ACORD 2005.

ACORD Standards

ACORDMarch 2006

SLIDE 2

Industry Trends

SLIDE 3

Is it the same old Insurance industry?

Carrier

CustomersVendors

Com

petit

ors

Regulatory

Environmental

Eco

nom

ic

Let’s look under the covers Bar is being raised Leaders are leading Fears of being left behind Talks of “leapfrog”

Technology as an enabler/hurdle Web-services BPM & STP SOA and reusable components Enterprise Architecture Standards

Source: TowerGroup

Source: Tower Group

SLIDE 4

Strategy: Run – Grow – Transform?

Redefine relationships

RUN (Tactical)

THESE TEND TO BE SILO - BASED ACTIVITIES

Reduce or control operating expense

Functions and tasks are managed

Free up investment dollars

Resource availability

GROW (Strategic)

Change capacity dynamics

THESE ARE ENTERPRISE CROSS - SILO AND FUNCTIONAL ACTIVITIES

Improve business focus

Better capabilities

Accelerate redesign efforts

Enable shared risk/reward models

TRANSFORM

THESE ARE ENTERPRISE CROSS - FUNCTIONAL ACTIVITIES

New business models

Create or enter new markets or renewed markets

New/quicker business models

Shorten or change the dynamics of life cycles

REACT TRANSACT ADAPTSource: Gartner

SLIDE 5

Business Growth: Strategic Innovation and Transformation

Strategic Flexibility + Operational Adaptability

Value Creation

New market demands New regulatory demands New customer demands Exploit strategic opportunities Sustainable profit and value Exploit technology (standards, SOA,

web services, etc)

SLIDE 6

Data as a Strategic Asset

Risk Data Pricing Underwriting Risk

Management Customer Data

Behavior Financials

Operational Data Financials Operational

Efficiency

Enterprise Data Model Usage in US Insurance

In Use Currently25%

Do not have, but need one

32%Under

Development31%

Do not need12%

Source: Celent’s 2004 US Insurance CIO/CTO Survey

SLIDE 7

“Straight Through Processing”

Keys Automated decisioning Automated workflow Integrated production

systems Integrated external

data sources Integrated internal data Standards

Benefits Reduce errors Improve turn-around

time (service imperative)

Improve consistency

INPUT OUTPUT STEP A STEP B STEP CDECISIONS

PROCESSING

ROUTING

DECISIONS

PROCESSING

ROUTING

Automation

Source: Celent

SLIDE 8

Frictionless Communication

Critical element in ease of doing business for insureds and distributors

Key differentiator Explosive growth of

agent portals over last five years

Growth of data standards

PrimaryInsurer

ReinsurerInsured

Agent/Broker

Agent/Broker

RequirementsVendor

ClaimsService Provider

Source: Celent

SLIDE 9

Competitive Advantage Via Technology

Data As A Strategic Asset

Straight Through Processing

Frictionless Communication

Ser

vice

Ris

k M

gt.

Effi

cien

cy

Advantage

Source: Celent

SLIDE 10

Enterprise Architecture: Best Practices

Bridging silos into shared services

DEPOSIT

CREDIT

PAYMENTTraditional Apps

Shared Apps

Common Apps

ServicesHIGH

TECHNOLOGY

APPLICATION

DATA

Guiding Principles

Unique Apps

Enterprise Architecture

STANDARDS

Source: TowerGroup

SLIDE 11

Architectures Break Silo Boundaries

Determine the value of people, process, data and technology

Make IT investment strategic and more responsive

Source: TowerGroup

Business Application Data Infrastructure

Outline the important business

functions and processes

Map the relationships of

software applications to

each other

Detail where the data and

information is kept and how it

is used

Diagram the hardware and

networks to support the business

START HERE

SLIDE 12

Impact of Legacy Systems

Legacy System Effects

22%

67%

67%

78%

67%

78%

22%

39%

44%

33%

56%

67%

No negative effects

Prohibits workflow improvements

Inhibits data mastery/businessintelligence

Unacceptably high maintenance costs

Too difficult to integrate with newsystems

Slows new product introduction

Large Midsize

Source: Celent 2004 CIO Survey

SLIDE 13

Industry approaches to change

Companies often err by taking a systems-focused approach to solving process problems

Companies tend to look first at what legacy systems they need to modify, update, or replace, but that is a very vertical, siloed focus

vs.

Looking at the problem in terms of what needs to be fixed in the process

It’s all part of not just having process-savvy systems but being a truly process-savvy organization

SLIDE 14

ACCESSView of data

and control of process

PROCESS

Once & done data entry

STP & Exception Processing

Predictive Analytics execution

ENABLING INFRASTRUCTURE

Source: TowerGroup

Future Business Perspective: Efficiency & Effectiveness

Reduced Complexity

BetterDecisioning

DATA

Operational Data

Analytic Data

Third Party Data

SERVICES

Robust rules engine

Robust workflow/process manager

Smart Forms

SLIDE 15

Insurance Value Chain of:Reusable Assets, Services, Process & Data - SOA

SERVICESPROCESS

ACCESS DATA

Role-based view of

information and data

Open access to core

technology assets

Reusable services and information

access

Business components

and rules

ENABLING INFRASTRUCTURE

(interoperability)

Business Process Mgmt., Content Mgmt., Rating, Analytics, Rules engine

Open & flexible data stores

-data standards-

Standard messaging protocol

Portals, Dashboards

Exhibit #: E1Source: TowerGroup

STP WORKFLOW

MANAGER

STP

SLIDE 16

Current Model of Insurance Underwriting (Simplified View)

AnalyticsPricing System

Closed Claim Review

Business Intelligence

Marketing

Policy AdminSystem

Contact Center

Policy AdminSystem

Policy AdminSystem

UnderwritingSystem

Quote – Rating/Pricing

Product Creation

Policy Admin

Risk Evaluation

Policy AdminSystem

Policy AdminSystem

Policy AdminSystem

RatingEngine

Legacy

Legacy

Legacy

Third-PartyData

RatingEngine

Operational Functional Ad Hoc

Product Development

Product Development

Third-PartyData

Source: TowerGroup

SLIDE 17

Future Model of Underwriting Technical Components (Simplified View)

DataCapture

CustomerView

TransactionView

ExceptionView

PortfolioView

PerformanceScorecards

MarketView

BusinessTrans.

WorkflowManager

EventManager

ProcessManager

Document Management

Records Management

ContentManagement

ProductConfigure

Rating Engine

BusinessRulesEngine

AnalyticsEngine

DataIntegration

BITools

Transaction Legacy ExternalCRMWarehouseFinancialData Mines

& Marts

Underwriting Desktop View

Process Managers Enterprise Content Management

Engines and Tools

Data Layer

Source: TowerGroup

SLIDE 18

Legacy system

• Addressing the legacy system•Replace?

•Re-platform?

•Componentize?

•Consolidate?

•Extend or Wrap?

Assessing and Improving Legacy Systems

• Standardizing data and processes across legacy systems

•Rules management?

•Data standardization?

•Web services?

•Enterprise architecture?

Legacy system

Legacy system

Legacy system

BPMBPM

Standards

Recommendation: Look for flexibility, agility, scalability, efficiency, Recommendation: Look for flexibility, agility, scalability, efficiency, compatible, standardized and open. Ensure that systems can meet compatible, standardized and open. Ensure that systems can meet future business requirements. future business requirements. Source: Gartner

SLIDE 19

I

N

F

O

R

M

A

T

I

O

N

AL

O

P

E

R

A

T

I

O

N

A

L

Decision Support

Call Center

DataWarehouse

CustomerInformation

System

ProductServicing

DDA, TDA, Loan

ContactManagement

Campaign Management

CustomerProfile

Channel-centric CRM FunctionsDialog

ScriptingDynamic

PersonalizationProactive

Sales

CRM Decisioning

MarketingData Mart Third-Party

Data

CRM DecisioningProfitability

Engine

TargetedAdvertising

SegmentedMailing

Direct Marketing

IndependentAgents

World WideWeb

CaptiveAgents

Distribution:Enablement Strategic CRM View

Source: Tower Group

SLIDE 20

Distribution: Multi-channel support

Insurers will need to support data interchange with multiple counter-parties

Standard messaging and data formats can reduce burden of custom integration for multiple user interfaces/client systems.

XML Engine XML Engine XML Engine XML Engine

Distributed Transaction Engine

Core System Core System Core System Core System

Agent ExtranetAgency

Management Systems

Shared Services

Source: Celent

SLIDE 21

ACORD and XBRL – Interoperability for the corporate reporting supply chain

ExternalFinancialReporting

BusinessOperations

InternalFinancialReporting

Investment,Lending,

RegulationProcesses Economic

Policymaking

Participants

AuditorsTradingPartners

Investors

FinancialPublishersand Data

Aggregators

Regulators

Software Vendors

ManagementAccountants

Companies CentralBanks

XBRLLedger

XBRLExternal Reporting

ACORD

SLIDE 22

Initiatives Cited As High-Priority For 2005

13%

13%

13%

13%

13%

13%

13%

13%13%

25%

13%

25%

25%

25%

25%

25%

25%38%

13%

25%

25%

25%

24%

12%

12%12%

12%

29%

18%

18%

18%

18%

18%

18%18%

6%

35%

24%

12%

12%

12%

12%

12%

29%

18%

18%

24%

13%

13%

12%

29%

24%

Point claims solutions Wireless for sales or otherTransactional agent portal

VRUData integration hub

Business rules engine (BRE)Voice over IP

Voice/data/video convergencePolicy administration system

Underwriting systemDisbursement/paymentsCommission mgmt/EIM

Business process management (BPM)Document/content management

Network securityWeb services/service-oriented architectures

E-BillingSarbanes-Oxley compliance

Informational agent portalInterface with agency management systems

Transactional policyholder portalContact center mgmt.

ImagingSingle sign-on

HIPAA complianceACORD XML

Business intelligence/reportingEmail security

Electronic signature

L/H P/C

Red indicates Initiatives Using ACORD Standards

SLIDE 23

Web Services And SOA

62%

75%80% 80%

38%

15%

40%

100%

50%

23%

40%

75%

40%

50%

25%

15%

0%

20%

40%

60%

80%

100%

Large L/H Midsize L/H Large P/C Midsize P/C

Live, mission-critical Live, ancillary systems

Critical integration method In pilot

Under consideration

Source: Insurance CIO/CTO Pressures, Priorities, Projects, and Plans: 2004 Survey Results (Jan 2005)

Web Services and SOA: Best Practice for Innovation

SLIDE 24

Source: Insurance CIO/CTO Pressures, Priorities, Projects, and Plans: 2004 Survey Results (Jan 2005)

Services Are Based On ACORD XML

40% 46%60%

25%

0%

20%

40%

60%

80%

100%

Large L/H Midsize L/H Large P/C Midsize P/C

Web Services and SOA: ACORD Standards as the Enabler

SLIDE 25

ACORD Strategy

SLIDE 26

Business Adaptability, Flexibility and Agility

Doing Work Supporting Work

Market Direction

CorporateStrategy

CorporateMeasurementAnd Control

Data an

d In

fo

Man

agem

ent

Technolog

y

Work Processes

ActivitiesTech and App Architecture

FunctionalityEmbedded Culture

Target Business Scenario

Transformational Tools and Infrastructure

Common Vision

Functional SilosOperations Administration

Macro Cross-Functional Process

Macro Cross-Functional Process

Change Management

Hum

an C

apit

al

Com

p a

nd R

evi

ew

ACORD Standards

Enable the Adaptability

Source: Meta Group (now Gartner)

SLIDE 27

Why Standards?

Business Issues Proving ROI

Analysts: Celent: $250 million savings per org

Not a Single Quarter Investment Initially more expensive/time

consuming

Ever-decreasing

Incremental Cost

Higher Initial Cost

STANDARDS Ever-increasing

cost

Custom Interfaces

Initial Lower Cost

SLIDE 28

Type of ROI Produced from XML Initiatives at YE03

83%

48%

100%

77%

54%

70%

80%

70%

70%

50%

100%

20%

87%

87%

80%

78%

78%

78%

67%

67%

Speed ofInformationExchange

Cost Savings

Ease ofApplicationIntegration

IncreasedEfficiency

IncreasedProductivity

EMEA General

US P&C

EMEA Life/Pensions

US Life/Health

Source: Gartner, April 2004, EMEA Mar 2004

Percentage of Insurers BY ROI Derived from XML Projects

Source: Gartner

SLIDE 29

Agent desktop integration (1999) In-force agent policy feeds (2000) Commission feeds (2001) Administration system consolidation

(2004) Web Policy Inquiry (2005)

Case Study: Manulife Canada Has Used ACORD

SLIDE 30

Canada: New Business

Financial Planning

SalesIllustration

Agent ContactManagement

System

ACORD OLifE

Electronic Application

New Business System

Admin System

SLIDE 31

Japan: New Business Upload

New Universal Life product introduction (ManuFlex)

Very tight schedule Used two [competing] North American

packaged solutions: Illustration and application system (Navisys) Life Administration system (Ingenium)

Used ACORD XML as the integration standard ACORD XML helped us

Reduce the time taken to write interface specifications

Reduce the effort required to get the packages to work together

SLIDE 32

B2B Challenges in China Large number of trading partners

100,000 retail banking branches, 50,000 post saving offices, 50,000 travel agencies, 1,5000 insurance agencies and brokers

High performance required for large volume real time straight through processing (STP) transaction For instance, ICBC demands for 15,000 transactions

per day and maximum request response time must be less than 5 seconds

Various integration requirements Various networking connections, communication

protocols, business protocols, data standards Full scope of insurance business processes

New business submission, customer information inquiry, policy administration, financial account changes, etc

Legacy system integration Policy administration, commission management,

financial systems, etc Fast response to market dynamics

SLIDE 33

PacificLife

E-DistributionManagement

System

PolicyAdministration

System

CommissionManagement

CustomerInformation

File

Internet

AirTicketingCenter

TravelAgency

CaptiveAgents

PostSavingOffices

25,000 captive agents3,500 travel agencies500 post saving offices Pacific Life

ACORD Standards in Actions – Pacific Life

SLIDE 34

ACORD Standards: Best Practice ROI

External Percent Savings

Add one Distribution Channel 20%

Add one Business Partner or Service Provider 50%

Setup one new Distributor 60%

Do not setup a proprietary Interface – rather use ACORD standard message interface

100%

License and appoint one agent 60%

Add one external interface 30%

InternalSubmit and quote one policy 20%

Underwrite one policy 20%

Process one claim 20%

Perform one policy service transaction 20%

Reinsure one policy 20%

Add one internal system interface 30%

Do not add one data dictionary/data model used internally 50%

Conversion of M&A with standards based systems 30%

Compliance violation Varies

Data Transparency and SOX compliance Varies

SLIDE 35

ACORD Standards Framework Expansion

Level of Industry Standards Adoption

Str

ateg

ic B

usi

nes

s V

alu

e

Use Standardizeddata

Use of Industry Standard

forms

Use of StandardMessages

Use of Industry Standard Process

Models andBusiness Service

Definitions

$

ACORD Data

Dictionary and

Models

ACORD

Forms

ACORD XML (P&C, Life,

Reinsurance)

Future: Standards for

SOA, Web Services and Best Practice

Metrics

SLIDE 36

Business and IT Strategy: Four Pillars of Focus

Business Strategy

Data

IT Strategy

Bu

sin

ess

Pro

cess

Str

ateg

y

Ap

pli

cati

on

In

teg

rati

on

S

trat

egy

Dat

a S

trat

egy

Infr

astr

uct

ure

Str

ateg

y

Business Applications and Components

SLIDE 37

Property & Casualty Personal Lines Commercial

Lines Surety Global

Reinsurance P&C

Reinsurance Large

Commercial Lines

Global

Life & Annuity• Life

• Annuities

• Health

• Group Lines

• Reinsurance

• Global

Data ModelXML

Forms

EDIXML

Forms

Data Model

EDIXML

Forms

Cross Program Standards

•DRI Standard (Document Repository Interoperability)

•SOAP Framework

Current ACORD Standards

SLIDE 38

SLIDE 39

Current Challenges

Inconsistent deliverables Impacts enterprise implementations Duplicate support Impacts interoperability, transparency and

consistency Impacts ability to effectively work with other

standards Lack of core components to work with

UN/CEFACT, SWIFT and ISO Multiple dictionaries

Lack of deliverables Single business dictionary Data model for PCS Common business messages

SLIDE 40

ACORD Standards Framework

SLIDE 41

ACORD Industry Standards Framework expanding to support insurance industry needs

Cross Domain Process Standards

Inventory of ACORD Process Service Definitions

Supported by a Common Data Architecture comprised of:

Underwriting Claims Channel Management Product Portfolio Mgmt

Provides the Business Context or

a list of standard business processes

Provides the Business Services

performed and process inputs and

outputs

Business Term Dictionary

Contextual Data Model = Listing and definition

Of things that are important to the business.

User = Business Strategy

Conceptual Data Model

A Semantic Model =Entity = Business Entity Relationship = Business

Relationship.User = Business Owner

Logical Data Model

A System Data Model =Entity = Data Entity Relationship = Data

Relationship.User = System Designer

Technology Layer supported by XML Messaging and Forms StandardsLife & AnnuityXML/EDI/FormsLife & AnnuityXML/EDI/Forms

P&C/SuretyXML/EDI/Forms

P&C/SuretyXML/EDI/Forms

RLCXML/

Forms

RLCXML/

Forms

By separating the technology layer, investments in standards stand the test of time as you swap out the technology but not the standard

Plans/Scope not yet defined

SLIDE 42

ACORD Standards: Enable Transformation and Interoperability

SLIDE 43

Enterprise Architecture - Examples

ManuLife MetLife NYLife Allianz - Fireman’s Fund St Paul Travelers The Hartford Swiss Re XL Re Aon Alea

SLIDE 44

Case Study: Fireman’s Fund SOA Architecture

Turn mainframe apps into set of networked services with real-time transactions to provide: Standard way for over 3,000 independent

agents to interact with them Modernize the IT infrastructure to be more

manageable, flexible and adaptable Creates Straight through processing (STP)

and Single entry multiple company interface (SEMCI)

Functions of multiple legacy policy admin and billing systems into reuseable components using ACORD standards

Create new apps with these components

SLIDE 45

Case Study: MIB – Medical Information Bureau

Web Services Architecture Solution Convert all legacy systems to web

services using ACORD standards Eliminates batch processing and

provides real-time STP Reduces time for carriers in the issue

process Reduces costs

SLIDE 46

Agent desktop integration (1999) In-force agent policy feeds (2000) Commission feeds (2001) Administration system consolidation

(2004) Web Policy Inquiry (2005)

How Manulife Canada Has Used ACORD

ACORD Membership: Leading the Industry

1970’s

P&C

Forms

1980’s

AL3 (ACORD’s P&C EDI

standard)

1998

XML for

L&A and P&C

Life Reinsuranc

e

2001

P&C Reinsuranc

e EDI & XML

L & A Forms

Fillable Forms

1990’s

AL3Implementation

1996

Life & Annuity

Standards

2005 +

Business Process Services

PCS V2

SLIDE 48

ACORD Member Best Practices Business and IT strategy to include ACORD

standards as core component ACORD standards as part of IT operating and

project management principles Oversight executive committee actively promote

adoption, participation and involvement Establishment of Standards Officer in the

organization RFI and RFP should include ACORD standards

requirements Solution provider contracts require ACORD

standards Incorporate ACORD standards as part of SLA’s with

outsourcers and shared services Incorporate ACORD standards in data warehouse

and enterprise architecture Trading Partner and third party agreements should

include ACORD standards as part of agreement

SLIDE 49

Industry Analyst View“Maximizing the use of standards is how grown-up organizations

operate.” — Marc Cecere, Forrester “Standards are crucial to enable real-time transactions with

internal and external users.”  — Kimberly Harris-Ferrante, Gartner

 “Use of ACORD Standards is central to establishing an overall

enterprise architecture.” — Deborah M. Smallwood, TowerGroup

“Web services using data standards will have an advantage.” — John Flynn, Gartner

 "ACORD Standards are a key tool for insurers to improve their

business capabilities" — Matt Josefowicz, Celent “Without data standards like ACORD, industry improvement

efforts will fail.” — Todd Eyler, Gartner

SLIDE 50

ACORD Standards Cartoon

SLIDE 51

London office:LUC - Suite 2/53 Minster CourtMincing LaneLondon EC3R 7DD UK+44 207 617 6400

World Headquarters:Two Blue Hill Plaza3rd FloorPearl River, NY 10965 USA

+1 845 620 1700