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The Benefits of Data Standards for Insurance

by Tana Sabatino
Companies differentiate themselves not by whether or not they use a data standard, but by how they use it.

The advertising industry is constantly changing. Interactive advertising is being taken seriously, on the web and beyond. For example, TiVo is developing a technology infrastructure that would enable content owners to “sponsor” exposure in search results for video. Visible World, a digital-media company backed by Comcast, is now using technology to target commercials based on viewer interests or locations.

According to Forrester Research, at least 75% of national advertisers are interested in targeting commercials to individual households through video-on-demand services on cable, satellite and the web.

In fact, advertising executives are now calling today the “Age of the Consumer.” This is occurring just in time for the holidays…

What is the biggest concern for any company selling consumer-based products, whether it is Coca-Cola, Prada, or an insurance company? Will you buy it? Will you buy it again? Will you recommend it to someone else? In essence, it’s all about sales. Before selling your product, you must first make sure that potentially interested people know about it. This is the latest advertising trend of target advertising.

Last month I examined the barriers within an insurance company that limited its ability to service customers. In order to best service them, you first have to know who these customers are. Thus, you must first know who your existing clients are (including their demographics, preferences, etc) before targeting your message to potential future clients. Otherwise, targeting will not be possible. Insurers will also get excluded from the benefits of the technology advances that are made in advertising to best target your prospects.

When ACORD, a not-for-profit insurance data standards association, introduced their ACORD XML for Life Insurance standards in 1998, the industry’s greatest priority was on new business. Specifically, this was getting the business in the door. Insurance companies did a number of activities to do this:

  • They modeled information representing the data captured on the insurance application and supplemental forms.
  • They defined how to represent the insurance product itself so a broker could identify and select the features that were most applicable.
  • They created transactions to support underwriting related events with third party service providers.
  • They completed a workflow process that represented the flow of information during the issuance process.

Since then, companies have implemented these XML standards to best support their sales process and boost sales.

Why are data standards in this role? I have been asked numerous questions about this. If I use a standard, how do I differentiate myself? Aren't I better off doing something proprietary? Wouldn't that give me a market advantage?

To answer these questions, you must first look at the market. We must all work well together in the insurance industry. Very few companies today have totally captive agents—agents who sell insurance for them and no one else. Instead, most carriers use a broker market for some or all of its portfolio. This means that the broker sells to more than one carrier. So what will convince them to sell your product instead of someone else’s? Although I’d like to claim it’s because your product is superior, less expensive and best matched for the consumers needs, most of the time it’s simply the easiest process for the broker. And using a standard mechanism for getting information to the broker makes it even easier. In this particular case, using a standard expands your market.

When considering the role and use of data standards, one critical issue that a company must think about is this:

Companies differentiate themselves not by whether or not they use a data standard, but by how they use it. 

The first example I mentioned is using data standards to make the sales process easier for the broker. Maybe you're making the application process easier, or providing information tracking prior to the issuing of the policy, or even describing the product features in a way that's accessible in an automated system used by the broker. In these cases you're differentiating yourself by making the information accessible.

Dealing with third party service providers during the underwriting process is another area in the new business process where companies are seeing significant advantage using standards. This is particularly true using lab and paramedical service providers. Here, the benefit is in reducing costs. It's an advantage for the lab company to use a standard interface because then they only have to implement one; and it’s an advantage for an insurer to use it so that they don't have to pay for something custom and proprietary. Clearly, this is a win-win situation.

Now, let’s return to the phenomenon of target advertising. Imagine taking the information that has been captured during the sales process, combined with policies on the books, to analyze your customer demographics. Who buys what products from you? 

This is a critical area, where data standards can play a huge role. Since insurance companies maintain important customer profile information across different systems for various lines of business, different business processes and stages of the policy’s lifecycle allow you to get that data for analyzing. This is accomplished using a data standard. If you're already using a standard to communicate with the broker during the sales process, you're on your way to getting the critical elements needed to understand your customer.

In this case, the data standards are simply a vehicle for getting at the information you need.  By first finding it, and then figuring out how to best use it, you can separate yourself from your competitors.

Only with the advent of XML (eXtensible Markup Language), have we seen true adoption of data standards in the insurance industry. XML has become beneficial for exchanging information with external data partners, as well as for integrating enterprise systems and performing necessary analyses. 

I have read about the role of XML standards in USA Today and Continental's In-Flight magazine. The national hurricane center has an XML feed for accessing their advisories.  This technology is being used everywhere, across all industries. The insurance industry is just one of many whose business models are changing because of this language.

Why XML? What makes it so special? These questions are answered in next month’s article. So stay tuned.     

Tana Sabatino -

Tana is the Founder of Vallue Consulting, which provides technology consulting for the insurance industry. Vallue Consulting specializes in the application of XML and ACORD's insurance standards. She formerly led the insurance industry standards efforts at ACORD. Here, she was instrumental in ACORD's success in meeting the challenges of a continuously changing industry. During her tenure, she introduced and developed ACORD's life standards program, and steered the development efforts of ACORD's XML standards. Tana is known industry wide as an expert for insurance XML. Prior to ACORD, she worked at Prudential Insurance. While at Prudential, she focused on field systems development and enterprise data architecture.

Editor's note: More insurance articles, resources, news and events are available in the Business Intelligence Network's Insurance Channel. Be sure to visit today!