STRIDE: taking the short-term industry into the future

STRIDE – an acronym for the Short-term Insurance Data Exchange - is a secure method of transferring customer information and underwriting data between insurers and binder holders including intermediaries - is a joint initiative between the South African Insurance Association (SAIA) and the Financial Intermediaries Association (FIA).

The genesis of the project is the Insurance Laws Amendment Act (ILAA), which calls for the transfer and exchange of data between the binder holder and insurer. The regulations for S48A, which are still in draft format and have therefore not yet been gazetted, prescribe that insurers should in the future be in possession of all information pertaining to risk and customer detail committed under its licence.

The intention of the regulator is to ensure that insurers are aware of the risk exposures and are able to service consumers by having relevant information available to inform various policyholder decisions.

Streamlining data sharing

Traditionally binder holders, except for an Underwriting Managing Agenter (UMA), have binder agreements with multiple insurers. The insurers mandate these binder holders to store data on systems owned by the binder holders.

Technically then, the data has to be returned to the insurer’s system. and Tthe challenge for insurers is to be able to receive the data from multiple systems, which may not be aligned to the insurer’s system. Currently, attempts at data exchange have been The result has been a rather rather clumsy data exchange, as a result of the disparate systems used by the insurers and binder holders, which leads to duplication of effort, technical instability, uncertain delivery, uncontrolled rules or rates, and isolation.

STRIDE will enable all insurers and their binder holders to communicate seamlessly with each other in real time using Web Services or a Data Switch. Implementation of these communication methods will be enabled through the creation of a standard data language and structure (ACORD) and security will be managed through centralised Directory Services.

Applying global best practices

In order to facilitate this process and for technical relief, the STRIDE team consulted with ACORD, an international insurance data standard used widely in the US insurance market for the creation of a data message library, which enables the transfer of insurance data.

Currently the ACORD standards are being ‘South Africanised ‘and will be adopted by STRIDE as the data interchange standard. Based on best practice, these standards have the potential of being adopted by the industry as the template for all future standardisation of industry data.

Industry participation

It is envisaged that for the effective management and successful implementation of this project, STRIDE will have to be registered as an independent entity. Short-term insurance industry members, insurers and brokers are welcome to participate in the company through the purchase of shares, the cost of which is calculated on a formula determined and agreed by the STRIDE Steering Committee.

The STRIDE Steering Committee is made up of short-term insurance and FIA representatives and, with the endorsement of the SAIA Main Board, FIA Executive and the FSB, makes strategic decisions for the advancement of the project.

Implications for insurers

This project holds many benefits for insurance companies. The effective management of risk is essentially the business of insurance companies, but insurers face an ongoing challenge of not knowing what risks are on the insurer’s book.

STRIDE enables an insurer to access and receive information concerning policyholder data. Access to this data will enable insurers, among other things, to more effectively manage solvency and to mitigate the acidic impact on consumers when, for example, books of business are moved without the consumers’ consent or awareness. Knowing the consumer, understanding consumer expectations and developing relevant products and services to meet these expectations are at the centre of the FSB’s ‘Treating Customers Fairly’ initiative. By enabling insurers and underwriting managers to risk manage policyholder data through improved knowledge of consumer demands, STRIDE will take the industry closer to meeting the ‘Treating Customers Fairly’ requirements.

Implications for brokers

In the absence of an industry solution, every insurer and broker has to adopt individual, disparate solutions which result in multiple processes at significant additional costs. The objective of STRIDE is to eliminate these inefficiencies and additional costs in the industry, to the benefit of all stakeholders, including the brokers and their clients. For the broker, STRIDE means that a single standardised transaction will produce multiple quotes from different insurers.

A standard list of questions will be available for clients to complete and brokers will send the answers to an insurer via ACORD through a single ‘port’ to ensure all data are is standard. Insurers with niche options or extras include their specific additional questions after the standard questions.

Agents and brokers will have access to all ACORD forms when they are published, without necessarily having to wait for their management system to implement them.

Efficiency through standardisation

STRIDE is not about comparative quoting. It is about achieving efficiency through standardisation. As such, participation is not mandatory. However, the standards, specifications and standardised message structures, e-forms and more, will be available to everyone in the industry. Thus, if a company wants to connect with another player in the industry via web services, or wants to develop its own system, it can be done in accordance with the industry standards.

Timeline

Over the next few months, STRIDE will focus on defining their commercial model, registering STRIDE as a separate company as a joint venture between SAIA and the FIA, and selecting vendors to develop, test and implement the system. The ACORD standard will also have to be designed, tested and implemented. Testing is expected to commence as early as January 2011 and the project is expected to be completed by 30 September 2011.

Thus, by this time next year, insurers and binder holders could already be reaping the benefits of standardised data and the associated cost savings. If these cost savings are passed on to the consumer, the ultimate beneficiaries of STRIDE will be the broker’s clients.