1. Market Reform Group Electronic processing The role of standards and how it all fits together Beginners session - 23 rd January 2008 Rob Campbell, MRO

2. Market Reform Page 1 Agenda What is electronic processing and why do it ? What forms can it take? Electronic processing discussion topics Some examples

3. Market Reform Page 2 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

4. Market Reform Page 3 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

5. Market Reform Page 4 What forms can electronic processing take Email Online Electronic messages Media (CD, DVD etc.)

6. Market Reform Page 5 Electronic processing – Discussion topics Internal reform determines benefits of electronic processing

7. Market Reform Page 6 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

8. Market Reform Page 7 Electronic processing – Discussion topics Internal reform determines benefits of electronic processing Technology architecture jungle

9. Market Reform Page 8 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 Email Communication directly between trading partners Communication between partners managed by external provider Transaction processing or workflow provided by external provider Data package creation from screen entry or integration Email between trading partners with or without external provider support Direct messaging Trading platform Messaging hub Electronic Form Email

10. Market Reform Page 9 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

11. Market Reform Page 10 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

12. Market Reform Page 11 Electronic processing – Discussion topics Internal reform determines benefits of electronic processing Technology architecture jungle Single data standard

13. Market Reform Page 12 SLIDE 12 Standards valuable Standards essential Standards: the foundation of electronic processing Paper document exchange Electronic message exchange

14. Market Reform Page 13 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

15. Market Reform Page 14 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. Message Gateway Message Gateway Message Gateway Message Gateway Message Gateway Electronic Forms Trading platform

16. Market Reform Page 15 Electronic processing – Discussion topics Internal reform determines benefits of electronic processing Technology architecture jungle Single data standard Legal and contractual requirements

17. Market Reform Page 16 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

18. Market Reform Page 17 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

19. Market Reform Page 18 Some examples Endorsements via email ACORD placing message Using a trading platform

20. Market Reform Page 19 Broker 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

21. Market Reform Page 20 Insurer 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 options Unsecured email Encrypted email Secure connections Email body ………….. ………….. ………….. ………….. (c) Email body only

22. Market Reform Page 21 Broker / Insurer Electronic Placing via ACORD message (concept diagram) ACORD compliant gateway Messaging system ………….. ………….. ………….. ………….. Attachments (optional) ………….. ………….. ………….. ACORD messages with attached docs Security Secure connection Encrypted documents Direct between trading parties or via a “Messaging Hub”

23. Market Reform Page 22 Broker / 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 ………….. ………….. ………….. ………….. Attachments (optional) ………….. ………….. ………….. (a) ACORD messages with attached documents Internal systems Data ………….. ………….. ………….. ………….. Attachments (optional) ………….. ………….. ………….. (b) Direct integration or proprietary message with attached documents

24. Market Reform Page 23 Questions

25. Market Reform Page 24 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 Insurer 1 Insurer 2 Insurer 3 Message NOT ok Message ok Non-standardised: each party provides own validation code. Standardised: all parties use validation code provided by standards authority.