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Life Health > Life Insurance

How The Life Reinsurance Industry Could Benefit From Data Standards

By Matt Brady

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Data standards could prove to be a significant benefit to the life reinsurance industry, if only more companies would adopt them, according to several speakers at a recent meeting.

At a session during the ACORD LOMA Insurance Systems Forum here last month, Lloyd Chumbley, ACORD assistant vice president of standards, noted that prior to last year, much of the implementation of data standards among life reinsurers and ceding companies was occurring “below the radar.” In fact, he said, much of the discussion at a meeting in 2005 revolved around what became known as the “silent implementation” of standards within the life reinsurance community.

During that meeting, participants agreed that more focus needed to be put on promoting life reinsurance and, he added, the issue has made some progress.

“As a result of that, in the past year a lot of things have moved above the radar,” Chumbley said.

But a great deal of work remains to be done, according to Leroy McCarty, vice president of reinsurance operations for Transamerica Occidental Life Insurance Company.

In the past, he said, the implementation of data standards in life reinsurance has been slowed by two major obstacles. First, he said, reinsurers and ceding companies were unable to reach any consensus on what standards were necessary and which were more of a luxury.

Second, McCarty explained, “cedents weren’t willing to spend any time and money” on implementing standards, and reinsurance companies did not have the leverage to force the change.

As a result, McCarty said, data standards implementation “isn’t a reinsurer problem” for the life industry, but “it’s a cedent problem.”

But the times are changing, he added, and “reinsurers are in a much better position to say ‘you’re going to have to do it; you’re going to have to get on board,’” with data standards.

Transamerica has been working to implement ACORD’s XML data standards, and McCarty said the process has produced several significant benefits, not the least of which is what he called “tangible goodwill,” among the company’s reinsurers.

“The fact that we’re making progress” in implementation and investing in data standards has made a difference in the company’s dealing with its reinsurers when problems do arise. “There’s an awful lot of latitude,” he explained.

Going forward, McCarty said the next step is to work on data certification, which would allow reinsurers and ceding companies to be sure their data has not been changed as files have moved through company systems, or how and when any changes were made.

“Any time you have systems passing data, at any one of those touch points you have the opportunity for something to break down,” McCarty noted. Using data certification would allow ceding companies to tell their reinsurers that the data they are providing is the same as the data initially collected.

Simon Bell, chief operating officer of Toronto-based LOGiQ3, which worked with ACORD on an implementation guide for its life reinsurance data standards, also spoke of data standards implementation as a step toward a larger goal, which from his perspective is for companies to be able to provide data “in as close to real time as possible.”

Currently, however, there are too many different types of standards being used by companies to have any industrywide cohesiveness. “There are lots of proprietary standards out there,” Bell explained, “and they change frequently and, often, randomly.”

ACORD has been working to promote an industrywide standard that would standardize what files should contain and what that data means, and has formed a working group with the Reinsurance Administration Professionals Association to further that goal.

More than anything else, however, Chumbley said the industry would benefit from more ceding companies implementing ACORD standards. “We need more cedents,” he said, adding that ACORD is “committed” to bringing more companies on board.

McCarty added reinsurers could do more to attract ceding companies to data standards, offering better pricing and retention to those companies that employ them.

“If you reward cedents,” he said, “then they’ll respond.”

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