by allowing the creation of enterprise data warehouses. Carriers will then eventually be able to interact with business partners, such as reinsurance companies, by being able to transmit data in XML-standard format—eliminating the need for re-keying of data, Milton adds.

XML Evangelist

One organization that has made a serious commitment to implementing XML is New York-based MetLife, and the firm' director, enterprise technology, Charlie Dietz, told attendees "XML is a recent development but already an integral part of our business," in areas such as agent portal links, institutional business portals and key infrastructure systems. Dietz describes himself as "an XML evangelist" and he advised executives to develop a corporate strategy "for how to use standards, which ones you are going to use, and how you are going to use them."

As part of a global organization, Royal & SunAlliance (Charlotte) has pursued what CIO Jim Williams describes as "a standards-based global architecture, a common architecture with one logical data center and common processes and applications." The biggest constraint to standards implementation has been the company's "legacy environment," he said. "We have to create a way to move away from the legacy, or retrofit it."

Also, economics continue to be both a motivator to achieve the efficiencies that standards enable, as well as an obstacle to more aggressive pursuit of those benefits, Williams noted. "It's hard to find the capital to fund such initiatives, but we lose the ability to compete unless we can address these issues."

Standards Economics

Also addressing the difficulty of gaining consensus on standards issues was Matthew Josefowicz, senior analyst, Celent Communications (New York). Although obstacles to implementing standards include business partners that are not yet using standards and fears associated with being a first mover, if embraced universally, the insurance industry could save more than $250 million in technology costs annually, Josefowicz explained. Still, "it takes the will to swallow that first-mover cost," and as adoption spreads, initial standards implementations are not going to get significantly cheaper.

Although wider standard adoptions will create increased efficiencies when it comes to the speed of integration with external business partners and technology vendors, efficiencies as great as 80 percent are currently being realized by some carriers, with the majority of carriers projecting 20 to 30 percent efficiencies due to standards use, Josefowicz projected.

Perhaps surprisingly, one area where there has been significant cooperation is the emerging technology of Web services. During a panel composed of representatives of IBM, Microsoft and Sun Microsystems, Microsoft's representative, Kevin Kelly, manager, financial services, insisted his firm and the competitors present were "definitely in kind of a love embrace moment right now all along Web services."

Web services provide a standardized approach for publishing and accessing services, enabling companies to use internal and external networks to get at defined sets of services, according to Rick Hoehne, program manager, e-infrastructure, global financial services, IBM. Hoehne asserted that in tough economic times Web services can provide a means of building flexible, innovative solutions without having to invest as heavily as with other technology developments. However, he cautioned "standards are essential if that opportunity is going to happen. Web services have to be accessed consistently, regardless of the technology that creates them," he said.

Sun Microsystems' Jim Del Rossi, chief strategist, e-solutions consulting, cited analyst consensus to the effect that "even though it's early in Web services, and there is a certain amount of contention in the industry, get involved now, if only in a small way—try to prototype, try to get things happening and get the reality occurring."

Insurers face challenges in taking advantage of Web services, as they follow industry trends of aggregating information and targeting its delivery to the right audience, according to Del Rossi. "One of the changes that's occurring in insurance is that you're taking a lot of systems that are back-end enabled, trying to turn them into line-of-business systems, expose them out into the real world."

Microsoft's Kelly asserted that some companies' belief that the Internet—as a global dumb-terminal network with a thin-client-only platform—was all that was needed, was erroneous. As revolutionary as the Internet and Web are, "no one will tell you that the basic standards that created the Web—TCP/IP, HTTP, HTML—were enough to build the rich applications that run e-commerce," he said. The Internet works well for people sharing information, Kelly argued, but a "second worldwide revolution" needs to occur concerning the value of business applications using the Internet.

"Web services is an application-to-application arena based around the local battles between rival firms are diminishing," Kelly said.

Sponsors of the Insurance Standards Leadership Forum included CSC, Blaze Advisor from Fair, Isaac, Firestar Software, G.A. Sullivan, InSystems, Microsoft, SAP, Sherwood International and Sun Microsystems. To view all the speaker presentations and to find out more about upcoming Insurance & Technology events, visit

Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio

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