Gregory Maciag

Model Insurer

A new report from Celent highlights the use of industry data standards as a prominent best practice. According to Celent Model Insurer Asia 2012: “Model Insurers understand that they need to think beyond successful point solutions and create lasting systems that work within a larger infrastructure.

Using data standards means that an insurer avoids reinventing the wheel and instead manages risk by working with accepted, well-tested and well-defined models.”   Model insurers should work with models – neat.

Crafting the Perfect Insurer

Beans Count

You'll have heard the saying, “If it doesn't get measured, it doesn't get managed”. But you may not have heard it recently, and if you have, it might have been delivered in an ironic tone. Metrics-obsessed management is associated with an uptight, wood-for-the-trees mentality. Measurement calls to mind “scientific management”, time-and-motion studies, behemoth organizations operating in long-gone environment where little changed year after year.

It's true that business saw an injection of creativity in management practices once the baby boomers took over the big desks. And people who stick to a measurement-driven approach get labeled as bean counters. However, my thesis is that we need bean counters because beans count. There's more to management than measurement – but measurement runs through management like connective tissue.

The things we care about in business are often abstract qualities: benefit, quality, risk. Yet unless we turn these abstract notions into concrete measurables, we can't tell whether or not we're achieving them, or how much they're costing us. The insurance industry is built on the reduction of risk to credible variables. For countries with socialised healthcare, measures of quality-of-life must be used to decide on treatment priorities. While it can be misleading and offensive to seek dollar values for abstract qualities, we do need to apply some kind of measurement system.

Business measures don't have to be designed with absolute scales. You can apply measurement – and thereby management rigor – to any area of activity with a small set of relative indicators. This is why our opinions as consumers are queried by categories such as “strongly agree”. How do we know if our customer service is getting better, for example? A simple start is to ask customers whether they'd rate their just-completed encounter as better than, worse than or the same as their last encounter with our organization.

If we're not measuring, we're not managing. I'll come back to the dangers of measuring the wrong things in another post.

CSIO Appoints CEO

Catherine Smola was appointed CEO of the Centre for Study of Insurance Operations in Canada this month.  She visited us at ACORD to discuss the partrnership we have had for many years. Catherine is pictured next to me with my senior team. 

Download CSIO Press Release

 

Did you know...

that you can read full details about installation, configuration, business object development, and troubleshooting for the IBM WebSphere Business Integration Adapter for ACORD XML

WebSphere Business Integration Adapters

 

ACORD Standards in South Africa

The recently established South African ACORD standards are set to impact the industry with the launch of Lime Street Xchange, a platform for parties to exchange data in real time or batch. I wish this new venture every success.  SAIT News Link

Download SAIT News

ACE Profile

What kind of people make ACORD Certified Experts? Read a profile of recent ACE graduate Patty Henson at AgencyPort Blog

PIANJ President Savino Speaks on Broker Dis-intermediation

Traditional economics tells us that disintermediation is the free market removal of intermediaries in a supply chain, often explained with the phrase, "cutting out the middleman".  It is a natural course of free markets seeking the lowest cost overall and the most efficient use of resources.  Ecommerce has empowered firms that create products and services at the source of the value chain to directly sell to customers, thus eliminating the need for costly intermediaries.  In theory, the competitive firm will pass part of these costs savings on to customers in the form of lower prices, thus retaining and attracting new customers.

Technology providers talked about friction-free capitalism back in the 1990’s as the internet was getting traction.  It’s the idea that ubiquitous and equal access to information will create the closest thing yet to Adam Smith's perfect market.

Friction has been decreasing for some years now. Affordable air travel, overnight delivery and improved communications have shortened distances. Credit cards and the internet have spawned home shopping from sources across the world.  In principle, we can sell products and services to a worldwide audience as easily and effectively as our largest multi-national competitor.

Not all friction is bad.  Ecommerce opens more doors than it closes to intermediaries who understand it, grasp it and build business around it.  Keith Savino has been an evangelist for modernization, technology and industry standards from the outset.  He is an industry leader representing the brokerage community and passionate about debugging legacy thinking.  He likes to say “It’s about the business.”  You’ll enjoy his perspective. 

Here is the link to Insurance Day

If they break this link over time, you can look at the Insurance Day Section of this website where I archive all these Op/Ed features.

Data is a Boardroom Issue

Colin Rickard sees Solvency II as a crucial opportunity for the European insurance industry to get its data management house in order:

“As a veteran of the data management industry, I have witnessed organizations across different sectors grapple with the challenge of ensuring high quality business data, but never before have I seen such a direct regulatory mandate for board level supervision of data. This is an opportunity, not a threat.

Data and IT professionals within insurance companies have been presented with the foundation for a business case to tackle the long-term data problems the industry has faced. Data is now a boardroom issue and that necessitates investment, KPIs and ongoing governance.”  Colin Rickard

Single Sign-on Anyone?

At no time in human history have so many people used so many "secret passwords" in order to go about their normal business. Password overload is common, and what a lot of people do is just give up, and start using the same password everywhere.  Something that needs more security now has less.

On the personal level, there are ways to come up with a few ID/Password combinations that you can use to access low priority sites where security and privacy are not big issues. I can appreciate the advantage of customizing a website based on the needs of the user, so the idea of authenticating a user makes sense.  The need for a good ID/Password system becomes critical for financial accounts and business transactions.

At the lowest level of security, you can come up with a simple system for many sites that use a combination of alphanumeric characters and symbols.  It’s better than using names or dates and gives you some peace of mind.  When security and privacy are important, one would think that a strong password can be used for all your accounts.  That’s not always possible because of requirements of the system.  Length is the least of the challenges as upper/lower case, symbols and expiration dates will vary across sites.

The problem is compounded dramatically in the corporate world. Brokers representing many insurers need to manage staff passwords for internal systems and all the ID/Password combinations required by their trading partners.  Will there be a better way to deal with all of this craziness? Will there be a biotech, DNA, 99.9% foolproof solution?  Perhaps, but it makes no sense to do nothing.

I am pleased to introduce you to the ID Federation.  Their mission is to provide our industry with common legal and technical standards to remove the need for multiple passwords while increasing security and the ease of doing business with one another. Below is a link to their website and the first issue of the newsletter.  Cal Durland (ACORD) attended the meeting this week in Boston. Go to the website, register and get involved

Trust Framework

Download Trust Framework Newsletter Issue 1   

Every Industry Has Its Standards

DDEX is a data standard for the digital content industry. This note about DDEX is one of the clearest and most concise accounts of what standards are and why industries need them that I've seen.

Mark Isherwood says: “We also knew that just about every other industry we could think of operated according to a set of standards. A standard is an agreed, repeatable way of doing something and standards are the basis of most industrial transactions. So, the manufacturer of widget A makes them to a specified standard in order that the manufacturer of widget B can include widget A in their product. The manufacturer of widget B is safe in the knowledge they can do so without any surprises or any significant need to update their products and processes every time they take a new delivery of widget A.” Digital Music

Data Standards in Healthcare

Some research figures for the benefits of data standards in the health care industry:

 “To assess perceived and actual benefits of implementing a data standards system within their organization, all survey respondents were given a set of supply chain performance indicators and asked to indicate observed and/or potential impacts of data standardization on these indicators. The most frequently observed supply chain performance improvements attributed to data standardization are: improved product tracking through the supply chain (36 percent), increased collaboration/partnering with other members of their supply chain (33 percent), and decreased cost/increased efficiency of contract management and administration (31 percent).

 “The most common potential benefits of data standardization include: achieving higher quality metric targets for your organization’s supply chain (69 percent), defining more effective quality metrics for supply chain performance (65 percent), decreasing labor costs associated with purchasing including rework (64 percent), decreasing cost/increasing efficiency of contract management and administration (63 percent) and increasing patient safety (63 percent).”  Industry Take on Standards

Data Management and Application Performance

Loraine Lawson blogs about an Ovum study that finds a strong connection between poor application performance and poor data management. “Specifically,” she reports, “85 percent of the companies complained of application performance problems and the leading culprits trace back to bad data practices such as a lack of standardization, inadequate archiving practices and too many point interfaces. The study also found that 20-30 percent of data is duplicated across applications, which increases application maintenance costs and creates problems for data migration, synchronization and retention.”

It's always useful to have figures for these kinds of effects. Numbers help us quantify and share the impact of data management practices. Without the numbers, we know we've got problems, but we don't know how to make our colleagues appreciate them.

It's also unusual in my experience for application performance issues to be traced back to data management competence. Since application performance is something that affects everyone's daily experience, we should be making more of the link. If your applications aren't responsive then you're losing valuable time. If your applications are giving you the wrong data then the business is at risk.

IT Business Edge

Standards Are A Public Good!

When people mention the benefits of standards, they often take an IT perspective, citing improvements in developer efficiency and systems integration. At ACORD, we of course acknowledge the technical benefits of standards, but we emphasise the business values more.

I recently came across this partial list of benefits, aimed at the financial services industry:

1. Visibility built on data standards will support global financial stability.

2. A standards-based universal coding system is a public good that should not be locked-up in proprietary ownership. It should be run by a not-for profit, industry-owned organization.

3. Industry stands to gain from data standardization. It is well understood that improvement in efficiency through standards would yield billions of dollars in annual savings.

Point 1, on stability, speaks to the general sense that the global financial industry doesn't have a coherent picture of who owes what to whom. The third point is an "everybody know that" argument, which nevertheless needs filling in. How many billions, and how soon?

The middle point is, to me, the most striking. The builders and implementers of standards are indeed custodians of a public good. Standards belong to the communities they serve. We should see standards bodies as defenders and promoters of their members' common interests. The not-for-profit, industry-owned route is the best way to ensure the inclusiveness, accessibility and above all relevance of our precious standards.  Financial Data Standardization

London Awards - BMS Group's iPad Project Wins

No sooner did we leave Fort Lauderdale and the annual awards reception, did we head over to London for the Insurance Day Awards. Insurance Day has 26,000 readers in 67 nations plus 24,000 visits on their website.  As you know, we partner with them on the Insurance Technology Congress. held in October of each year.

The BMG Group  was awarded the Technological Initiative of the Year for their iPad project in London tonight.

Communities Drive ACORD Standards: Ruschlikon

Most people equate ACORD with the standards we maintain on behalf of the global insurance industry. I wouldn't have it any other way.  But ACORD is also a community of communities, a movement and a focus when you think about it.  We bring together people and organizations to develop common standards that benefit everybody today and help to build a brighter future. We lead the movement towards smarter use of information, closer collaboration and better customer service. And we provide focal points for groups interested in breaking new ground with standards.

The Ruschlikon initiative is such a group part of the ACORD community. It is making excellent progress and it's got that quality that all successful initiatives need – momentum. I salute everyone involved in the group.  READ MORE FROM  INSURANCE DAY

Open Data Standards

Vancouver-based David Eaves says the world's most successful open data set is the General Transit Feed Specification (GTFS), a format developed by Google and the City of Portland, OR. He says developers have experimented and innovated with this data set more than any other: “All in all the benefits of a standard data structure are clear. A public good is more effectively used, citizens receive enjoy better service and companies (both Google and the numerous smaller companies that sell transit related applications) generate revenue, pay salaries, etc"

Since we're likely to hear more about open data standards in the future, it's worth making a few important distinctions upfront. First, GTFS is a standard for developers. It's intended to make it easy for developers to create transit applications. Since cities all over the world have similar transit systems, GTFS makes it easy for people to develop and port applications. But this is not a domain in which different parties need to share data across domains. I guess it would be possible in some cases to offer journey planning services between contiguous cities. In the main, this standard facilitates the creation of similar islands of functionality.

Second, Eaves assumes that the public good at the heart of GTFS is clear. I'm not sure it is. Is data about public transit systems automatically property of the public? The transit data generated by the City of Portland should be, presumably, the property of the City of Portland – whose taxpayers may want to have use of that data. But is extending ownership rights to the world clearly a public good? Perhaps it doesn't matter. Good data drives good apps, so everyone benefits in the end.

I make these distinctions because ACORD is the custodian of open data standards. However, we create and maintain standards for the benefit of all our stakeholders, not just developers. The aim of our standards efforts is sharing data rather than replicating functionality. And our focus is not on the value of data per se, but on the creation and servicing of relationships – relationships between teams, business partners and customers.

So, GTFS is a successful open standard if you measure success according to developer downloads. But it does not, as I understand it, have the potential to change the domain it serves. ACORD standards, on the other hand, improve both efficiency and effectiveness in the insurance domain. If GTFS was at the heart of a continuous industry-led effort to evolve the transit industry, then it would meet my key criterion for a true standard.  Open Data Battle

 

Models Part 6: Moving Ahead With ACORD

I said that ACORD has a Framework development process that aims to ensure the Framework models track industry evolution. This is not to say that the ACORD Framework is a moving target, nor that organizations are obligated to shift to new versions of models as they become available.

We release the Framework models with careful version control, so that change is introduced in a stepwise fashion. And of course the change process involves staff working with our members.  Even organizations that choose to stay with one set of model versions gain a benefit that is new in our industry's history, and which is rare in business: they get to validate an industry view. Since changes to the models are incremental rather than revolutionary, this means that organizations gain valuable insights through evaluation alone.

Many ACORD members will use the Framework evolution as a guideline for their own strategic development processes, and others will choose to schedule version shifts as default activities. I believe all members will benefit from this mature and comprehensive set of models, and the processes we have put in place to ensure their continuing relevance. 

In this series of posts I've approached business models – and what we term the Information Model in particular – from the point of view of the management cycle. I've appealed to the idea that facts are central to management, and that facts are more than data. I've presented models as a means of organizing facts.

 My questions to industry practitioners are as follows:

• Do facts have the status they need in business?
• Do facts have meaning for technologists or are we drowning in data?
• Are you ready to articulate the facts at the heart of their business?
• Are you aware that we must manage the ongoing evolution of models?

 I welcome your thoughts.

2011 ACORD Awards - Fort Lauderdale

Christoper Murulo of Sword holds back his enthusiasm.

 SEE FORT LAUDERDALE PHOTOS HERE

Don't Let the Future Randomly Unfold

Dan Burrus has spoken at our annual conference in the past and has also spoken at IIABA and other industry events.  He resonates a theme that we have been preaching for decades.

In his recent newsletter, he says:  "At the end of the day, being able to manage perceptions and distractions is just as important as being able to manage people and projects." and "Don't wait for your future to unfold randomly, only to end up in a place yo don't want to be.  Instead, invest time in yourself and watch your success gorow."  Download Burrus

 

 

Models Part 5: Managing the Evolution

The economist John Maynard Keynes is quoted as saying: “When the facts change, I change my mind”. Effective managers don't cling to a model when the model needs changing. Equally, an effective standards organization doesn't carve its models out of solid rock.

I began this series by talking about the difference between facts and data. I said that businesses need facts in order to manage well. Data are voluminous and variable; facts are relatively few and stable.  However, when we take a longer view, we can see that the level of facts evolves too. Facts mutate and facts become redundant. New facts are born – leading to new data acquisition facilities. We therefore need a level of management – a meta-management level, if you will – that focuses on the development of the models which the business uses to control its behavior.

We implement this meta-management level by using the same management cycle on the management cycle. We figure out what our goals are for the models, define the relevant facts, execute, and measure. At ACORD, we do this on behalf of the insurance industry. So, as well as publishing the Information Model and the other models in the ACORD Framework, we have a process for managing the evolution of those models. The aim is to track industry evolution.

In the next and final part of this series, I'll have a few words to say about the relationship between member organizations and the Framework evolution process, and I'll wrap up the series with some queries for you to ponder.

NIPR Recognized at ACORD Awards Dinner

NIPR was established as an affiliate to the NAIC in 1996 to facilitate the electronic exchange of producer information.  It’s a self-supporting not-for-profit organization governed by a Board comprised of state regulators, industry and association members.

Two years ago, NIPR began work with ACORD to create messages for the submission of producer licensing data.  They in turn share this data with state insurance departments through the NAIC’s Regulatory Information Retrieval System. I truly believe that this trailblazing collaboration between state insurance regulatory and industry systems will serve as a gateway to greater cooperation in the future.  It benefits the regulatory community the industry our policyholders and consumers.

The ACORD Rainmaker Award is a fitting tribute to all the people at NIPR for their contribution to and support of ACORD industry standards. Accepting the Award on behalf of NIPR was Executive Director Mary Ellen Waggoner.  Download NIPR News Release

Implementation Forum in Fort Lauderdale

Rick Heil was the master of ceremonies at the ACORD Annual Awards Dinner held at the Implementaion Forum this week. Rick heads our standards activities for the ACORD Standards Committee. He upstaged the boss by sporting a tuxedo.

ACORD coaches were on hand to assist participants.

Plus agent scholarship participants.

Plus our recognized volunteers.

Finally our new ACORD Certified Experts with Beth Grossman (ACORD Chief Learning Officer)

Integration Headaches

Joe McKendrick writes Insurance Experts' Forum on October 25, 2011

“The nice thing about standards is that there are so many of them to choose from.”  That line has a ring of truth to it, but fortunately, the insurance industry for some time has had a common set of standards it can build around. And that is XML.  No other standard has done more to bring disparate, siloed systems and data together within any industry than XML, or eXtensible Markup Language"

Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.  See the full post at Insurance Networking News

Real Time Best Practices Report

Courtesy of Jeff Yates, Executive Director of the Agent's Council on technology, I posted the latest report from the Agency Real Time Experience Work Group under Documents on the right side-bar.  It is titled Real Time Best Practices and is from the of the Real Time/Download Campaign work group chaired by Cyndy Smith of Haylor, Freyer & Coon, brought agents, carriers, vendors, user groups and associations together to outline the preferred real-time workflows that agencies would like to have from their carriers and vendors.

The work group is particularly indebted to Teresa Addy and Sara Richards of EMC Insurance Companies for putting the work group’s conclusions into a format that would be most useful to carrier and vendor implementers of real-time transactions, whether implementing the transaction for the first time or refining the current workflows that they offer to their agents. The report also outlines strategies that have proved successful for carriers and vendors as they roll out real-time functionality to their agents.

Models Part 4: Evolving Models

Business models sometimes meet resistance from managers who are not convinced of their utility. Some people don't “get” models like the ACORD Framework's Information Model because they're not clear on the distinction between facts and data. In the most worrying cases, managers mistake the data they happen to have for the facts they really need. Luck and momentum can combine to keep organizations moving along profitably on this basis. Sooner or later, however, the shaky factual basis of their activity leads to failure.

Other people are wary of models because models can look rigid and static. At first sight, any structure that claims to describe a piece of business will look like it's trying to set something fluid in stone. To describe, for many people, is to destroy. They believe that anything we say with certainty today will be wrong tomorrow. 

I empathise with this attitude. But there is an inherent danger in adopting any model – the danger of freezing the business to one version of the model. I can also see that doing so could be seen as a worse error than using no model. If you're not using a model, you stand a chance of succeeding despite having a loose grasp on the facts. If you use a model that's perpetually drifting into error – becoming the wrong model – then you lay your self open to much more culpable failure.

The solution to this dilemma is to rethink what a model has to be. The downsides of models that we've just looked at are all implications of a static, once-and-for-all conception of modelling. But models don't have to be like that. They can evolve too.   In the next and part of this series, I'll look at how model evolution can be managed.

NIPR Adopting ACORD Standards

After I depart the CPCU meeting in Las Vegas, I am off to Fort Lauderdale for the ACORD Implementation Forum.  I will be presenting the ACORD Rainmaker Award to the National Insurance Producer Registry (NIPR) and Maryellen Waggoner will be in attendance for the celebration.

I spoke with Sylvia Mary Nott who was managing the NIPR exhibit booth at the CPCU meeting here in Las Vegas. Here is what they do. NIPR

 

 

Models Part 3: Building Models

In the previous post in this series, we looked at two examples of facts that would figure in any commercial organization's model of its world, whether or not that model was ever written down. But how many facts (remember, facts are different than data) is an organization interested in? Twenty? Twenty million?

Facts tend to self-organize into groups and hierarchies. So, for example, you could place the fact of the White House's zipcode in a structure of facts about addresses, which could be further embedded in an array of facts about traffic routing. When we articulate the environment of a business in terms of facts, we are building a model of what interests the organization.

Such models are, for unfortunate historical reasons, usually called “data models”. As we have seen, they would be better termed “fact models”. At ACORD, we document and organize our industry models within the ACORD Framework. We have a data model in the software architect's sense of the term. But we also have an Information Model, which is a model of the facts relevant to the insurance industry.

This Information Model defines the common vocabulary of the industry. When I say “defines”, I'm talking descriptively, not prescriptively. In other words, the Information Model reports the facts that the industry uses in its management processes. It doesn't stipulate those facts. The analogy is with the English dictionary. The English dictionary doesn't tell you what the words of English should be, but what they are; and dictionaries are updated to reflect the evolution of language in use.

Working with a model of facts like the Framework's Information Model, managers can be sure that they're asking meaningful questions and acquiring actionable answers. In the next post in this series, I'll have more to say about the evolutionary nature of our industry, and how models cope with evolution.

Standards for Cargo Containers

From the New York Times: Keith Tantlinger, the son of a citrus grower in Orange, California. Tantlinger earned a bachelor's degree in mechanical engineering from UC Berkeley during the Great Depression of the 1930s, eventually landing a job at the Douglas Aircraft Company during World War II. By the 1950s, Tantlinger was the vice-president of engineering for Brown Industries, a company which produced truck trailers in Spokane, Washington. And it was there in the mid-1950s that Tantlinger took a call from Malcom McLean, the owner of the Pan-Atlantic Steamship, that would change the face of modern shipping and, with it, the world.

Until then, transporting cargo by ship was a labor-intensive process that involved hand-loading hundreds of thousands of individual items, packed in sacks, crates and barrels, and then unloading them all over again at the destination port for transportation to their final destination. The earliest versions of the shipping container significantly reduced the labor required, but stacking containers from different manufacturers in a secure manner was impossible because of the lack of standard designs and coupling options. This constraint severely limited their usefulness on long-distance sea passages.

Tantlinger changed all that. Hired by McLean, Tantlinger designed a set of fittings to be welded to each corner of a container, along with a locking mechanism that would allow a stack of containers to be safety secured to one another on board container ships. The fittings also enabled cranes to hook on to individual containers to quickly and safely lift them on and off ships. And the locking mechanism could also be used to secure containers to a truck chassis or railroad car, for transportation to and from the port.

Once Tantlinger's innovation became an industry standard, the speed and safety of sea cargo transportation increased dramatically. As a result, manufacturers gained access to markets around the world, and consumers benefited from a wider array of products at lower prices. Indeed, today's global marketplace would not have been possible without Tantlinger's seemingly small but monumentally significant innovation. 

The complete story of Tantlinger, McLean, the shipping container and their contributions to global commerce is wonderfully documented in Marc Levinson's 2006 best-seller The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger, which I highly recommend. You can read the obituary of Keith Tantlinger as published in the New York Times by going to our Resources page and clicking on the heading "Innovation".

www.bestpracticesforbusiness.com/Resources

Best Practices for Business

Models Part 2: Facts & Data

To manage a business effectively, you need to have a solid grasp of the facts in your domain of operations. You'll collect data that answer your questions about the domain and measure the environment's responses to the actions you take.  Every business will ask different questions, make different plans based on the answers, and execute their plans differently. The data they have will be different. But many of the facts they use will be common to them all.

For example, one company might gather data about the age profile of its local market. It could use this data to design a product for the largest age segment. This company defines its product and the target segment in its own terms. However, “product” and “segment” are concepts that travel outside the company. The company's understanding of “product” has to match that of its customers and competitors. Its understanding of “segment” has to match that used by the marketing community in general.

Note that this doesn't mean there is, for example, a standard market segmentation that everyone must use. Every organization is free to slice up the market however it sees fit. The commonality comes into play when you start comparing segmentation schemes with each other. They're all different – but they're all segmentation schemes.

Similarly, on the product side, a sector doesn't have to have a rigidly defined product portfolio common to all players. But the sector is likely to share the outlines of a product category scheme. And it will certainly share a core understanding of what “product” means in the sector.  In the next part of this series, I'll look at how facts like these are organized into models, so that they can be used in effective management processes.

Enterprise Achitecture Belongs to the Business

I'm indebted to Michael Denis for this:  Dr. Pallab Saha, professor at the National University of Singapore, Institute of System Sciences and self-proclaimed EA [Enterprise Architecture] Evangelist) has a running debate on the Enterprise Architecture Network group of Linkedin on why EA should not reside in the IT Department. His top six reasons are:

6. Notwithstanding history and evolution, EA does not equal IT Architecture.

5. True EA leads to redistribution of authority and reallocation of accountability, both beyond the CIO’s jurisdiction.

4. EA value proposition and benefits are solely business realisable.

3. The primary goal of EA is to build coherent enterprises, not better IT systems.

2. Organizations are complex adaptive systems, hence holistic synthesis takes precedence over fractional analysis.

1. EA failure is a business organizational failure, not an IT failure. Resistance to EA is a consequence of failure, not the cause of it.

Denis adds: “The natural fit is for EA to reside within the business and not IT.”

Business Must By Dynamic

Insurance Technology Congress Today in London

ACORD and Insurance Day launched the inaugural ITC today at the Grange Tower Bridge Hotel in London. Visit ITC 2011 for more information and plan to join us next year for ITC 2012. Pictured are the ACORD and Insurance Day team.

Download ITC 2011 Brochure

Models Part 1: Facts

There are many ways of defining management. Some of those definitions get mixed up with leadership and others get confused with bureaucracy. I'd like to offer this definition of management: The continuous process of aligning intention with facts.  Management is about understanding the world you operate in, forming a plan about engaging with that world, executing the plan, and measuring the outcome. You then go around the cycle again.

Now, facts are hard to come by.  A fact is more than a piece of data. Data isn't hard to come by at all - we're drowning in data. Facts are data that are tied to meaningful entities. So, “1600” and “20500” are two pieces of data. They could be sums of money in a list of transactions. Or they could be elements of the White House address (1600 Pennsylvania Avenue NW Washington DC 20500). Data give answers, but only in the context of facts.

Facts and intentions are bound up with each other. Since a fact is data that responds to a question, you need to be asking questions if you're gathering facts. The questions you ask will be based on what it is you're trying to accomplish. Analysis of the domain you're interested in is closely connected with your intentions for that domain.

Sometimes, gathering facts is a way of gaining an overview that will allow you to make more targeted intentions – and thereby gather more specific facts. In any case, when the facts are in, you will take action, and measure the effect by gathering new data.

What I've described here is the classic management cycle: set goal – take action – measure feedback. I've described it in the way I have because the “measure feedback” stage depends crucially on the nature of facts. Unless you have a clear understanding that facts are more than just data, your management cycle can spin off into a parallel universe. You can end up approaching the wrong markets, fixing non-existent problems, or promoting symptoms over causes.

The way to avoid this danger is to have a strong articulation of your domain in terms of facts. In the next post in this series, I'll outline what that strong articulation must be.

Dangers of non-ACORD Forms

Curt Pearsall recently counselled agents on what action they should take if they are asked to provide a non-ACORD certificate for one of their insureds. He points out that it may well be illegal to do so in the agent's state, because the non-ACORD form is unlikely to have been approved. He offers a form of words that agents can use to explain their insistence on using a standard ACORD certificate in such circumstances.

Pearsall mentions that the agent could contact the carrier to see if “they are agreeable to honoring any unique language on the non-ACORD certificate”. But: “There is a very good chance that they will not allow you to execute the form.”

 

I like the phrase “unique language”. Doing business in our industry means, among other things, knowing where originality belongs – and where it can kill the business. What purpose can “unique language” serve in a certificate of insurance? The relevant passages are either intended to undermine the purpose of the document, or are unintentional variants on standard passages which then have to be interpreted and validated by experts. Either way, if an agent calls a carrier to query a non-ACORD standard certificate form, he's presenting an unnecessary and unmeasured risk.

Standards are about correct language, where “correct” means “agreed to meet the needs of the adopting parties”. Standards create assurance. Let's leave “unique language” to the poets.  Curt Pearsall

Layering Standards

A suite of standards and models can be hard to communicate. People with an urgent technical focus just want to know which tool will get the job done, and aren't concerned about how that tool fits in the toolbox. People with strategic responsibility resist the idea of adopting an alien language or structure that's supposed to describe what they're already experts in.

One of the ways of managing this problem is to bring standards and models together into an overall structure that pretty much unpacks and explains itself. Another approach is to create layers of abstraction, so that detail is organized in a hierarchy, making it more tractable. We have used both these techniques to produce the ACORD Framework.

Blogger Brandt Redd has a good graphic showing a four-level model for data standards. The contents of the levels in his model are technical. But his explanation of the leveling itself is firmly business-oriented. Redd's higher levels show increasingly “broader applicability and longevity of standards”. Reading the chart in the opposite, downward direction reveals increasing “ease of data exchange and depth of system integration”.

This is a useful perspective on the issue of standards organization. At ACORD, we deal with the dynamic between generality (for broader applicability and longevity) and particularity (for ease of implementation). However, I question the coupling of “ease of data exchange and depth of system integration”. The implication is that you get easier data exchange the more integrated your systems. While this was true once, I believe that the rise of distributed systems has led to architectures which are more collaborative than integrated. With web-based hubs and agents doing the leg work of translating between low-level formats, and service wrappers making legacy systems more amenable to new uses, integration isn't what it used to be.

As software engineering continues to develop, the tasks associated with the lower levels of Redd's model are increasingly being performed “out there”, on the network. See Redd

Data Quality is a Business Issue

How much does poor data quality cost business? There's no doubt that acting on information that is wrong or missing can lead to process failure or revenue loss. Events of this type tend to be the ones that draw attention to data quality issues. However, there are types of failures and losses stemming from lack of action based on faulty or absent information that are less noticeable. These types of event are only recognized with hindsight. But while it may be easy to categorize types of data quality costs, it's much harder to quantify them.

David Loshin, author of a 2010 book on data quality, has a blog post that rounds up various estimates of data quality costs.  He finds quoted figures ranging from 8% to 35% of operating revenue. These figures span the time period 1998 to 2009. Loshin tentatively concludes that the perceived costs of poor data quality are rising, but he also calls for more hard research to be published so that those of us who care about business information can get a better picture.

The impact of poor data quality is ultimately, like everything else, measurable. If it wasn't measurable, then it wouldn't matter. I suspect the official reason why companies don't target this metric is the difficulty of separating out the contribution of data quality from other factors in a failure or loss. I'm pretty sure the unofficial reason is that people find it hard enough to nurture a quality culture around visible and tangible quantities; asking them to consider the impact of invisible, abstract entities seems like going too far.

I think we can tackle the first objection to measuring data quality by insisting that three questions are embedded in every business decision point:

1: What items of information are used in making this decision?

2: What is the acceptable tolerance for error in each item?

3: What is the net acceptable tolerance for error in this collection of items?

Question 1 may seem obvious, and it's the basic stuff of systems development. However, not all the information consumed in a decision process is captured in systems designs. These is increasingly the case as data from emails or web sites are used.

Question 2 is harder to answer. Answering it implies providing a business value for business data. The IT profession has long talked about data as an asset. This question takes that rhetoric seriously.

And Question 3 is what I guess we can call – taking inflation into account and considering the interconnectedness of today's businesses – the sixty-four trillion dollar question.

Certain combinations of data items have net values different than simple addition. Some data collections have the effect of reducing risk. In insurance, for example, the more you know about an insurable item, the more accurate your rating will be. On the other hand, some data collections generate additional uncertainty. This is particularly true of speculative data sets, such as customer behavior models. I know from experience that getting a solid answer to Question 1 in the most prominent parts of an enterprise is pretty hard.

Applying Question 1 right across the businesses is even harder – and harder to justify, even though it's often the peripheral parts of a business that trigger catastrophic failure through incidents of poor data governance. Yet rolling out Question 1 is achievable. We know how to do it. I suggest that we don't really know how to even pose Questions 2 and 3, let alone answer them.

I say “tolerance for error”, but I don't know what units that tolerance is measured in. Is it a unit derived from the data type itself? Is it a standard corporately defined unit? Whatever the units are, they have to be convertible into cash.  I don't think we see enough discussion of these issues.

The good news is that we have IDMA (Insurance Data Management Association) (IDMA Home Page), the organization for data management professionals. Members of IDMA are dedicated to addressing data governanace and management issues.  We need more atttention paid to data. Take a look at their website, get involved.  Also see the blog from  David Loshin

ACORD Standards in Africa

ACORD staff will be going to Botswana in a couple of weeks to meet with more people there as well as representatives from other African Nations, such as Nigeria and Swaziland, who also have an interest in joining/participating with ACORD.

Here is a press release on the Insurance Council of Botswana that mentions ICB president Catherine Lesetedi-Letegele talking about ACORD. She revealed that ICB is a self-regulatory body on the insurance industry.  Membership consists of reinsurers, insurers, intermediaries, a training institution and a global insurance standards development organisation called Acord based in the United States of America (US).  ICB Meeting

Good Listening From Our Friends at ACT

Dear ACT Participant:

I am very pleased to announce that Dr. James McQuivey’s presentation at the IIABA Special Event in Minneapolis – “Welcome to the Era of Experience: How You’ll Have to Adapt to a Hybrid Digital/Personal Customer Relationship” – is now available online to ACT participants as an audio recording along with his PowerPoint.  In addition, an audio recording along with PPT of Tom Minkler’s presentation from the same event – “Delivering Our Promise: Digital Services for Today’s Consumer” – is also online.

Both of these presentations were enthusiastically received by the over 200 participants at the IIABA Special Event that was co-hosted by ACT, the Young Agents and the Education Directors. McQuivey, VP, Principal Analyst of Forrester spoke about how the interfaces available to consumers have changed over time from the advent of the remote, the mouse, the touch screen and now to the voice recognition and motion detection interfaces emerging today.  Each one of these new interfaces “changed the world” and has led to changed consumer expectations to which businesses have had to respond.  He then discusses how we have now entered the new Era of Experience where the quality of the personal and digital experience that businesses deliver to consumers will be a critical differentiator.  He discusses what several businesses are doing to enhance their personal relationships with digital components and advances several ways in which independent agencies can enhance the experiences they provide consumers and clients in the same way.

Tom Minkler, Clark-Mortenson Agency, an IIABA officer and member of the Executive Committee, followed McQuivey with a discussion as to how IIABA plans to support independent agencies in enhancing their digital presence, through the Consumer Agent Portal (CAP) initiative and the Trusted Choice® brand and services.  Tom discusses why IIABA is undertaking CAP and provides an excellent overview of its different components including the industry services website and the consumer portal to attract new customers to our distribution system.  (For further information on CAP, I have included the recent press release announcing CAP’s formation and its current investors.)

Both of these presentations are well worth your while to listen to and please feel free to share them with colleagues in your organization.

To access the presentations and the accompanying visuals:

 James McQuivey, “Welcome to the Era of Experience”

Click here for the audio recording

Tom Minkler, “Delivering Our Promise: Digital Services for Today’s Consumer”

Click here for the audio recording

Thanks

Jeff Yates

Agents Council on Technology

Executive Director

jeff.yates@iiaba.net

703-780-4078 (Home Office)

703-706-5402 (IIABA Office)

www.iiaba.net/act

National Insurance Conference of Canada

I attended the NICC in Vancouver this week. The session I moderated was on Business System Transformation. My guests included Robert Merizzi, EVP & CIO of Aviva Canada, Jamie Bisker, Insurance Relationship Manager, IBM Research and Jack Dougan, VP, Global Insurance Leader for Capgemini Financial Services.

Download NICC 2011 Brochure

ACORD in India

Here is a copy of a release from the Insurance Regulatory and Develoopment Authority.

Download India ACORD Committee

Business Models - A Valued ACORD Asset

Wisdom has it that the most important asset of any business is the people. But we rarely unpack what that means. Obviously, organizations need people to get stuff done, although some dream of fully automated organizations where no product or process is touched by a human hand. A cold analysis of the value of people might find two main components: there's what people do, and what people know. These two components are related.

If managing effectively is a matter of doing the right things and doing them right, then marrying knowledge and action must be at the heart of running a successful business. Creating such an organization is hard work. It takes time and energy to build a great team, to keep it on track, and to evolve its knowledge capabilities.

In today's business environment, there isn't the time to nurture new business units over several business cycles. The nature of modern business opportunities means you only get one shot. So businesses that want to expand need some way of reproducing the virtues of their people – their knowledge and activity – that's instant, reliable and portable.

Happily, there's a name for the required artefact. It's called a business model. A business model tells you (crudely) the inputs, outputs and transforming processes of a company. For investment purposes, such a model will be quantified in terms of money. But for management purposes, the model must also be described in terms of knowledge and activity. The way this is done is to detail the data and processes that comprise the business as a system. Notice that this way of modeling says nothing about computers, despite the computing terminology. We're just looking at what the business needs to know and do in order to meet its objectives.

If you were creating a business plan for a new venture, you'd find a plethora of resources to help with the money version. From spreadsheet templates to plan-in-a-box solutions, there's no shortage of blueprints to help make a sound case for investment. Curiously, there isn't an equally mature set of resources on the operational-descriptive side. The lack of credible and comprehensive non-financial business models means that every time a new business or business unit is conceived, the leaders have to mine their own experience rather than referring to a blueprint. They must also focus on attempting to release relative expertise that's latent in their people, without having any objective map to orientate them, or any indicator of how thorough the knowledge extraction process is.

Enterprises know they can't afford this costly and risky way of doing things. They seek to “can” as much expertise as possible. Lately, the rise of knowledge management as a discipline has helped to ensure that fewer wheels get reinvented.

However, not enough decision makers in our industry realize that the descriptive business models they need actually exist. The ACORD Framework is a complete business model for the insurance industry, articulated in a family of complementary views. It has evolved from several industry initiatives going back many years, representing many centuries of combined expertise. It has been validated by the industry, and there is an industry process for maintaining it. It is, quite simply, the set of blueprints that every insurance company needs whenever it's considering setting up a new line of business, entering a new market, or altering its operational repertoire in any way.

The Framework talks about data and process, but that doesn't make it a software spec. Think of it as  the counterpart to a financial business modeling toolkit. Far from being a technologist's tool, it's the only artefact I know that actually serves the vital “people” aspect of business. The Framework is your key to the knowledge and activity that drives your business – and the fast route to agility.

For more information about the ACORD Framework, including the Capability Model, send us an email.

US Reinsurance Advisory Committe Meeting Today

The Advisory Committee met in New York City with invited guests to discuss the future of reinsurance processing and ACORD Standards.

Pictured are Maggy Leon, Guy Carpenter; Marc Codispoti, ACORD; Gary Stropoli, Chartis; Shawn Sylvester, Swiss Re; Sal Iannaccone, Munich Re; Ian Summers, Aon; Mark Barwick, ACORD; John DiBuduo, Partner Re; and Ursuline Foley, XL Re

Frank Nutter, President & CEO of the Reinsurance Association of America opened the meeting with a state of the industry presentation followed by panel discvussions and case studies.

Frank Nutter at the ACORD Reinsurance Meeting in New York

Frank Nutter, President & CEO of the Reinsurance Association of America.

 

Search Box

LIMRA has published a report called “Connecting for Service Online: Customer Service for Life Insurance". The organization finds that, by and large, consumers use the functionality they are offered and would like more. Strikingly, 70% of website visitors register - it's more like 75% for younger visitors.

I note also that more than half of life insurance policyowners say a site search box is important, even if they haven't used the company's website. This is significant because it reveals a lot about the attitude of consumers to insurers. It implies that consumers see searching as a default means of meeting their information needs.

This may seem obvious, in an age where Google seems to dominate. Yet it's worth realizing that this finding runs counter to much of the received wisdom about user interface design. We take pains to design meaningful hierarchies of information, and to offer clear signposts, but at least one in every two users wants to input a search term and go straight to the information they need.  Insurance Network News

Crash Avoidance Tech

Systems that slam your brakes on automatically to avoid slow-speed collisions have been found to result in 27% fewer claims for vehicle damage - and 51% fewer claims for injury. So it's not just usage-based insurance that will leverage technology to change auto insurance offerings; technology is playing a growing role in making us better drivers, whether or not we want to be.  READ MORE

 

Mobile Wallet Cover

Technology and business commentators have been forecasting the arrival of the digital wallet for many years now, and a number of systems have come and gone in that time. With mobile devices firmly in the mainstream, the e-wallet is looking like more of a reality. The problem is, if you're worried about losing your cash and cards, won't you also be worried about losing your phone? And if your phone is your wallet...

In Britain, insurance2go.co.uk is offering coverage for electronic money lost when a phone is stolen. "Any risks" additions to traditional homeowner policies don't cover e-money. How long will it be before mass market homeowner policies include options for digital cash coverage?    Mobile Wallet

Industry Standards v Proprietary

How do we defend and strengthen our business?   If anyone regards proprietary standards as defensive assets, then they need to realize they're cooking the golden goose.  They need to see that a proprietary standard only ever buys time. But while you're buying time in your closed market, your competitors are innovating in the open market. And pretty soon you're surrounded by competitors with better economics and better access. So sticking with a proprietary standard buys you the wrong kind of time - time that's only going to help you stagnate and fall behind the competitors waiting to snatch your market away.

Industry standards are best when they can be used across the enterprise and with all trading partners. Otherwise, implementers end up with a patchwork of disparate systems that need to be bridged. Open industry standards supported by ACORD represent a valuable asset that increase the ease and lower the cost of doing business.    

Crop Protection

Allianz Re has announced a new approach to crop protection insurance based on remote radar sensing. "We can quite literally watch the grass grow," says Thomas Heintz of Allianz Re.

Crop protection insurance normally has very high costs. Satellite imaging and smart algorithms cut the cost of monitoring crops while extending coverage to the whole globe. With food security and biofuel both riding high on political and economic agendas, this is one innovation that should see enthusiastic take-up.   Allianz Re

Reporting Financial Data

The UK's Intellect, a technology trade association, says that new banking regulation isn't enough to avoid future crashes. It's not the regulations that matter so much as the data that's reported to regulators. They say: "What we need is a single, uniform data standard so regulators can interrogate and understand the data they are receiving. Unless this happens regulators may not be able to spot a future crisis and indeed know when part of a bank needs to be resolved".

Intellect also claims "that the UK is falling behind the US, which has established the Office of Financial Research, which can be utilised as a 'single source of the truth' for data standards". This isn't completely accurate. The OFR is going to issue standards around legal entities and financial instrument types. If that's all that's involved in creating a robust and comprehensive data standard for the industry, I'd be very surprised. Regulators also need to see transaction details, so there have to be standards there. And that's just off the top of my head.

For sure, regulators need to press for data standards. But there's no call for complacency around the OFR's leadership. The OFR is in the lead - but it's not like they've vanished into the distance. They've made a start.  READ MORE

 

ACORD Celebrates Technology & Service Providers

Attending the Review Awards Dinner in London this week with team and guests.  I am presenting the Service Provider Initiative Award at the event.  John O'Farrell was Awards host. He and I presented the award to Dr. Christopher Guider from GFK Geomarketing.

 

Dr. Christopher Guider of GFK Geomarketing