When it comes to collaboration within the insurance industry among different parties, "if we don't change, we are in trouble," says Chris Milton, vice president and reinsurance officer at AIGreferring to the insurance industry's need to adopt Internet standards to increase transparency.
Milton's comments were delivered at the Insurance Standards Leadership Forum: "Business Strategies for Industry Transformation," held in New York City last week and co-produced by Insurance & Technology and ACORD (Pearl River, NY).
A "new economy" and "new business models for self service" require that insurance carriers adopt Internet standards, such as ACORD's XML standards, in order to improve efficiency, create strategic partnerships, improve customer retention, expand into new markets and increase transparency"which is vital for future success," Milton told the conference attendees.
Open standardssuch as ACORD's XML standards are important, says Daniel Schutzer, vice president and director of external standards, Citigroup, 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.
Also, many carriers are still dealing with internal "business silos," where transparency inside the organization has not been completely achieved, much less resembling the industry transparency that Milton says will be required for companies in the near future.
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 formateliminating the need for re-keying of data, Milton adds.
Unfortunately, pointed out Citigroup's Schutzer, standards alone will not guarantee success in industry interoperability. For instance, even though a company may use an accepted standard, other organizations may be using different versions or may implement the standards and technology slightly differently. Also, "open standards are arrived at through a consensus-building process which often takes time and doesn't produce the best standards and may ignore business and user requirements," Schutzer adds.
Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio