IRDA Circular : Though the Indian insurance industry has been in existence for over 125 years, the pace of standardization and integration has picked up speed with the liberalization of the sector. The most time and cost-consuming activities are concentrated in back office functions and administrative tasks.
These business functions are the highest priority for automation and have the potential to deliver the fastest and greatest return on investment. While e-business greatly reduces these difficulties and removes all error-prone and slow administrative tasks, the challenge is ensuring that the sector is able to conduct business electronically.Â
The public and private sector companies are looking at innovative solutions to reduce the cost of delivery of services and bring greater efficiency in their operations. To become an efficient centre for the general, life and health insurance, e-business would entail
â€“ Standard forms and e-forms for proposals / quotation
â€“ Potential appetite for standard forms and e-forms for micro-insurance
Like-wise a market hub to automate and route for reinsurance business would require e-business solution for
â€¢ Placing transactions (build â€“ quote â€“ bind â€“ post-bind)
â€¢ Accounting and settlement
This is where ACORD standards play such an important role as the standards adopted by these jurisdictions and others ensure consistency and uniformity.
To keep insurance affordable, insurers strive to simplify the process of exchanging information between brokers, policyholders, claimants and regulators. This requires a common technology basis robust enough to meet the varied types of communications. The most common use for ACORD data standards is in the exchange of information between trading partners. Most communities using ACORD Standards for messaging use modern XML (extensible Markup Language) following rules established by the World Wide Web Consortium.
Common Industry Definitions
As regulators, it is important that the data the Authority receives allows comparisons among companies and aggregation into reports. To achieve this, common agreed-upon definitions are necessary. ACORD members develop common industry definitions to ensure companies are reporting data that allows for comparison of different entities.
ACORD Standards for life, non-life and reinsurance
– Non-life Standards (Property/ Casualty & Surety: PCS
In the non-life sector, ACORD primarily focuses on information exchange between trading partners. There are three formats today: AL2, PCS v1.x, and standard Forms for business processes like personal line applications and claims processes.
– Life Standards (Life/Annuity & Health: LAH
ACORD Life Standards are also focused primarily on the exchange of information between trading partners. There are two formats today: LAH v2.x and Forms.
– Reinsurance & Large Commercial Standards (RLC)
ACORDâ€™s RLC Standards today primarily focus on the exchange of information between trading partners in the direct and subscription markets using XML technology with its own Naming and Design Rules. In addition to message definitions, these standards also contain specific exchange patterns to orchestrate messages in contexts like placing, technical accounting, or claims.
ACORD Message Library
In the world of IT, a message is a defined term, meaning a specific set of codes which replicate similar exchanges of information, intra â€“ or inter-company. The ACORD Message Library (AML) is a structured approach to the definition of XML messages regardless of line of business embodying a harmonized set of Naming and Design Rules. The library contains XML messages segmented for specific markets and functions all adhering to a set of common design principles.
The IRDA has also embarked upon the Business Analytics Projects which is required to collate and analyse information coming from different stakeholders. It is necessary that this large mass of information is understood uniformly by all the stakeholders. At the same time it should also be seamlessly aggregated and consolidated for a meaningful analysis. Informal discussions with ACORD representative s have also been held who explained that there are two sides of the reinsurance and insurance business, the technical and the business side.
ACORD India initiative would require participation from people who actually conduct insurance business and those who are familiar with the manner in which the business is carried on. Therefore a widest possible working group having representation from all the stakeholders should be constituted to achieve Indian centric ACORD standards which could then be broken down into small working committees addressing various issues.
In order to give overall thrust and direction to the ACORD India project it is recommended that an Empowered Group may be constituted with the following members:
1. Chairman, IRDA – Chairman
2. Member (Life), IRDA – Member
3. Member (Non-Life), IRDA – Member
4. Member (F&I), IRDA – Member
5. Executive Director (Admn & IT), IRDA – Member
6. Financial Advisor, IRDA – Member
7. Consultant & Special Officer (Life) – Member
8. Secretary General of Life Insurance Council – Member
9. Secretary General of General Insurance Council – Member
10. HOD (Non-Life), IRDA – Member Convener
In order to achieve the above it is necessary that the following steps may be considered:
i) A committee consisting of experts in insurance and representing various stakeholders including insurers, reinsurers, agents, brokers, surveyors, Insurance experts, IT professionals, etc be formed to create Indian specific ACORD standards.
ii) The group shall also create a glossary of insurance terms specific to Indian insurance market.
iii) Formally invite the ACORD representative on this committee and engage him in discussions on creating Indian specific ACORD standards.
iv) Draw up an action plan in creating awareness and educating the various stakeholders on ACORD Standards.
v) Draw up a time schedule in moving the Indian insurance industry to ACORD compliance status.
vi) The ACORD India Working Group may consist of the following members:
1. Executive Director (Admn & IT), IRDA – Chairman
2. Financial Advisor, IRDA – Member
3. Joint Director (Actuarial) – Member
4. Joint Director (F&A-Life) – Member
5. Joint Director (Life) – Member
6. Deputy Director (F&A-Non-Life) – Member
7. Representative of ACORD – Member
8. Representative of IDRBT – Member
9. Representative of LIC – Member
10. Representative of GIC – Member
11. Representative of two life Pvt. Insurers – Members
12. Representative of one non-life PSU – Member
12. Representative of one non-life Pvt. Insurer – Member
13. Representative of one insurance broker – Member
14. Representative of insurance agent – Member
15. Representative of insurance surveyor – Member
16. Representative of National Insurance Academy, Pune – Member
17. Representative of IIRM, Hyderabad – Members
18. Representative of ICAI – Member
19. Representative of ASI – Member
20. HOD (Non-Life), IRDA -Member Convener
The working group may invite subject matter experts as special invitees.