Acord Framework
description
Transcript of Acord Framework
P R O G R E S S P E R S P E C T I V E
Cindy Maike
Founder, Smallwood Maike Associates
Updated by
Deborah Smallwood
Founder, Strategy Meets Action
B U S I N E S S M A K I N G P R O G R E S S ™
www.progress.com
> ACORD fRAmEwORk
TAblE Of COnTEnTS
Preface 1Executive Summary 2Embracing Change in the Insurance Industry 3The need for new business Integration and Interoperability
Capabilities 5learning from the Past 6A new Approach to Enterprise business Architecture 6ACORD framework Initiative Enables Change in the Insurance
Industry 9what the ACORD framework means for the Insurance Industry 10A Common Information model for the Insurance Industry 12Positioning for the future while Retrofitting the Past 13A Call to Action 15About Strategy meets Action 17
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PREfACE
This is an update to a white paper that was originally written by Cindy Maike, Founder, Smallwood Maike Associates, and released for Progress Software in January 2009. The update, supplied in 2011 by Deborah Smallwood, Founder, Strategy Meets Action, reflects the current insurance industry environment and the evolution of the ACORD Framework since this time. For example, some aspects of the framework discussed in the original paper that were described as “future plans” are now generally available.
From an industry perspective, the framework is no longer simply a vision; it is a reality that’s currently under development and has seen a positive response from the industry ecosystem ACORD has moved this framework forward very quickly after receiving several contributions of intellectual property, once considered proprietary, along with active participation from business and technology thought leaders With the framework, fragmentation and multiple proprietary “formats” are being eliminated, and the industry is moving forward to establish a much-needed industry-standard enterprise architecture The framework provides end-to-end assets that will streamline the development of business and technical solutions More importantly, it is technology neutral
See page 10 for recent updates around the ACORD Framework
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ExECUTIVE SUmmARy
The insurance industry is operating in an uncertain and rapidly changing business environment As the industry slowly recovers from the global financial crisis, there is a new urgency to address major forces such as demographic shifts, increasing distribution channel options, and a heightened competitive environment These forces are directly related to the changing expectations of insurance customers, who are more informed and demanding than ever before, as well as the agents/brokers, stakeholders, and employees who service these customers
To meet the demands of these customers, insurers must align their business processes to the customer and deliver true end-to-end experiences across the insurance ecosystem This starts by creating a network model that facilitates the exchange and sharing of data between carriers and other key industry stakeholders, including distributors such as brokers/agents and third-parties such as reinsurers, claim service providers, government entities, and regulatory bodies
This cannot be accomplished without establishing best practices for business integration and interoperability throughout the ecosystem Without standardized business processes and a common vocabulary, connectivity to value-chain partners will remain a costly challenge
This paper shows insurers new ways to collaborate with agents/brokers, partners, and other members of the insurance ecosystem to deliver a better customer experience The paper discusses why analyzing successes in other industries that have leveraged a common framework to improve integration, interoperability, and communication can also benefit the insurance industry It also details a new approach to business architecture that can provide a formal link between enterprise business strategy and the processes and technologies that support it
Finally, this paper will explain a framework for the insurance industry that carriers can use to redesign their business processes in order to support demographic shifts, develop innovative business models, optimize distribution channels, and achieve financial profitability This framework has the potential
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to unite, align, and link the insurance industry so it can meet the demands of a rapidly changing marketplace
EmbRACInG ChAnGE In ThE InSURAnCE InDUSTRy
Many insurance companies are trying to keep pace with the rapidly changing business environment by investing in quick technology fixes that not only end up on the shelf in three-to-five years, but also result in added process inefficiencies, poor customer service, and, ultimately, a decline in profits Other insurers are embracing innovative technologies for online collaboration, business performance management (BPM), and dynamic business processes (business processes that are automatically created and executed using BPM and service-oriented design capabilities) These companies are evolving their business models to think about business processes and capabilities through a different lens—one that looks through the eyes of customers and agents/brokers.
Looking through the customer lens requires business processes that better align with a new generation of customers who are far less tolerant in dealing with redundant business processes and requests for information Given a choice, consumers will choose carriers that make doing business both easy and “real-time ” This requires the industry to design processes that are defined by the customer and deliver a true end-to-end experience across the insurance ecosystem
In order to design more customer-centric business processes, insurers require a more effective way to connect to their value-chain partners and drive efficiency into their business processes This connection will enable them to quickly sense and respond to an ever-changing business environment (see illustration on following page)
One way the industry can accelerate achieving these customer-centric objectives is by eliminating line-of-business, information, and system silos and moving to a services-oriented environment This requires more than simply looking inward to increase efficiencies; it requires collaboration with the entire value chain of agents/brokers, partners, and other members of the insurance ecosystem Enterprises in this ecosystem must move toward a networked model in which they combine to deliver better customer experiences
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G i v e n a C h o i C e ,
C o n S u M e r S w i ll
C h o o S e C a r r i e r S
th at M a k e D o i n G
b u S i n e S S b oth ea Sy
a n D “ r ea l-ti M e .”
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The networked model required to support this change places additional pressures and challenges on the integration of business processes and information For an industry in which data and information functions as the lifeblood, this added demand requires both the industry as a whole and its individual organizations to more effectively share and exchange data to support innovation The exchange and use of data via business processes bind the insurance ecosystem together, uniting disparate groups into a collective whole This will make the industry strong and able to meet the challenges of the uncertain and changing business environment
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SPEED OF DEVELOPMENT
FREEDOM
SPEED OF ADJUSTMENTTO CHANGE
CHOICE
FLEXIBILITY
BUSINESSCAPABILITY
AND PROCESSREUSE
WirelessLAN Line
Internet WEB 2.0(Instant message,
alerts, blogs& wikis)
ReinsurersNCCI, ISO,
& OtherRegulatory
CUSTOMER/DISTRIBUTIONINTERACTIONS
3RD PARTYSERVICES
InsurerCRS/CRM
Under-Writing
Billing/Collections
ClaimsMgmt
Brokers &Agents &
MGS
Policy holderInsured
Commercial& Group
InternetWEB 2.0
(Instant message,alerts, blogs
& wikis)
Forms/Mall
VRUFax Calls
CustomerPortal &3rd Party
InsurerPortals/System
Agent Broker/MG/Portals/
Systems
Medical Providers& other 3rd PartyServices
State Insurance
Commissions &Federal Reg.
Bodies
Repair Shops,Inspection, &
other 3rd ClaimsService
Providers
INSURANCE VALUE CHAIN – CORE CAPABILITIES
OTHER CAPABILITIES (NON CORE)
OTHER BACK OFFICE SUPPORT (HR, IT, ACCOUNTING)
MarketStrategy
ProductMgmt
Sales &Channel
Mgmt
Under-Writing
PolicyMgmt
Billing &Collection
Claims CustomsRelations
RiskMgmt
NS
MSt
AND…MOREDATA/INFORMATION
DATA/INFORMATION MOREDATA/INFORMATION
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ThE nEED fOR nEw bUSInESS InTEGRATIOn AnD InTEROPERAbIlITy CAPAbIlITIES
In addition to customer wants and needs, business strategies, marketplace demands, and regulatory requirements have further increased the importance of business process management, data quality, and consistency Consistent data and information are also needed to support a diverse set of business goals that include:
> Mergers and acquisitions
> Consistency in cross-channel marketing campaigns
> Shortened product development cycles required by changing market demands
> Real-time product/price comparisons to improve closure rates and to adapt to demographic shifts
> The use of external and internal data to improve risk selection, segmentation, and exposure analysis
> An increase in the number of closed-book outsourcing deals
> More accurate settlement of claims, including subrogation and recovery
> A continued single view of the customer, independent of customer touch point
> Easier compliance with changing regulatory requirements for all insurance parties
One component these activities have in common is that they require sound interoperability and business integration capabilities, both internally and externally, with ecosystem partners Much of the industry still struggles to achieve effective interoperability and business integration, and those carriers that have achieved it have found it to be a very costly and challenging process
Without the ability to quickly and cost-effectively share information and data across the insurance ecosystem, carrier business processes will be unable to align with customer expectations for real-time, end-to-end interactions To
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make ecosystem interoperability a reality, it’s critical for insurance companies both to learn from the past and to take a fresh look at business concepts like enterprise business architecture (EBA)
lEARnInG fROm ThE PAST
Analyzing other industries that have thought about their processes through the eyes of consumers and suppliers can be very telling Although most industries believe they are different, in reality they can evaluate and learn from companies in other industries Taking a step outside of the insurance industry “comfort zone,” are rate, quote, and issue really that much different from source, make, and deliver?
It may be, but if insurers look at what the manufacturing and distribution industries have been able to do with the Supply Chain Council’s reference model (SCOR), they will find many similarities SCOR provides a framework that gives supply-chain managers a leg-up when it comes to modeling a supply-chain process It provides the supply chain industry with a consistent set of modeling conventions; named processes like source, make and deliver; metrics for evaluating those processes; and best practices for executives and operational managers to evaluate whether existing processes can be improved
Additionally, SCOR has greatly enhanced the interoperability among companies within the supply-chain industry and has required them to think about their business models and need for increased “connectivity ” This reference model may not help supply-chain companies create a new product design process, but differences in product design are the way companies in this industry differentiate These concepts are very similar to the insurance industry
A nEw APPROACh TO EnTERPRISE bUSInESS ARChITECTURE
In insurance, the existence of different definitions for the very same business terms and business processes is largely responsible for creating interoperability and communication issues Compounding these issues are external
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sources, influencers, and other factors that create added layers of complexity and miscommunication The lack of standardized business processes and a common vocabulary results in added costs as insurers try to collaborate with partners all speaking a slightly different language
Utilizing concepts such as business architecture or process modeling shifts the focus back to business strategy and the “business framework” required for implementing that strategy Historically, the implementation of such frameworks has suffered as enterprise business architecture (EBA) initiatives moved too quickly away from the lines of business and into technology This has also contributed to the misalignment of business and technology, resulting in enterprises that are no longer linked together to deliver on business strategies
EBA defines the formal link between the enterprise business strategy and the results predicted from supporting strategic initiatives It also requires that companies look through the customer lens This is called “business by design ” Without this, companies are doing business in a very ad hoc manner, which results in processes that do not always align with customer needs
Over the last decade, one of the only places where architecture concepts have been consistently followed is the construction industry In this industry, no one is willing to let a truck back up to an empty lot; offload the carpenters, bricklayers, plumbers, electricians, and heating and cooling personnel; and let them start building the house without an architectural blueprint This industry has been successful in leveraging architectural techniques because standards are readily available and used by many
In the insurance industry and, unfortunately, in several other industries as well, EBA is not the normal course of business Architectures that have been built are proprietary or “one-offs” using company-specific data models and business processes These “one-off” models are difficult to leverage as the foundation for innovation or for supporting new business models Building a networked business model using business processes based upon proprietary vocabularies or multiple “dialects” (multiple data exchange formats or definitions) is not only difficult to achieve, it very often results in disenchanted customers
All this requires the insurance industry to think differently Insurers must think or re-think about how an EBA operates, interacts, delivers and provides value
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to industry participants Thinking in the context of the larger industry ecosystem and applying lessons learned with an analysis of their business models will lead to meaningful ways to improve ecosystem connectivity If the industry continues to use individual company or solution provider proprietary definitions for key business processes, business terms, and data definitions, the insurance industry will continue to be plagued by costly integration as it struggles to meet customer expectations
An EBA and its corresponding strategy provide the foundational components of enterprise linkage—a concept that Strategy Meets Action believes is required for the insurance industry to embrace and implement the changes necessary to support the marketplace of today and tomorrow
Developing business capabilities that support strategic initiatives and business drivers is critical to the success of an organization Using an ad hoc business design approach lasts for only so long An example of an enterprise business architecture framework is illustrated on the next page
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ENTERPRISE LINKAGE
STRATEGY PROCESS
GOVERNANCE
IT INVESTMENTS
Source: Strategy Meets Action
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ACORD fRAmEwORk InITIATIVE EnAblES ChAnGE In ThE InSURAnCE InDUSTRy
In 2006, ACORD (Association for Cooperative Operations Research and Development) defined a strategy to develop an industry-wide enterprise architecture This resulted in the ACORD Framework, which provides the architectural foundation that the insurance industry needs to more quickly prepare and implement change An illustration of the ACORD Framework is provided below:
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STANDARDS
TRANSACTIONAL PROCESSES
ARCHITECTURAL MODELS
BusinessArchitecture
InvestmentReview
SegmentCoordination
MarketResearch
AssetManagement
Technology
Applications
Data
Security
ARCHITECTUREDRIVERS
BusinessDrivers
DesignDrivers
STRATEGICDIRECTION
Vision
Principles
Current
Architecture
TechnologyArchitecture
ApplicationsArchitecture
DataArchitecture
BusinessArchitecture
Target
Architecture
TechnologyArchitecture
ApplicationsArchitecture
DataArchitecture
BusinessArchitecture
TechnologyArchitecture
ApplicationsArchitecture
DataArchitecture
INFORMATIONMODEL3
BUSINESSDICTIONARY1
CAPABILITYMODEL2
COMPONENTMODEL5
DATAMODEL4
Source: ACORD
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The ACORD Framework provides the insurance industry with a robust, detailed, consolidated, and complete set of models that supports business innovation, transformation, and process efficiencies The five main elements of the framework include the following, with reference numbers to the previous figure:
> Common vocabulary that can be leveraged by the insurance ecosystem (#1)
> Business capability model (#2)
> Information model that supports a robust reference model for a variety of enterprise applications (#3)
> Data model specifically designed to meet the needs of data architectures (#4)
> Broad component model including detailed interfaces and service definitions that support the entire insurance value chain (#5)
The ACORD Framework also helps address existing implementation challenges that result from the fact that current ACORD messaging standards have been developed independently by insurance lines of business ACORD will provide a smooth transition path for members/adopters of the framework that will allow them to continue to build upon prior investments This will be accomplished through the ACORD Framework Information Model, which will “house” the linkage and mappings to both current and prior versions of the ACORD standards This is a much-needed “translation and transition” capability that will support interoperability, industry connectivity, and more efficient exchange of data/information via data messaging and business forms within an insurance company or between participants in the insurance ecosystem
whAT ThE ACORD fRAmEwORk mEAnS fOR ThE InSURAnCE InDUSTRy
Like the SCOR model, the ACORD Framework is a critical component for addressing a redesign of business processes that supports demographic shifts, innovative business models, distribution channels, and financial profitability in the insurance industry The framework and the expansion of
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the ACORD standards provide a promising future for the insurance industry by helping it to:
> Identify areas of business innovation
> Perform industry benchmarks and identify best practices
> Create a map/catalog of business processes that can be used for internal planning
> Use a common set of business terms for building/bridging the exchange of information that will serve as a foundation within a carrier
> Leverage solutions from providers that build their insurance industry solutions with standards that ease implementation and integration and reduce overall implementation costs
> Improve the time-to-market of standards to meet industry needs
> Leverage a broader base of industry knowledge and expertise, resulting in more robust industry reference models
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OPPORTUNITY
LEVEL OF INDUSTRY STANDARDS ADOPTION
$
STRA
TEGI
C BU
SIN
ESS
VALU
E
USE OF INDUSTRY-STANDARD FORMS
USE OF STANDARDMESSAGES
USE OF INDUSTRY- STANDARD PROCESS MODELS
AND BUSINESS SERVICEDEFINITIONS
Future: Standards for SOA,Integration, Web Servicesand Best Practice Metrics
ACORD XML(P&C, Life,
Reinsurance)
ACORD DataDictionary
and Models
ACORDForms
USE OFSTANDARDIZED DATA
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A COmmOn InfORmATIOn mODEl fOR ThE InSURAnCE InDUSTRy
In addition to an EBA that expresses business processes or business activities, the insurance industry requires a solid information model to facilitate the flow of information and data An information model is one of the primary ways to express a common and shared understanding of data, the lifeblood of the insurance industry
Today, several carriers and solution providers have defined their own internal information models, which allow them to communicate However, when there is a need to share or extend information with other lines of business, outside of the enterprise or to a networked partner, these proprietary models create a different “dialect” for what was considered a common definition
Having a common information model that the industry can leverage is critical for implementing the changing business models needed for industry innovation If organizations have created their own information models, these models can continue to be leveraged within their organization However, an insurance industry information model can be used as a reference to facilitate communication and interaction for shared or networked business processes
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ReinsurerBank
Framework
CommonACORD
InformationModel
BUSINESSUSERS
BUSINESSPROCESSES
DATA
BUSINESSPARTNERS
AgencyInsurer
ClaimsProcessing
AgentClaims
Adjuster
Banker
Cross-enterprise integration concepts
enabled by ACORD Framework
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POSITIOnInG fOR ThE fUTURE whIlE RETROfITTInG ThE PAST
There are several benefits the industry can take advantage of by building upon the available ACORD Framework assets For existing ACORD implementers, the framework will include the ability to leverage existing messaging capabilities plus the additional components of the framework Ultimately, the framework will help drive down business integration costs Below is just a short list of the tangible and intangible benefits that are available:
> ACORD domain-based connectivity
> Property, Casualty & Surety Standards
> From ACORD XML <-> ACORD AL3 <-> ACORD Forms
> Life Standards <-DTCC <-NAVA
> Reinsurance <-EDIFACT
> ACORD cross-domain capabilities (Life, PCS and RLC)
> ACORD versioning support
> Traceability
> Messaging to application connectivity
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S o h o w D o e S th e
i n S u r a n C e i n D u Stry
p r e pa r e f o r th e
f utu r e w h i le
“ r etr o f itti n G ” th e
pa St?
CUSTOMER/DISTRIBUTIONINTERACTIONS
3RD-PARTYSERVICES
InsurerCRS/CRM
Brokers &Agents &
MGS
PolicyholderInsured
Commercial& Group
InternetWEB 2.0
(Instant message,alerts, blogs
& wikis)
Forms/Mall
VRUFax Calls
CustomerPortal &3rd Party
InsurerPortals/System
Agent Broker/MG/Portals/
Systems
Medical Providers& other 3rd-partyServices
Reinsurers
NCCI, ISO,& Other
Regulatory
WirelessLAN Line
Internet WEB 2.0(Instant message,
alerts, blogs& wikis)
State Insurance
Commissions &Federal Reg.
Bodies
INFORMATIONMODEL
Repair ShopsInspection, &
3rd-partyClaim Service
Providers
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> Basis of an enterprise information model
> Enabler for straight-through processing
> Common/robust foundation for the insurance ecosystem for carriers, solution providers and system integrators
Additionally, there is the ability to leverage the information model, the ACORD messaging library, and the use of cross-industry standards ACORD recognizes that in order for its members to embrace this kind of change, there must be continued support for, and a bridge to and from, the existing ACORD standards
Below is a sample illustration of how the Framework Information Model can be leveraged to facilitate information interactions using multiple ACORD formats In this example, both Life and PCS definitions of a Address Type are mapped to a common Address definition of Information Model The example, therefore, establishes the means for translating data between Life and PCS via the Framework Information Model
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TXLife to ACORD (Example A) and
PCSchema to ACORD (Example B)
Information Model TransformationsExample A
Example B
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In practice, the ACORD Information Model enables common-model-centric integration of multiple standards (like AL3, ACORD XML, X12, HR-XML, XBRL), database data models, and proprietary application interfaces (COBOL, XML), as shown on in the example below
The framework truly positions ACORD to provide interoperability capabilities for the insurance industry It moves the industry from technical data exchange to providing the much-needed enterprise business architecture More information on the Standards Framework is available from ACORD at www acord org
A CAll TO ACTIOn
Change is at the heart of the insurance industry Having an enterprise business architecture and using the ACORD Framework can provide insurance companies with a “structural architecture ” While components of an enterprise business architecture may appear too cumbersome or disciplined, these components can bring untold advantages to insurance companies
Participation in this industry effort requires insurance industry visionaries and leaders who can take a vision, embrace it, and use creativity and innovation to create a framework that enables the insurance industry to operate holistically and seamlessly
Participants will be organizations that understand the industry’s changing nature and have leaders that recognize that the insurance industry of the future can be achieved today Early adopters will be better positioned
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to realize competitive advantage by enabling industry standards based upon enterprise business architectures capable of embracing change and allowing enterprise IT to be more responsive to the real requirements of the business
This initiative won’t be a “silver bullet” for the industry, but rather should viewed as a “golden spike” for insurance that unites, aligns, and links the industry
SPEED OF DEVELOPMENT
FREEDOM
SPEED OF ADJUSTMENTTO CHANGE
CHOICE
FLEXIBILITY
BUSINESSCAPABILITY
AND PROCESSREUSE
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AbOUT STRATEGy mEETS ACTIOn
Exclusively servicing the insurance industry, Strategy Meets Action (SMA) blends unbiased research findings with expertise and experience to deliver business and technology insights, research, and advice to insurers and IT solution providers By leveraging best practices from both the management consulting and research advisory disciplines, SMA’s services are actionable, business-driven and research-based —where strategy meets action—enabling companies to achieve business success Visit strategymeetsaction com for more information about SMA, or contact Deb Smallwood at dsmallwood@strategymeetsaction com
PROGRESS SOfTwARE
Progress Software Corporation (NASDAQ: PRGS) is a global software company that enables enterprises to be operationally responsive to changing conditions and customer interactions as they occur Our goal is to enable our customers to capitalize on new opportunities, drive greater efficiencies, and reduce risk Progress offers a comprehensive portfolio of best-in-class infrastructure software spanning event-driven visibility and real-time response, open integration, data access and integration, and application development and management—all supporting on-premises and SaaS/cloud deployments Progress maximizes the benefits of operational responsiveness while minimizing IT complexity and total cost of ownership
wORlDwIDE hEADqUARTERS
Progress Software Corporation, 14 Oak Park, Bedford, MA 01730 USA Tel: +1 781 280-4000 Fax: +1 781 280-4095 On the Web at: www.progress.com
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