acord xbrl whitepaper
TRANSCRIPT
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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
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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.
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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.
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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]