Market Reform Group

Electronic processingThe role of standards and how it all fits together

Beginners session - 23rd January 2008

Rob Campbell, MRO

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Agenda

• What is electronic processing and why do it ?

• What forms can it take?

• Electronic processing discussion topics

• Some examples

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The paper world

Transacting business involves the exchange of information

Information printed by the originator’s computer systems …

… is re-captured by the receiver into their computer systems

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The electronic world

• Information is shared:– Data captured once

– Fast, efficient turnaround

– Reduced errors

– Fair

• It is:

– the transfer of information

• It is not:

– the automation of trading

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What forms can electronic processing take

• Email

• Online

• Electronic messages

• Media (CD, DVD etc.)

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Electronic processing – Discussion topics

• Internal reform determines benefits of electronic processing

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Internal reform determines benefits

Broker Insurer

The degree to which a firm benefits from electronic processing reform will depend on the degree to which they address change and reform in their own organisation.

People

Processes

Culture

Contract creation

Document repository

Workflow

Infrastructure

Core systems

Desk top services

Controls

Quality assurance

People

Processes

Culture

Risk management

Document repository

Workflow

Infrastructure

Core systems

Desk top services

Control

Quality assurance

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Electronic processing – Discussion topics

• Internal reform determines benefits of electronic processing

• Technology architecture jungle

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Multiple technologies for exchanging data electronically

Brokers Insurers

A number of different routes are possible for an electronic transaction

Direct messaging

Trading platform

Messaging hub

Electronic Form

Electronic Form

Email

Communication directly between trading partnersCommunication directly between trading partnersCommunication between partners managed by external provider

Communication between partners managed by external provider

Transaction processing or workflow provided by external provider

Transaction processing or workflow provided by external provider

Data package creation from screen entry or integration

Data package creation from screen entry or integration

Email between trading partners with or without external provider support

Email between trading partners with or without external provider support

Direct messaging

Trading platform

Messaging hub

Electronic Form

Electronic Form

Email

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Multiple trading partner connections

Brokers Insurers

email

ACORD message

Trading platform

Insurers may be faced with different forms of input from different brokers (or even the same broker … and vice versa).

Supporting face to face interaction as required

Electronic Forms

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Multiple messaging architectures can co-exist

Brokers Insurers

Trading platforms

Supporting face to face interaction as required

Electronic Forms

Messaging hubs

Document Repositories

Portals

The market is likely to evolve into an environment of mixed peer-to-peer and multi-hub messaging rather than a single central infrastructure.

direct messaging

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Electronic processing – Discussion topics

• Internal reform determines benefits of electronic processing

• Technology architecture jungle

• Single data standard

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SLIDE 13

Standards valuable

Standards essential

Standards: the foundation of electronic processing

Paper document exchange

Electronic message exchange

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What is ACORD?

• Who are ACORD?

– A global, non-profit insurance association established in 1970

– Offices in London and New York

• What do ACORD do?

– “… facilitate the development and use of standards for the insurance, reinsurance and related financial services industries.”

– The standards define transaction flows and associated data

– Promoting the standards via market support, training and other events and facilities

• ACORD membership

– 480 members comprising: Brokers & Carriers (44%), Solution Providers (46%) and Market associations and other

– USA, UK, EU, South Africa, Canada, Australia, China, India, South Korea, Japan, Bermuda and other Asia Pacific

• Boards, Committees and Working Groups

– ACORD working activities based around membership participation in committees and groups

– Standards work divided into 3 domains:– Reinsurance & Large Commercial ( based on early message standards involving the UK market )– Property & Casualty / Surety– Life and Annuity

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Message specification independent of route

Brokers Insurers

Messaging hub

Because a standard message is used, the same message can be used by all parties regardless of the route the message takes.

MessageGateway

MessageGateway

MessageGateway

MessageGateway

MessageGateway

Electronic Forms

Trading platform

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Electronic processing – Discussion topics

• Internal reform determines benefits of electronic processing

• Technology architecture jungle

• Single data standard

• Legal and contractual requirements

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For electronic processing how do I know …

… if anyone else has read

my information?

… who has agreed the

transaction?

… that the document has

not been tampered

with?

… that the document I sent

has been received by the intended

recipient?

security

signature

delivery receipt

tamper proof

… that there a verifiable record

of the transaction?

audit

… that the

address is

correct?

directory

… where the document came

from?

authentication

… the information is

understood correctly or not

corrupted?(who is liable?)

interchange agreement

… if anyone else has read

my information?

… who has agreed the

transaction?

… that the document has

not been tampered

with?

… that the document I sent

has been received by the intended

recipient?

security

signature

delivery receipt

tamper proof

… that there a verifiable record

of the transaction?

audit

… that the

address is

correct?

directory

… where the document came

from?

authentication

… the information is

understood correctly or not

corrupted?(who is liable?)

interchange agreement

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Electronic processing – Discussion topics

• Internal reform determines benefits of electronic processing

• Technology architecture jungle

• Single data standard

• Legal and contractual requirements

• Lessons from other markets

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Some examples

• Endorsements via email

• ACORD placing message

• Using a trading platform

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BrokerBroker

Remote endorsements via email – Broker(concept diagram)

Email System

Email body…………..…………..…………..…………..

MRCE…………..…………..…………..…………..

Attachments(optional)…………..…………..…………..

(a)Email with attached documents (may include scanned signatures)

Email body…………..…………..…………..…………..

MRCE…………..…………..…………..…………..

Attachments(optional)…………..…………..…………..

(b)Email with electronically signed attachments

Email body…………..…………..…………..…………..

(c)Email body only

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InsurerInsurer

Remote endorsements via email – Insurer(concept diagram)

Email System

Email body…………..…………..…………..…………..

MRCE…………..…………..…………..…………..

Attachments(optional)…………..…………..…………..

(a)Email with attached documents (may include scanned signatures)

Email body…………..…………..…………..…………..

MRCE…………..…………..…………..…………..

Attachments(optional)…………..…………..…………..

(b)Email with electronically signed attachments

Security optionsUnsecured email

Encrypted email

Secure connections

Email body…………..…………..…………..…………..

(c)Email body only

Agree

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Broker / InsurerBroker / Insurer

Electronic Placing via ACORD message(concept diagram)

ACORD compliant gateway

Messaging system

<XML>…………..…………..…………..…………..

Attachments(optional)…………..…………..…………..

ACORD messages with attached docs

SecuritySecure connection

Encrypted documents

Direct between trading parties or via a “Messaging Hub”

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Broker / InsurerBroker / Insurer

Using a Trading Platform(concept diagram)

Trading platform

Trading platforms include application functionality.

They may be owned and operated by a third party or by one of the trading parties.

3(c)Online access

ACORD Gateway

Messaging system

<XML>…………..…………..…………..…………..

Attachments(optional)…………..…………..…………..

(a)ACORD messages with attached documents

Internal systems

Data…………..…………..…………..…………..

Attachments(optional)…………..…………..…………..

(b)Direct integration or proprietary message with attached documents

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Questions

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Standardised validation

• Reduces unpredictable differences in message processing

• Reduces initial and ongoing costs incurred by each party

• Makes ongoing enhancements easier and less costly

• Runtime validation is consistent with certification test validation

Broker

Insurer1

Insurer2

Insurer3

Message NOT ok

Message ok

Message ok

Message ok

Non-standardised: each party provides own validation code.

Non-standardised: each party provides own validation code.

Standardised: all parties use validation code provided by standards authority.