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Standards: Will We Ever Get There?

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By Ara C. Trembly

As an aspiring guru in high school and college, I have to admit that mathematics was not my forte. Oh, I could do basic calculations and even enough algebra to ace my physics class. But when we got into more esoteric areas, my writers brain was toast.

That all changed, however, with a unique college course entitled “Concepts of Mathematics.” What made it completely different is that instead of filling blackboards and notebooks with formulas, we simply talked about math and some of the basic concepts that underlie it as a discipline.

One of the most memorable examples from that course was a sort of riddle: If youre standing 10 feet from a wall and with each step you cover half the distance to the wall, how many steps will it take you to reach the wall?

Ill give you a moment to think about this.

The answer, of course, is that you will never reach the wall, because no matter how many steps you take and how miniscule the distance between you and the wall, you will only cover half of that distance.

So why do I bring this up in a supplement devoted to the development of standards in the insurance industry? Precisely because the industry has for years been taking half-the-distance steps toward achieving universal standards of the type that will allow such desirable outcomes as single-entry, multiple-company interface (SEMCI).

In the years Ive been covering the insurance industry, Ive seen plenty of products and technology initiatives that have advanced our knowledge and made our communications more efficient. But as I write this, were not even close to the point where everyone is speaking the same electronic language.

ACORD is to be applauded for taking the lead in standards developmentand thanks to ACORD, we are making progress. Yet insurance doesnt seem to be able to get its arms around standards the way that competing financial services industries have.

Why should this be?

One reason is that insurance companies insist on seeing themselves as combatants, rather than as healthy competitors who share many common interests. As Judy Johnson, formerly an insurance analyst at Meta Group, Stamford, Conn., said a year ago in National Underwriter, carriers continue to “act like a bunch of hostile neighbors” when it comes to transaction standards.

In a sluggish economy, its only natural that carriers would seek to maintain any and every competitive advantage. One way some companies seek to do this is by maintaining proprietary systems, believing this will give them such an advantage. But analyst James Bisker of Needham, Mass.-based TowerGroup pointed out in last years NU Standards Supplement, its unlikely that any companys systems are head and shoulders above anothers.

Then theres the fact that a lack of standards results in inefficient communications with agents and with a carriers own customers. The irony here is that the perceived advantage of proprietary systems is antithetical to the growth of a carriers business–because its more difficult and more time consuming to communicate with that insurer.

Despite this cutting off of the nose to spite ones face approach, however, some insurers continue to believe they will lose something if we really get standards, because it will be easy for agents to “spreadsheet” quotes on a risk, allowing consumers to shop based on price alone. Those carriers who think this way will be dragged kicking and screaming into the standards eraif and when we ever reach that time. Meanwhile, such carriers will continue to pay lip service to the idea of standards by supporting redundant surveys and other half-distance steps that seem to indicate progress, but will never ultimately get us there.

Aiding this attitude of benign impediment is the well-known reluctance of our industry to adopt cutting-edge technologynot that most of the technology were seeing in insurance is actually on the cutting edge. Its just that even technology that is several years old is indeed “new” in this industry.

Most of the action on standards that were seeing from the vendor end is coming from big players like Microsoft and IBM. These and other companies have their own standards agendas that are generally meant to serve many industries. And while they are focusing on verticals like insurance, they are also running up against the phlegmatic pace of technological advance that has characterized insurance.

Yet, despite a climate that would inhibit their progress, standards are moving inexorably toward that wall, even if the steps arent as lengthy as many, including myself, would like.

How can we hasten the journey, and more importantly, make the goal attainable in our lifetime? One way to do so is to let go of the notion that isolated systems represent a competitive advantage. Once more companies see that the alleged advantage is, in fact, a disadvantage, a huge obstacle will have been removed.

It will also help to realize that as parts of the insurance industry, were all in this together. While we will always thrive on competition, we need to find areas of cooperation that will benefit all parties. Certainly, the establishment and implementation of transaction data standards is one such area.

Removing the barriers that have traditionally hamstrung this industrys progress on technology can help eradicate the half-distance-step mentality that has had such a fearsome grip on insurance.

Who knows? Some day, we just may be able to reach out and touch that wall.

Senior Editor Ara C. Trembly is NUs resident tech guru. He may be reached at [email protected].

Reproduced from National Underwriter Edition, May 12, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.