Insurance industry finally adopts XML standard

You’ve heard it time and time again — the life insurance industry prefers their paper processes over electronic ones. But a new survey released by the Canadian Life Insurance Electronic Standards Association shows that more companies are going digital than ever before.

The report, which was introduced to CLEIDIS members at their annual general meeting last Friday, says 68% of the 35 companies surveyed, used XML in 2006 to conduct business with their trading partners. XML, a markup language that easily shares information between computers, is becoming the industry standard for external communication among life insurance companies. According to the survey, 45% of carriers use the language for new business applications status, while 36% use it for commissions.

That’s a huge jump from 2005, when only 14% used electronic processes for new business applications and commissions. In total, 14 of the companies surveyed last year used digital data feeds to communicate with an external trading partner.

Byren Innes, senior vice-president and director of NewLink Group, the organization who conducted the survey, says what stood out this year was more demand from distributors. “They’re saying, ‘We want information and we want to be able to be more efficient.'” The universal nature of XML also helps, as nearly every system can accept this type of information.

But while more carriers are sending feeds to their distributors (the reverse hasn’t been implemented yet), using XML internally is almost non-existent. Currently, only 32% of vendors and non-vendors are using the markup language within their companies. “There isn’t anybody demanding this,” says Innes, who adds that the systems currently being used are often homegrown or have been built up by a company for a number of years.

Naturally, this makes it expensive to update internal technology. “The cost is huge,” explains Innes. “Some of those systems are 20 and 30 years old. It’s not as simple as [announcing] there’s a new standard.”

Adopting XML standards internally, however, could save money in the long run. Right now most insurance companies have several applications for different parts of their business. These programs often house the same customer information, which means if there’s an address change, every program needs to be updated individually. If every aspect of a company’s business used XML, an advisor would be able to access and update client information with one quick click.

“Over time, there’s a need to get a better holistic view of the business,” says Innes. “While using this standard is not mandatory, it’s probably better to have one.”

Because it’s internal though, companies don’t feel the pressure to update their system. Plus, Innes says, if the processes that are already in place are working then there’s really no need to adopt something new. “I don’t think it’s a problem. They can get along without it, but would some things be better? Yes.”

Despite the benefits of using one standard system, most companies have no plans to change their processes in the coming year. According to the survey almost 28 carriers reported that they won’t use XML internally in 2007.

That stands in stark contrast to the number of companies who plan on using XML for external business in the coming year. Twenty-five companies say they’ll use XML this year, with 64% of them planning to focus on in-force business.

Still, Innes would like to see every carrier use the industry standard mark-up language. He says the only way distributors will change over is if advisors demand it. The problem is advisors aren’t aware of the benefits XML can provide. “Advisors should want to go to one place for their information,” says Innes. “But they’re not thinking that way, because they don’t know that these solutions are out there. What advisors need to do is to start saying, ‘What I really want is to get my information at once.'”

While advisor demand is clearly important, Innes recommends that the insurance industry stay consistent, and keep pushing for XML adoption. “If my distributors aren’t telling me that it’s important, then it’s not,” he says. “If the industry wants it to happen they have to have a strong, consistent voice and some people haven’t heard that message yet.”

Filed by Bryan Borzykowski, Advisor.ca, bryan.borzykowski@advisor.rogers.com