No Respect

Insurance is necessary, it’s how we make a living, but admittedly staid. Technology, to most of us, isn’t exciting stuff. Standards, especially insurance technology standards, are just downright boring. In short, the CSIO (Centre for Study of Insurance Operations) — the organization responsible for property and casualty standards in Canada — is like Rodney Dangerfield: it gets no respect.

The CSIO formed in 1981 to improve the competitive advantage of the independent broker distribution channel. To this day, the mandate has never changed. The forefathers of the CSIO wisely chose standardization as their Number 1 priority. This is still CSIO’s Number 1 priority as we fast forward to 2008; only now, the focus is technology (XML) standards rather than forms (paper) standards.

For the independent broker channel, a key issue related to the biggest competitive advantage of its competition: direct writers boast an ease of doing business based on the fact that they have only one company underwriter with whom to communicate. In contrast, independent brokers face both increased costs and slower customer service due to the inherent inefficiencies of communicating with multiple insurers, each of which has its own underwriting rules, forms and systems. Of course, the independent broker distribution channel has advantages of its own: for example, independent brokers offer choice, the broadest possible product selection, strong customer advocacy and nonpartisan advice.

To help overcome the cost and potential service disadvantages of the independent broker distribution channel, the CSIO has been developing standards for property and casualty insurance for more than 26 years. These standards were originally paper form standards — application forms and claims forms. But as technology developed, so, too, did standards for EDI (electronic data interchange), enabling brokers to transfer data from their BMS (broker management systems) directly to insurer’s underwriting systems. To this day, CSIO continues to manage the standards for both forms and EDI; as a result, the work of CSIO has a substantial impact on the workflow of the independent broker. Unfortunately most of this goes unnoticed by those that it helps the most: the independent broker.

Today’s technology has advanced even further with SOA (service oriented architecture), the benefits of which include speed-to market,lower costs and greater flexibility, giving insurers much greater ability to exchange data between their new and old (legacy) systems and broker’s management systems.

Underpinning both SOA and Web services is XML (Extensible Markup Language). Today a significant proportion of CSIO’s standards activity is devoted to XML, including the development of XML standards and assisting vendors and insurers with the implementation of those standards.

The real promise of XML standards for the property and casualty industry includes the following vision. Independent brokers enter their information in their broker management systems; the information then seamlessly, accurately and in “real-time” transfers to the selected insurer or insurers information systems. That information would then be passed back with the necessary changes — a new business quote, a renewal, a policy change — in the same seamless, accurate and real-time way.

Unfortunately the adoption of XML standards is going very slowly. There are many reasons for this:

• insurers have limited time and resources. Due to past EDI implementations that were costly, and the efficiency of which ranked only “so-so,” they have been slow to adopt XML standards;

• broker management system vendors face the same resource dilemmas. As well, demand for XML is very low; and

• XML is a long-term solution. Standards by their very nature require broad adoption to work at peak efficiency.

The list goes on. Meanwhile brokers continue to face the same workflow challenges they have always faced.

There have been many attempts at solutions, but none have survived. The implementation of standards is not a quick fix: it is a long-term solution. Now with the promise of XML and very sound XML property and casualty standards, any future systems development in the Canadian property and casualty industry should adhere to the standard.

But vendors and insurers have to resist the temptations of the past. They must find ways to fit within the standard, rather than customizing it to fit them. CSIO is grateful to those who participate in developing the standards and always encourages greater participation. CSIO does not build the standard: its members build the standard. CSIO merely facilitates the process. Those developing with XML standards must recognize the standards represent what the membership has agreed upon; they should not stray from the agreed-upon format. If change is required, processes are in place that allow for necessary change to happen.

If competitive advantage for the independent property and casualty broker channel is to be defined as simpler workflows — including one data-entry point, real-time information exchange and complete data integrity — the key to this is broad acceptance of CSIO XML standards amongst insurers and broker management system vendors. The true “drivers” of this change must be the independent brokers themselves. They can help by demanding, in unison, that their insurance companies and vendors continue to develop XML solutions.

One can take heart that there is a light at the end of the tunnel. We are beginning to see some promising XML projects emerge in the commercial lines arena between some very prominent insurers and one vendor whose systems are based on CSIO XML. It will be interesting to get feedback from brokers who benefit from these solutions. Hopefully, when the successes come, XML standards will become a little less boring and CSIO will be a little less like Rodney Dangerfield.