acord xbrl whitepaper

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ACORD & XBRL US: White Paper

XML Standards and the Insurance Value Chain

F E B R U A R Y 2 0 0 5


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Acknowledgements

The authors of this white paper wish to thank the Executive Review Committee for their participation, input

and recommendations.

Igor Best-Devereaux, CEO eReinsure

John Hodge, Global Chief Information Officer XL Capital

Barbara Koster, Chief Information Officer

Prudential Financial

Mel Kwassman, Financial Examiner Department New York State Insurance

Michael Ohata, Director of Business Reporting Finance - Global Platforms and Operations Microsoft

Alex Spencer, Chief Deputy

North Carolina Department of Insurance


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Table of Contents

Introduction ................................................................................................................................................1

Goals and Objectives ....................................................................................................................................1

Defining the Languages ................................................................................................................................2

XML: The Basics ..........................................................................................................................................3

XML and Document Standardization ..........................................................................................................3

The Insurance Value Chain ..........................................................................................................................4

ACORD XML..............................................................................................................................................4

XBRL GL, The Journal Taxonomy ..............................................................................................................5

Enterprise Business Reporting ......................................................................................................................6

The Full Data Flow ......................................................................................................................................7

Improving the Data Flow: The Banking Industry....................................................................................8

Improving Data Flow: The Potentials of Harmonization for the Industry ..............................................9

The Future....................................................................................................................................................9

Future Benefits ..........................................................................................................................................10

Appendix A: ACORD............................................................................................................................11

Appendix B: XBRL ................................................................................................................................11

Appendix C: Benefits of Standards ........................................................................................................12

Examples of the Benefits Standards ......................................................................................................12

Third Party Analysis of Standards ........................................................................................................12

Benefits of ACORD XML ..................................................................................................................13

XBRL Benefits............................................................................................................................................14

Appendix D: Terms and Definitions ......................................................................................................16

Appendix E: Website References ............................................................................................................17

Appendix F: Recognition and Participation............................................................................................18

Appendix G: Additional Information and Contacts ..............................................................................18

Figure 1: The Big Picture: XML, ACORD, XBRL ..........................................................................................2

Figure 2 : Standards Organizations in the Financial Services Community ........................................................3

Figure 3: The Insurance Value Chain ............................................................................................................4

Figure 4: ACORD Standards for Transaction Processing ..................................................................................5

Figure 5: ACORD and XBRL Data Field Mapping ........................................................................................6

Figure 6: Insurance Industry Data Flow ..........................................................................................................7

Figure 7: Banking System Old Process ............................................................................................................8

Figure 8: Insurance Industry Data Flow ..........................................................................................................9

Figure 9 : Working Together..........................................................................................................................10

Figure 10 : Standards Provide Proven ROI I ................................................................................................12


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exploratory venture. It may, in fact, promote more dis-

cussion and questions than it answers. However, this is

essential for the industry and for improved data flow.

This paper by no means has all the answers.

HarmonizationFinding harmonization between ACORD XML stan-

dards at the business operational level and XBRL stan-

dards at the internal enterprise business reporting level is

another potential outcome of this venture. This linkage

would form a common data set that could create the

standard for moving this type of information across the

insurance value chain. In addition, these harmonized

data standards can be used by insurance companies

within their internal business reporting processes to help

improve controls and facilitate compliance with the

Sarbanes-Oxley Act (SOX).

Issues, Regulations, and Data

With the industry as a whole dealing with new demands

on data such as Sarbanes-Oxley, corporate governance,

risk management, and internal controls and manage-

ment, there is a clear need for improving how data is

received and moved. To facilitate this activity, whether

you are a carrier, regulator, reinsurer, solution provider,

distributor, or other, establishing a common standard

for communication and naming is essential. The elimi-

nation of redundant data entry, data interpreters andconverters, manual intervention, and a host of other

activities is needed to create this improved flow among

all partners.

Outstanding Issues

Many issues are raised when exploring the “free flow”

of information. Confidentiality, security, and proprietary

data are just some of the obstacles which must be

addressed. However, at this time, we are still taking our

first steps. This paper raises these issues which the

organizations and the industry will tackle as workprogresses.

Potential Benefits

The potential benefits of this effort are great. This

“handshake” of standards could lead to improved data

quality, increased access to data, and increased opportu-

nities to automate, further facilitating communication

and increasing overall efficiency. In addition, harmo-

nized standards could be leveraged by companies to

help reduce the cost of their ongoing compliance efforts

associated with Sarbanes-Oxley.

Defining the Language

ACORD XML and XBRL each have distinct roles in a world where we can systematically structure data, trans-

actions, and reporting on a common platform. Both

ACORD and XBRL use XML as a foundation for their

specific standards. What ACORD and XBRL provide

are the XML vocabularies, or taxonomies, specific to

that segment of the value chain.

ACORD provides the forum where the industry agrees

upon the data set needed for transaction processing for

the insurance industry — the common names and defi-

nitions. Where the insurance industry requires data names and definitions specific to another industry, such

as communicating insurance information to lenders,

we look to that industry’s consortium. For example,

MISMO (Mortgage Industry Standards Maintenance

Organization) should look to ACORD for the attributes

of a policy number or coverage.

Similarly, the XBRL International organization provides

this same service for enterprise business reporting in the

insurance world. By developing enterprise business

reporting taxonomies like US GAAP (US Generally

Accepted Accounting Principles) or IFRS (International

Financial Reporting Standards), jurisdictional users of XBRL technology, such as the XBRL US organization

and the IASCF (International Accounting Standards

Committee Foundation), fill a niche outside of the pro-

cessing world of the insurance industry. They enable

companies to tag each data element in their enterprise

business reporting and/or financial statements in a con-

sistent manner.

ACORD & XBRL 2

Figure 1: The Big Picture: XML, ACORD, XBRL


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XML: The Basics

XML is a universal format for data on the web and

is maintained by the World Wide Web Consortium

(W3C), the Internet standards body that is responsible

for HTML and a wide range of other Internet

protocols. It provides a framework to develop tags

that identify data elements (i.e. a schema) and

establish the relationships between multiple data

elements (a data model or “vocabulary”).

“It is called extensible because it is not a fixed format

like HTML (a single, predefined markup language).

Instead, XML is actually a ‘metalanguage’ —a language

for describing other languages—which lets you design

your own customized markup languages for limitless

different types of documents. XML can do this because

it's written in SGML, the international standard meta-

language for text markup systems (ISO 8879)” (from

W3C, http://www.ucc.ie:8080/cocoon/xmlfaq).

The promise of XML was its extensibility for supporting

schemas and definitions of vocabularies. Using XML as

the foundation, a variety of industries have created or

have started creating standards for industry-based XML

use. For the insurance industry, ACORD and ACORD

XML provide the standards at the processing and trans-

actional level. Enterprise business reporting, not only for

the insurance industry but also for other industries in

general, is maintained by XBRL

XML and Document StandardizationThe insurance industry has long recognized the impor-

tance of document standardization. However, until

XML, no tool has been useful for the exchange of infor-

mation within documents. This has become critical in

light of dramatic changes in the Internet environment.

With the emergence of such technologies as Web

Services, information exchange has been moved from

the document level to the data level. This means that

individual fields on forms, or concepts in a report, can

be extracted, analyzed or used in other business process-

es. They are no longer locked into a document.

Information can be instantly extracted and re-used in

analytical or reporting software without the need for

manual searching, “copying and pasting” or re-keying.

The reason information can move from file to file

instead of from file to hands to file is the use of the uni-

versal language, XML. XML uses “tags” to describe and

provide context for each piece of data and text so that it

can be shared and processed by disparate types and

brands of software, regardless of which software sends or

receives the information.

These tags are generally grouped into one of a growing

number of vocabularies, which are “dictionaries” of

terms and the relationships between terms that have

universally agreed definitions. Applying XML tags to

data enables direct communication between all software,

ACORD & XBRL 3

Figure 2 : Standards Organizations in theFinancial Services Community


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feed the data to the insurance company via the transac-tion cycle. The data is then fed from the insurance com-

pany back into the transaction cycle or on to the exter-

nal enterprise business reporting cycle. The XML

Standards shown above are maintained by ACORD.

ACORD maintains the XML standards for Life and

Annuity, Property & Casualty, Surety, Long Term Care,

Disability, and Reinsurance for Life and Property &

Casualty operational communications. ACORD also

maintains the EDI (electronic data interchange) stan-

dards to enable agency management systems and carriersto upload and download large amounts of information

from each other. In addition to the XML standards,

ACORD maintains both paper and electronic forms —

which will also provide XML capabilities in the

near future.

ACORD XML standards are created, developed, and

voted upon by its membership which includes carriers,

agents, brokers, distributors, and solution providers.

ACORD, as an entity, maintains these standards and

provides the forum for development and works with themembership to foster implementation.

XBRL GL, The Journal Taxonomy

XBRL GL, the Journal Taxonomy, is an extensible stan-

dard designed to represent the data fields found in a

typical accounting system. It has robust and detailed

ways to represent general ledger accounts; resourcesconsumed or used, identifiers for the parties engaged in

the transaction, and links to the eventual reporting

summary fields. This means that transactions that look

different can all be transformed into a common data

format by mapping from the unique format of individ-

ual incoming data types to the common format of

XBRL GL.

XBRL GL’s modules include:

• a core module of data fields common to all industries

and jurisdictions,• extensions for jurisdictions (e.g., US/UK Advanced

Accounting),

• extensions for special needs (Multi-currency, Advanced

Business Facts), and

• extensions for industries.

In the case of insurance industry transactions, it is possi-

ble for all relevant ACORD XML transaction sets to be

mapped to the XBRL GL (figure 5.) It is anticipated

that such a mapping will be completed as part of a

future collaboration between ACORD and XBRL US.Transforming data to a common format has many possi-

ble benefits. First, in today’s environment of increased

concerns over internal control, a common data format

allows the creation of a single, unified and standardized

audit trail. With XBRL GL as a basis for a standard

audit trail, information about the source document

(such as links to an online document retention system)

and eventual summarization (such as an XBRL report-

ACORD & XBRL 5

Figure 4: ACORD Standards for Transaction Processing


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ing taxonomy element for summarized, aggregated and

filtered reports) can be maintained. XBRL enhances

reporting capabilities by allowing “drill-up” and “drill-

down” – or “drill-around” – functionality. Moving

information from one system to another for data consol-

idation, migration, or just to avoid manual reentry is

facilitated as well. For insurance companies in the

future, leveraging the combined functionality of

ACORD and XBRL GL enables greater interoperability

of transactional ledger level data which enhances a wide

variety of enterprise operational, performance and risk assessments.

Enterprise Business Reporting

Many insurance companies prepare reports in accor-

dance with Generally Accepted Accounting Principles

(GAAP), Statutory Accounting Principles (SAP) and

other externally and internally mandated principles such

as for income taxes, operational, performance and risk

assessments. The regulated nature of the insurance sec-

tor increases the reporting requirements relative tocompanies operating in other less regulated industries,

such as manufacturing.

Leveraging information standards (i.e. ACORD,

XBRL) enables insurance companies to standardize and

therefore automate many of these externally mandated

(GAAP, SAP, Tax) and internally mandated (operational,

risk and performance) reporting processes. The use of

consistent enterprise wide information standards articu-

lated in the XBRL interoperable format transform an

insurance company’s internal information environment

from a series of disparate systems and sub-systems into a

more seamless network; information “silos” no longer

exist. Data enters the system “ready to re-use” and

moves more accurately and reliably between operational

areas and from transaction systems into reporting

systems.

As the XBRL format becomes more pervasive acrosssoftware applications, both external and internal analysts

will interact with XBRL exactly as they interact with

business data today— directly through their desktop

and analytical tools. XBRL taxonomies allow desktop

tools to automatically pull requested business informa-

tion directly in upon request. Analysts can work directly

with XBRL, adding additional data points and analysis

conclusions as they go. XBRL promotes faster turn-

around between events and decisions and enable man-

agers to expand the scope of their analyses to incorpo-

rate data related to key performance indicators that weredifficult or impossible to track before. For internal

analysis purposes, they may rely upon ACORD defini-

tions such as premium, rating basis, incurred loss or

others such as customer penetration, claims ratios, and

asset quality. This enterprise reporting environment will

result in fewer resources applied to data aggregation and

manipulation with more applied to value added analysis.

To facilitate increased efficiencies for external reporting

ACORD & XBRL 6

Figure 5: ACORD and XBRL Data Field Mapping


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purposes, the XBRL US - Domain and IGIS are devel-

oping a U.S. GAAP taxonomy for insurance companies.

A public draft of the insurance GAAP taxonomy was

released in 2004. This taxonomy will allow insurance

companies to more efficiently prepare their external

GAAP financial statements. Business information for-matted in this interoperable format standard adds to the

transparency for reported information; because investors,

regulators, and rating agencies will be better able to more

efficiently consume the company’s reported information.

As XBRL increases the efficiency of information produc-

tion and consumption, regulators and intermediaries

around the world are beginning to leverage it for their

market segments. The U.S. Securities and Exchange

Commission (SEC) has recently announced that it will

seek public comment on the cost and benefits associated with tagged data. The SEC is also considering a proposal

to accept voluntary supplemental filings of financial data

using XBRL. This proposal, if accepted, would allow reg-

istrants to submit voluntary supplemental filings in

XBRL for the 2004 calendar year-end reporting season.

In addition, the National Association of Insurance

Commissioners (NAIC) has developed an XBRL Study

Group to further understand and explore how the

NAIC and state regulators might utilize the XBRL stan-dard.

The Full Data Flow

From individual transactions to the financial statements,

ACORD XML and XBRL standards should sit at the

hub of an insurance company’s data flow. Having such

standards at the hub will help an insurance company

effectively and efficiently pass data accurately to all of

the players within the insurance value chain. This is

reflected in Figure 6.

For internal reporting purposes, information standards

provide a range of benefits described in the next section.

Standardization of information specific to internal

ACORD & XBRL 7

Figure 6: Insurance Industry Data Flow


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reporting processes (e.g. standard chart of accounts)

provides:

• Increased access to greater details and levels of infor-

mation.

• Lower costs of production, distribution, consumption,

and analysis.• Enhanced controls through the greater access to data.

• Lower control costs as data can be moved to the con-

trol rather than vice versa.

• Accelerated frequency of production and analysis

processes.

Today, financial data is kept on a variety of disparate

systems and spreadsheets through out an insurance com-

pany. This financial data flows through the organization

in variety of ways including email. Controls are neces-

sary to ensure the integrity of the financial data as itpasses through the organization. In the future, ACORD

XML and XBRL tagged data will help an insurance

company ensure that its data flows throughout its

organization in a more controlled manner. Once data is

tagged, it is less susceptible to clerical error or manipula-

tion. When internal data is tagged in an interoperable

manner and is therefore highly portable, it influences

the nature and application placement of controls (e.g.

more likely to apply monitoring controls) which is par-

ticularly relevant in helping a company improve its

internal control environment and manage the ongoing cost of compliance.

Improving the Data Flow: The BankingIndustry

The banking industry is in the process of updating its

Call Report process to leverage some of the benefits of

commons data standards and XBRL. Under the “Old

Process” (figure 7) a bank would submit a variety ofCall Reports to the different federal agencies that

regulated it.

Under the “New Process”(figure 8) a bank would sub-

mit one Call Report to the Federal Financial Institutions

Examination Council’s (FFIEC) clearing house, which

in turn would pass the information onto the various

regulators through the use of XBRL and web servicing.

This new process is made possible by the various regula-

tors agreeing on the basic information that each needed.Once the information standards were determined,

XBRL was able to provide the standards to transport the

information so each of the regulators will be able to use

the information within its own agency. This also

requires a reengineering of the systems as well.

This new process represents a big plus for the banking

regulators. Today, it takes between 60 to 75 days to

receive, validate and publish the Call Report filings. It is

anticipated that it will only take 2 days under the new

process. This reduction in processing time will result inbig cost savings. The new process is expected to save the

regulators $26 million dollars over the next 10 years.

ACORD & XBRL 8

Figure 7: Banking System Old Process


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Improving Data Flow: The Potentials of

Harmonization for the IndustrySo what does harmonization mean for the insurance

industry? For ACORD and XBRL, this is an area to be

determined. The extent of harmonization has yet to be

explored. Discussions and meetings, focus groups, tech-

nological input, and business input will direct the future

activities and explorations.

The focus remains on improving the communication

flow from operations to accounting to actuarial

activities.

In some cases, harmonization may mean agreeing upon

common data names and definitions. In other cases, the

same name for an element may have different defini-

tions in the ACORD and XBRL data flows. Technology

will allow us to use a common data name with different

definitions without collision in the XML world — this

is normally referred to as namespaces.

The Future

The future is quite clear in some respects. XML is and

will remain for some time, the de facto language for

transporting data over the Internet and among systems.

Its acceptance and use throughout a myriad of indus-

tries proves its utility as well as its flexibility.

Also clear is that standards are an essential part of this

XML communication process. Organizations such as

ACORD and XBRL US show that a common language

and a common vocabulary make these communicationspossible in a more efficient and cost effective way.

ACORD and XBRL are committed to working together

towards harmonization. Initiatives to familiarize our

two communities with our respective standards and

projects to identify areas where interoperability will

create efficiencies for the industry will be a byproduct of

this white paper. The exact approach to harmonization

that will be needed will be identified through future ini-

tiatives. The naming conventions and architectural and

business rules will surely vary between the two stan-dards. We will look at opportunities to agree to com-

mon definitions, map between the two standards, create

new taxonomies together, and agree on namespaces.

However, it should be clearly noted that while the

prospect for such harmonization and cooperation

exist, numerous issues are being raised, such as privacy,

proprietary data, and degrees of harmonization, that

must be addressed by the organizations, their member-

ship, and the insurance industry as a whole. This is a

first step in what may be a complex and long road butalways moving towards the overall vision of greater

efficiency and improved communication is critical. As

work progresses and both organizations receive industry

input, these issues will be explored and solutions found.

ACORD & XBRL 9

Figure 8: Banking System New Process


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Future Benefits

Following the vision of harmonized data standards

between ACORD and XBRL, many potential benefits

would be possible.

Today, the movement of data from operations to actuar-

ial spreadsheets varies greatly. While standards and har-

monization are far from a “silver bullet” to make this

seamless and acknowledging that human intervention

will be a part of this activity, there is the potential to

make this process flow more smoothly. One possibility

— companies might be able to use these standards to

move claim data tagged in ACORD XML to an actuari-

al spreadsheet used to calculated loss and loss adjust-

ment expense reserves. The company’s actuaries and

management would then be able select the appropriate

ultimate loss factors enabling the spreadsheet to calcu-

late the loss and loss adjustment expense reserves. These

balances could then be tagged in XBRL and fed to the

general ledger for both internal and external financial

reporting. This is but one possibility

This same concept applies to the movement of data for

risk management. During meetings with RIMS (Risk

and Insurance Management Society), AIRMIC

(Association of Insurance and Risk Managers), and

other risk management personnel and associations, it

has become clear that there is a need for moving thedata more efficiently for improved analysis.

In the future, it is possible that data flow will become

even more important in light of the Section 404

requirements of Sarbanes-Oxley Act. Controls around

the completeness, existence and accuracy of data are at

the heart of the Section 404 requirement. Companies

that were required to comply with this section by

December 31, 2004 have spent many months docu-

menting their financial reporting and transactional

processes and internal controls. In many cases, these

efforts have identified opportunities to strengthen con-

trols and/or achieve greater efficiencies. While compa-

nies are looking to remediate the more serious internalcontrol issues in the short-term in some fashion, they

will likely not look to implement longer-term solutions

for many of the process and control improvement

opportunities identified as part of the Sarbanes-Oxley

404 effort until later. Companies should assess the

potential for ACORD XML and XBRL solutions to

help address these opportunities as they move forward.

Creating and harmonizing standards for the insurance

value chain is a difficult but worthwhile endeavor.

However, this endeavor needs to be undertaken with aneye to adoption, where the success of the standards will

be determined. In creating these harmonized standards

ACORD, XBRL, insurance companies, regulators and

other interested parties need to work together. A coor-

dinated discussion of standards in an open forum, so

everyone's voice can be heard and concerns addressed,

will lead to a harmonization that everyone can embrace.

This coupled with support from the regulatory commu-

nity who are also actively following these processes and

looking to enact standards in a timeframe respectful of

the current regulatory demand on insurance companies will also increase the likelihood of success for the har-

monized ACORD and XBRL standards.

ACORD & XBRL 10

Figure 9: Working Together


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Appendix A: ACORD

ACORD (Association for Cooperative Research and

Development) is a non-profit insurance association

whose mission is to facilitate the development and use

of global standards for the insurance and related finan-

cial services industries. It is an objective, independent

advocate for sharing information among diverse plat-

forms.

ACORD’s goal is to provide standards and services that

improve efficiency and expand market reach by:

• Reducing costs.

• Reducing duplication of work and ambiguous

communication exchanges.

• Improving accuracy.

• Facilitating e-business.

• Supporting multiple distribution models.

ACORD XML provides a foundation for real-time

exchange of data among producers, insurers, rating

bureaus, service providers and others. The specifications

were developed and enhanced by ACORD Members.

New developments are presented either as proposals for

working groups and/or as proposed changes to future

specification releases. The ACORD Steering

Committees oversee the development of the specifica-

tions and determine which new working group propos-

als will move forward.

ACORD is responsible for maintaining and implement-

ing the standards for the transaction and processing side

of the insurance industry including developing data tag-

ging, models, naming conventions and schemas for

transactional processing of life and annuity, long term

care and disability, property and casualty and reinsur-

ance. In addition to maintaining the standards in com-

pliance with local, state, and federal requirements

throughout the United States, ACORD also maintains

the standards for some other global geographies and

cross border transactions, such as subscription markets

and reinsurance.

Appendix B: XBRL

XBRL (eXtensible Business Reporting Language) is the

XML-based standard for identifying and better commu-

nicating the complex business information in corporate

business reports. XBRL makes the analysis and exchange

of corporate business information easier and more reli-

able.

XBRL is a royalty-free, open specification for software

and is being developed by a non-profit consortium con-

sisting of over 250 leading companies, associations, andgovernment agencies around the world. Anyone inter-

ested in applying XBRL to enterprise business reporting

processes can receive a license from XBRL International.

XML is an open standard that anyone can use, which

has a potential downside: the entire purpose of facilitat-

ing direct data exchange will be lost unless the same

tags, i.e., the same data definitions and contexts, are

applied across supply chains. XBRL International is

dedicated to developing and promoting XBRL standards

to ensure that the consistency needed for direct data

exchange is achieved. XBRL International is organized

into various geographical jurisdictions. The XBRL –

US jurisdiction is charged with developing XBRL stan-

dards in the US. A working group within XBRL –US

called "US – Domain" is responsible for developing

XBRL taxonomies for US GAAP. A subcommittee of

US – Domain called "Insurance GAAP Insurance

Statutory (IGIS)" is responsible for developing tax-

onomies for the insurance industry in the US.


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Appendix C: Benefits of Standards

Even though the data needs of constituencies may be

different throughout the insurance value chain, the

importance of creating and implementing standards

remains the same. There is a wide array of benefits for

companies instituting XML-based data standardsincluding:

• Cost Savings

• Increased Efficiency

• Improved Client Communications

• Decreased Errors

• Improved Analytical Capabilities

Examples of the Benefits Standards

• Standards increase the likelihood that an integrationbetween two disparate systems will be successful by

reducing the number of interfaces required to commu-

nicate among systems, as well as, internally and exter-

nally eliminating the costs associated with building

and maintaining “translators.”

• Standards reduce the time and cost of implementing

interfaces to partners and vendors as well as among

internal systems.

• Standards create a single vocabulary allowing all those

involved in the insurance value chain to communicate

efficiently and effectively and leveling the playing field

linguistically. Communications flow can be achieved

without interruption.

• Standards reduce data translation errors from inde-pendently produced interfaces and errors caused due

to manual re-entry.

• Financial analysis will be improved as digital data can

be more accurately and quickly consumed by analysts.

Enterprise business reporting can be improved

through the automated production of reports that

eliminate errors caused by re-keying information.

Third Party Analysis of StandardsThe true benefits of standards, particularly for efficiency

and cost savings, are apparent and quantifiable. A 2002

Celent Communications analysis, ACORD XML

Standards in US Insurance found the following:

• Some carriers report efficiencies on projects as great

as 80%, however most can achieve or had already

achieved integration efficiencies on the order of

20%-30% by using ACORD XML standards.

• A 20%-30% reduction in integration costs would

reduce integration from 23% of new project budgetsto between 15%-20%.

• If embraced universally, use of standards could save

the industry over US$250 million in technology costs

annually.

• Business units have seen efficiencies of 25-50% on

subsequent integrations after adopting standards.

• Companies have seen efficiencies of 60% on integra-

tion with external technology vendors.

ACORD & XBRL 12

Figure 12 : Standards Provide Proven ROI, Insurance CIO/CTO Pressures Priorities, Projects and Plans: 2003, Survey Results,

Celent Communications, November 2003.


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Benefits of ACORD XML

While the benefits of data standards and of XML in

particular are true across all industries and across all

domains within our industry, there are unique aspects of

the insurance industry that result in particular benefits

of the application of data standards at the transactionprocessing level.

ACORD represents members from life, annuity, proper-

ty & casualty, surety, long term care and disability, and

reinsurance for life and p&c globally. ACORD mem-

bers have worked to establish and implement these stan-

dards to better communicate data internally and exter-

nally.

Partner to Partner Integration A central repository for the common data elements and

agreed upon definitions are essential to an industry

where collaboration with external business partners is

key. The sharing of data across risk managers, independ-

ent and captive intermediaries as well as insurers, plat-

forms, reinsurers and regulators loses meaning with each

transaction, unless the common language is in place.

ACORD has worked with all of the partners in the

value chain to agree upon that language and establish

the data standards.

Internal Integration

Of concern to the insurance industry is the need for

disparate systems to communicate in order to complete

a business process. The ability for a claims system to go

out to a policy system to verify coverage and to ensure

that the claim is correctly coded is essential to the

smooth and swift settlement of the claim, reserving and

accurate statistical coding and reporting to regulatory

authorities. This shows the need for ACORD XML

standards to communicate items such as claim number

and policy number from system to system.

Electronic Data Sharing

The events of 9/11 and its ramifications to exposure

location data highlight the importance of data quality

and transparency. Carriers cannot receive exposure

information in disparate and incompatible formats if

they are to effectively identify aggregation of exposure

across customers and lines of business. Reinsurers are

demanding increased visibility into cedent risk

portfolios for underwriting, audit and sustained

profitability. This type of information cannot be

successfully captured and analyzed in multiple formats

across partners. ACORD data standards provide this

common format and definitions needed for thisextensive exposure analysis.

Web Services

Web Services are being used for real time integration

throughout the insurance industry transaction process-

ing cycle. Examples include:

• Integrating backend systems with an agent portal

• Communicating with service providers such as body

shops, glass companies, hospitals

• Enabling transactions for reinsurance placement and

technical accounting

For real time communication with trading partners,

ACORD standards have become essential for these

processes.

Document Repository Standards

While there will never be a single repository for all risk

related information, the need for consistency across data

repositories is growing. ACORD XML standards were

established to allow trading partners to share structured

and unstructured documents and data stored in a varietyof third party systems through brokers, regulators, and

TPA’s of all types. ACORD released version 1 of the

Document Repository Interface Standards in 2004 to

allow access to free format documentation for improved

decision making.

Improved Cash Flow

Implementing ACORD XML standards has led to

quicker transaction processing. This ultimately allows

faster access to money – premium payments, commis-

sion payments, claims payments.

Global players need to have a standard that is adopt-

ed across the enterprise.

Companies dealing in multiple jurisdictions — whether

states or countries — have to deal with a myriad of

regulatory and business requirements. ACORD XML

standards have been implemented globally as well as

locally to enable companies to speak the same language

ACORD & XBRL 13


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internally and then facilitate both current and future

communications across companies and borders.

XBRL Benefits

Insurance companies can realize significant benefits by

deploying XML standards, like XBRL, over existing internal systems, insurance companies can migrate more

information production and consumption to the Web,

eliminating manual processing — and its costs. Current

systems and software can understand and process XML

enabled information, therefore, deploying XBRL stan-

dards for enterprise business reporting could facilitate

the following efficiencies in the enterprise business

reporting process in a relatively short time:

• Re-deploying resources from low value “data shovel-

ing” tasks to those more meaningful to the business.

• Increasing data accuracy by minimizing the risk of manual transcription errors.

• Preserving data integrity through a “hands free” infor-

mation environment and ability to more easily trace

information directly to its originating source.

• Facilitating instant internal and external report

creation at any time.

• Facilitating management access to more of the infor-

mation resident in company systems directly through

analytical tools for better, more informed decisions.

• Strengthening management controls by establishing

direct information feeds from enterprise systems tomonitoring processes.

• Facilitating the audit function by providing a better

audit trail for each item of information.

Based upon the above noted benefits, it is most likely

that XBRL standards are going to generate positive

change in the following areas:

• Preparation of consolidated management and

enterprise business reports

XBRL will streamline the consolidation processes fororganizations that currently utilize reporting systems

that are not on a common platform. This will result in

both a more timely gathering process and will facilitate

the re-use of the information for varying types of

reporting and analysis. Uploading of information and

reconciliation will be greatly reduced as XBRL draws

upon a single source of data for multiple re-uses (i.e.

financial statements, separate account reporting, tax

returns, press releases etc).

• Enterprise business reporting applications

XBRL will enable more timely and accurate inter-

nal/management analysis based upon single input of data across products, geographies, distribution chan-

nels, businesses processes, or any other specified and

mapped criteria.

• Actuarial analysis

XBRL will allow less costly, timelier and more accurate

preparation of loss reserve analyses and other actuarial

reports because XBRL is a common format that helps

organizations to aggregate detailed information from

disparate financial information sources (i.e. Schedule

P, internal loss reserving, benchmarking among peersand across the industry).

• Credit analysis of reinsurers and other business

partners such as MGA’s

XBRL will enable less costly and more real-time analy-

sis of enterprise business information for assessing the

financial stability of reinsurers and other business

partners.

• Investment portfolio analysis

XBRL will enable more timely and flexible enterprisebusiness analysis of investments on both a portfolio

basis and an individual investment basis. Elements

of analysis include financial performance as well as

non-financial measures and communications.

• Corporate insured risks

XBRL will enable greater transparency for insurers

regarding financial and business operations of their

corporate insured entities and risks. Greater trans-

parency can be utilized in the context of improved

underwriting of new business and continuousmonitoring of existing risks.

• Competitor analysis

XBRL will enable tailored analysis of competitor

financial and business information (including

benchmarking) in a timely and efficient manner with

resources redirected from information gathering to

information analysis.

ACORD & XBRL 14


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Appendix D: Terms and Definitions

ACORD Association for Cooperative Operations Research and Development (http://www.acord.org)

AICPA American Institute of Certified Public Accountants (http://www.aicpa.org)

ARMIC Association of Insurance and Risk Managers (http://www.airmic.com)

HR-XML Human Resources XML Consortium (http://www.hr-xml.org)

IFRS International Financial Reporting Standards (http://www.iasb.org)

IASA Insurance Accounting and Systems Association (http://www.iasa.org)

IASB International Accounting Board Standards (http://www.iasb.org)

IASCF International Accounting Standards Committee Foundation (http://www.iasb.org)

IGIS Insurance GAAP Insurance Statutory

ISO International Standards Organization.Information provider for property and liability risk. (http://www.iso.ch)

Metadata Data about data. Metadata describes how and when and by whom a particular set of data was collected, and how the data is formatted. Metadata is essential for understanding infor-mation stored in data warehouses and has become increasingly important in XML-based Web applications.

MISMO Mortgage Industry Standards Maintenance Organization (http://www.mismo.org)

NAIC National Association of Insurance Commissioners

Namespace A namespace uniquely identifies a set of names so that there is no ambiguity when objectshaving different origins but the same names are mixed together. An XML namespace is a collection of element type and attribute names.

RIMS Risk and Insurance Management Society (http://www.RIMS.org)SEC U.S. Securities and Exchange Commission

Schema A diagrammatic representation; an outline or model.

Tag An identification of a single or grouping of data elements that allows the definition of theelement to accompany the specific piece of data.

Taxonomy A set of tags used to relate items, defined by a schema and a set of linkbases

US GAAP US Generally Accepted Accounting Principles

Value Chain A group of companies or individuals working together to reach a common goal that bene-fits everyone.

W3C World Wide Web Consortium (http://www.w3c.org) maintains the general XML standards. XBRL eXtensible Business Reporting Language (XBRL) is a collaborative agreement of the busi-

ness reporting supply chain on how to use XML to represent business reporting data.(http://www.xbrl.org)

XML eXtensible Markup Language (XML) is an Internet-based standard for creating metalan-guages, a tool for providing new tools to add structure and validation to documents anddata on the web and is maintained by the W3C.



Apendix E: Website References

ACORD and XBRL White Paper Excerpt http://www.acord.org/news/pdf/ACORD_XBRL.pdf

ACORD XML for Life Standards http://www.acord.org/Standards/lifexml.aspx

ACORD XML for P&C Standards http://www.acord.org/Standards/propertyxml.aspx

ACORD Implementation Guides & Reports http://www.acord.org/Resources/im_reports.aspx

SEC Announcement on XBRL http://www.sec.gov/news/press/2004-97.htm

XBRL Web Services http://www.nasdaq.com/xbrlws

XBRL White Paper Corporate Reporting http://www.fei.org/rfbookstoreand the Internet

Primary Web Sites

ACORD http://www.acord.org XBRL International http://www.xbrl.org

IASA http://www.iasa.org

Case Studies

ACORD Case Studies http://www.acord.org/standards/case.aspx

System Demonstration

Other Documents

XBRL Demonstration http://www.xbrl.org/XBRLDemos

XBRL Taxonomy

Insurance GAAP Taxonomy http://www.xbrl.org/us/fr/gaap/ins/2004-08-15/us-gaap-ins%20Summary%20Page.htm


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• Beth Grossman, Assistant Vice President, Industry Relations, ACORD

• Paul L. Horgan, Partner, PricewaterhouseCoopers; Co-Chair, XBRL US InsuranceGAAP and Insurance Statutory Working Group (IGIS)

• Gary A. Wicklund, Executive Director, Capricorn Research; Co-Chair, IGIS, XBRL USDomain Working Group Member

• Michael Carroll, Communications Specialist, ACORD

• Eric E. Cohen, PricewaterhouseCoopers Past Chair, XBRL US Steering Committee

• Thomas Finnell, Partner, Ernst & Young

• Robert E. Lembach, Goldman Sachs; IGIS Member, XBRL US

Domain Working Group Member• J. Louis Matherne, CPA, President, XBRL International; Director, XBRL, AICPA

• Yossef Newman, Senior Manager, Assurance Technology and Innovation Team Deloitte;Vice Chair, XBRL US Domain Working Group

• Paul A. Penler, Ernst & Young; Chair, XBRL US Steering Committee

• Ray Pietrunti, Information Systems Specialist/Data Steward, MetLife

• Campbell Pryde, Partner, Risk and Advisory Services, KPMG; Chair, XBRL US Domain Working Group

Appendix F: Recognition and Participation

Participants in the development and creation of this document were:

Appendix G: Additional Information and Contacts

For additional information on this white paper, contact:Karl Best, XBRL-US, 201-938-3920, [email protected] Beth Grossman, ACORD, 845-620-1700 ext. 421, [email protected]

For additional information on ACORD, contact:Beth Grossman, ACORD, 845-620-1700 ext. 421, [email protected]

For additional information on XBRL, contact:Karl Best, XBRL-US, 201-938-3920, [email protected]