# XML - Managing Data Exchange/acord

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* Learning objectives
* get to know insurance industry's standardization organization
* understand how XML is used in the insurance industry
* realize why industry standards are so important
* comprehend the main aspects of the ACORD XML standard
* learn about the advantages of using ACORD XML

## Introduction

ACORD is the Association for Cooperative Operations Research and Development.

### Organization
## ACORD

ACORD was founded in 1970 as a standards-setting organization for the insurance industry. As a global non-profit organization, they develop and provide cost saving digital standards for data interchange to reduce paperwork. The goals of their standards are to minimize redundant work and maximize data accuracy; making life far easier for all companies, agents and policyholders.

### Work

The standards are the result of the work of all members, synchronized by ACORD working groups. Finally the ACORD Steering Committees will decide, which results would end up as public standards, in coordination with other standardization organizations and governments.
One of the recent standards incorporates the use of XML as a frame for flexible data transmission and interchange. In 2001 XML for P&C and Surety Version 1.0 was approved, in 2002 Version 1.2 was approved.

### XML

XML provides an open standard, with easy to be made connectivity between ERP systems, managment systems, web services, web applications and other related systems. It can be used in business-to-business, customer-to-business and business-to-customer applications.

## Benefits of ACORD XML

Usually the benefits of XML are across all industries and domains of similar type, but that does not apply to the insurance industry. There you can find unique benefits like:

### Partner to Partner Integration

Common data elements and definitions are necessary to deal with external business partners in this industry. So you need a common language to share data with all actors from the value chain, e.g. reinsurers or intermediaries. By involving this actors in the process of development ACORD designed this common language and data standards.

### Internal Integration

The Insurance industry requires the separation of communication systems to complete a business process. Furthermore a claim adjuster, who wants to verify coverage or to ensure that the claim's code is correct, needs a system that offers accurate transfer of the claim or policy number. ACORD XML standards are essential to transfer such items from system to system.

### Electronic Data Sharing

Moreover the data should have a high quality and transparency. Without that it is not possible for carriers to get exposure information in disparate and incompatible formats in order to identify aggregation of exposure across customers and lines of business in an effective way. Reinsurers need high visibility into cedent risk portfolios for extensive exposure analyses. ACORD data standards support a format that captures and analyzes information and data in multiple formats across partners.

### Web Services

By reason of Web Services are required for real time integration througout the transaction processing cycle, ACORD standards realise processes like the integration of back-end systems with an agent portal.

### Document Repository Standards

A single repository for all risk related information is in general not possible. Due to the fact that consistency across data repositories is very important, ACORD XML standards were established to allow trading partners to share structured and unstructured documents and data also in a variety of third party systems. Therefore Document Repository Interface Standards exist to guarantee access to free format documentation for improving decisions.

### Improved Cash Flow

By using ACORD XML standards transaction processing is accelerated. Consequently there is a faster access to money or other types of payments.

## Standards

Following standards allows different companies along the value chain of a market to exchange data with less "frictional losses" that are usually generated by the usage of incompatible data formats. A standard serves as a common communication method to increase efficiency - a lowest common denominator. It is a set of rules and guidelines that provide a common framework for communication. The set of ACORD standards consists of subsets for the 3 main segments of insurance industry. These are:
* Life, Annuity and Health
* Property and Casualty
* Reinsurance and Large Commercial
By implementing and following ACORD's standard definitions, member companies can achieve ...
* competitive advantages
* end-to-end process support
* easier access to markets
* lower costs, which lead to more profit
* better market acceptance
* higher performance and enhanced credibility.
As seen in the previous chapters (esp. in "Introduction to XML") using XML as a means of data exchange is a suitable base for a standard like ACORD. It's flexible enough to be tailored for the usage within different insurance segments but it also offers methods to ensure data quality and the stability of the standard.

## Technical Standardization

The ACORD standard describes different concepts that can be implemented by a member. The access to the standard's descriptions is partly free, partly limited to ACORD members. It can be found here: ACORD Standard Descriptions.

### XML structures

To ensure the correct form of the transferred data, ACORD provides XML schemas and DTDs for its members. Companies implementing the standard can validate their data against those definitions. The ACORD XML standard is strongly based upon the United Nations EDIFACT standard and expands the standard XML data types with the financial data types used by the Interactive Financial Exchange (IFX).
ACORD's data types consist partly of those definitions but also expand them with own data types. The data types are used as building blocks for larger entities within the specification:
Exhibit 1: XML entities used within the ACORD XML standard
| Entity | Description |
| Element | a base element, based on one or more of the described data types |
| Aggregate | a collection of corresponding elements, entities or aggregates |
| Entity | aggregate with the same structure |
| Message | an aggregate that is used as one entity for communication |
| Service | a collection of corresponding messages |
| Document | a collection of messages that are sent together at the same time |
A detailed description of the technical XML related aspects of the ACORD standard can be obtained for Property & Casualty and for Life, Annuity & Health.

### XML messages

The before mentioned data types and structures are used to define messages that can be interchanged between companies implementing the ACORD standard. Different message types are defined within the data model for each insurance segment. The following example shows the messages used within the Reinsurance & Large Commercial segment:
Exhibit 2: ACORD XML message types for RLC business
| Message | Description |
| Placing | message for placing obligatory or facultative business |
| Bordereau | message between primary insurance and reinsurance company with information about signed risks |
| ClaimMovement | message for a claim notification |
| TechAccount | message to exchange accounting data for a treaty |
| Settlement | message to exchange settlements |
| Acknowledgement | message to confirm other messages or to request information |

### ACORD message service

ACORD messages can be exchanged between implementing companies as plain XML files. Additionally the ACORD standard defines a specialized message exchange service. It is based on the Web Service Description Language (WSDL) to implement the concepts of web services. The messages are send using the Simple Object Access Protocol (SOAP) standard. Following this protocol a message consists of an envelope with the XML root element, a header and a body which both are direct child elements of the envelope. The SOAP envelope only contains structural information, not the message itself. The actual SOAP messages are send as attachments with the message and are referenced within the message body.
Therefore it's possible to enrich the ACORD messages with additional information in PDF or DOC format.
Exhibit 3: ACORD message service structure

### Examples

To provide an impression of the complexity of ACORD's XML standard definitions, following a small excerpt (only some lines of more than 5.000 per XML schema file / DTD) of the Reinsurance & Large Commercial segment's XML schema and DTD files are presented:
Exhibit 4: Excerpt from the RLC XML schema
Exhibit 5: Excerpt from the RLC DTD

### Certification

To ensure data quality and member's compliance with the proposed standards ACORD offers a special certification program. ACORD members can send their XML messages to ACORD. There the messages are validated in 2 steps:
* Automatic Validation against the standard's XML schema and DTD files
* Validation of the sent data by a human for plausibility which goes beyond the automatical, technical consistency check

## Members

World's largest insurance companies and insurance related businesses are ACORD members: "Over 70% of the top 10 and 60% of the top 25 Life & Annuity carriers; Over 75% of the top 50 Property & Casualty carriers; and 70% of the top 10 Reinsurers, as well as the Top 5 reinsurance brokers representing 80% of the top 20's gross revenue." The following list shows just some of them:
* Allianz Insurance
* Allstate
* Hannover Re
* AXA
* Benfield
* ING Group
* MetLife
* Munich Re
* Zurich Insurance Group
For a complete list have a look at the ACORD Memberlist.

## References

Sources:
* [1] ACORD Website
* [2] Market Reform Group
* [3] IFX Forum
* [4] University of Leipzig
* [5] SAP INFO
* [6] ACORD White Paper

## Summary

* In the previous chapter you have learned about the insurance industry's standard for electronical data exchange. It's maintained by a nonprofit organization called ACORD and defines data models for the main insurance segments. The main concepts of the ACORD XML standard are:
* a set of XML schemas and DTDs to ensure the content, structure and "quality" of the sent XML streams
* a set of XML messages for different business cases
* the ACORD message service for exchanging enriched XML data based on WSDL and SOAP