Just about everyone in the insurance arena agrees that having a single set of data standards for transactions is a good thing, but when it comes to how far along efforts are in developing such standards for the entire industry, experts have conflicting views.
"We are in a state of suspended standards animation," states Judy Johnson, vice president and principal solutions architect for Princeton, N.J.-based Patni Computer Systems and a well-known industry analyst.
"The state of standards right now is pretty much exactly the same as it was a couple of years ago," she notes. "Nothing dramatic has happened. There have been a few things but not as far as moving anything out to the industry."
According to Johnson, the primary focus for the industry "has been around cleaning up processes for the purpose of saving money and cutting expenditures. Standards are the more strategic play, and I just don't see it happening."
She adds that some standards work has been done in committees organized by Pearl River, N.Y.-based ACORD, "but not too much is coming out of that in terms of actual use and implementation across the industry. I think we're not there yet."
Johnson blames what she sees as the current malaise in standards development on the tendency of insurers to focus on tactical, rather than strategic initiatives. "It doesn't matter whether it's BPO or legacy modernization; it seems to be all in the same state," she says. "A real commitment to standards is a strategic move and carriers, no matter what lip service they give to standards, have not found the motivation to do it."
Instead, she says, insurers care more about improving results in a given quarter. "You could argue that moving to a standards platform would make [such improvements] happen, but it's a much longer-term thing."
Johnson says she has seen many requests from insurance organizations for information and proposals concerning business process outsourcing and custom software development, "but there are no significant questions around standards. They're not saying it must be ACORD-compliant; it's not even on the radar screen.
"A few years ago, you saw a demand for ACORD compliance, but you don't see it now," she continues. "The total focus is on saving money and business performance improvement. Companies appear to have refocused."
Another reason insurance organizations have been so tactical in their focus, according to Johnson, is that there is increased pressure in the area of compliance. "Between Eliot Spitzer, Sarbanes-Oxley and other pressures, there has been a tremendous amount of money and attention sucked away for compliance," she explains. "For this to change, compliance must be less onerous, less of an issue. When you have to spend so much money to comply, it's hard to focus on making sure your systems are ACORD-compliant. ACORD isn't levying fines and putting people in jail."
Looking ahead, Johnson says she sees little prospect of any major change in standards development in the near future. "We're still too deep in the trough of getting processes straight and fixing problems," she says. "I don't see standards rising to the top of the heap in two years. Maybe in three."
On the other hand, Matt Josefowicz, an analyst for New York-based Celent, sees "a definite strong interest and good participation across the industry in data standards." In particular, he says he has seen increased awareness among insurance organizations of the potential value of standards within the enterprise.
While the standards discussion traditionally has focused on the benefits for agency-carrier communication, Josefowicz says the newer internal emphasis has been aided by the rise of SOA–service-oriented architecture. (SOA is a combination of hardware and software in which many functions can be accessed to perform business processes, independent of their native platform or operating system.)
SOA, he notes, "has made people more aware of the value of standards because most SOA web services in insurance are based on ACORD XML standards. ACORD has provided a common language for SOA."
