Insurers, Reinsurers Lack Governance For XML Initiatives

While XML adoption continues to rise year over year among insurers and reinsurers, many companies lack the governance and management structure to optimise its use, according to a joint survey conducted by Gartner, Inc. and ACORD.

The survey, conducted in the third quarter of 2007 with a global sample of 176 respondents providing life insurance, property and casualty (P&C) insurance and reinsurance, found XML is becoming a core technological component for both supporting application integration and interactions with external partners. Adoption rates continue to rise annually however, many insurers pursuing XML do not follow best practices in XML governance, funding, or oversight. For example, the study found that only 42 percent of life insurers, 33 percent of P&C insurers and 38 percent of reinsurers currently have a corporate XML strategy in place to guide their XML projects and investments.

“For insurers and reinsurers to generate more business and technical benefits from XML use, they must improve their management and oversight of XML across the enterprise,” said Kimberly Harris-Ferrante, research vice president at Gartner. “Organisations following XML best practices of having established governance, including organisational support of a standard across the enterprise, ensuring that all core application vendors support the standard, and demanding that projects comply with the standard, will find improved system-to-system transactions and enterprise straight-through processing.”

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The study found, however, that less than half of respondents with XML projects in place have a corporate XML strategy to guide investments and project plans. Additionally, few insurers or reinsurers had dedicated leadership for their XML projects. Both of these are key governance best practices for promoting business and technical benefits from XML use.

A lack of governance has adversely impacted XML funding and vendor requirements. Most companies reported that XML was optional for each project rather than having either a formal budget or making it mandatory for projects; and most said it was a “nice to have” rather than a requirement that core application vendors support industry XML standards.

“In today’s global environment, the need for effective, efficient, consistent, and accurate data communications is a vital foundation for companies to be competitive. We are a data-intensive industry, and having business solutions that utilise standards for communications is a necessity both internally and with business partners,” said Denise Garth, vice president, Membership and Standards, ACORD.

“As an industry, we need to start implementing standards from the very core of our systems and processes to achieve our overall strategic and operational objectives,” said Garth. “The true benefits of standards can be best achieved when companies organize their efforts strategically with a governance structure that guides development and implementation of standards which are a core component of projects and enterprise architectures. This ensures that standards are woven into all the business functions and systems across the enterprise which will help achieve greatest value to organisations.”