Q&A with Frank Sentner, Sentwood Consulting on InsurTech and Insurance Data Standards

Natural Language Processing - August 21 2019

Frank Sentner has been providing technology solutions to the insurance industry for 43 years. He was an insurtech pioneer long before the industry coined the phrase. Among his many contributions to the industry, Sentner designed and directed the development of Sagitta, the first ACORD-based agency management system, which is used today by some of world’s largest insurance brokers. He has managed major policy, billing, and claims system replacement projects for insurers and has provided strategic consulting for many insurance brokerage firms, concentrating lately on mentoring Start-up InsurTech firms as a Hartford InsureTech Hub mentor. We sat down with Frank to ask a few questions about the current state of data standardization in the global P&C insurance industry, the InsurTech Revolution, and where insurance carriers and brokers need to focus next.

Frank, you were spearheading innovation in insurance before InsurTech was cool. Can you talk about how the insurance industry has changed since the InsurTech Revolution has taken hold? What is the next big breakthrough in insurance technology that carriers and brokers need to prepare for?

Currently, it’s more accurate to call this the InsurTech Evolution… since most of the investment and innovation is benefitting incumbents, some of whom have been quick to seize upon these opportunities. For those insurers and agents that lack sufficient motivation in this regard, there are significant disruptors (which get more than their fair share of press) who are nipping at their heels. More than half the InsurTech innovations that I see are focused on risk mitigation rather than risk transfer technologies. This may well lead insurers and agents to embrace IoT (Internet of Things) technologies and concentrate more of their time and energy on engineering and loss control, as was once the case before the industry chose to focus on purely financial operations. The benefit of this approach is that risk mitigation services are a lot “stickier” than financial risk transfer services, which should reduce “churn” and enhance profitability.

It might not be a sexy topic, but the lack of data standardization in insurance is an issue that costs the industry an enormous amount of time, effort, and money, and adds friction to the entire insurance value chain. If you had to give the insurance industry a report card, how would you grade the data standardization efforts of brokers and carriers? 

Sadly, I would have to give our industry a D+ and the plus is just to acknowledge the efforts of all the folks in insurance organizations who struggle to implement data exchange using ACORD Standards. Most of the industry uses decades old versions of the Standards and many choose to use their own codes rather than those in the Standards. The ongoing focus on forcing work processes through proprietary websites, the perpetual reliance upon paper Standards by the regulators, and the reluctance of insurance organizations to invest in implementing new Digital Standards are all to blame. And, it’s not just brokers and carriers.  As mentioned, the regulators are also responsible as well as most of the legacy software vendors who have little incentive to implement newer Standards and technologies due to lack of adequate competition.

While personal lines have embraced standard insurance forms and documents to a greater degree, in commercial insurance, it’s still anything goes. How can complying with data standards help commercial insurers achieve their digital transformation and business goals?

As alluded to above, the reliance on forms (Standardized or otherwise) is a huge part of the problem. Forms represent a compromise between the full data that is needed to properly execute any business process and the most commonly needed data that can reasonably be gathered using a formatted document. As long as the regulators and our industry attempt to solve our business challenges using forms (electronic or paper), we will fail. Consider proofs of insurance… the idea that the thousands of data elements in an infinitely variable legal contract (i.e. an insurance policy) can be sensibly reflected on one page (i.e. a Certificate of Insurance) is ludicrous. And, that’s without even considering the opportunities for fraud afforded by such a modality for proving insurance coverage. Capturing the data at its source, either from insureds’ devices (mobile, etc.) and data sources or brokers’ systems, and moving that data electronically among all industry partners without re-keying using ACORD Data Standards is the only way that we will ever achieve our business goals.  That is real digital transformation.

You’ve had a hand in shaping the ACORD standards. In our work with clients, we find that only about 30% of carriers are ACORD-compliant today. And there are competing and country-based standards like CSIO in Canada. Do you think we’ll see the day when there’s a global data standard for the insurance industry?

I am actually much more optimistic than my previous answers would indicate. My optimism is a direct result of the successful efforts that ACORD and ACORD Members have been engaged in for the last year building Digital Standards and DLT (Distributed Ledger Technology) Standards. While ACORD’s own Data Standards domains (i.e. P&C, L&A, GRLC, AML) have diverged in the past and other countries (i.e. Canada with CSIO) have their own versions of these Standards, the Digital Standards and DLT Standards initiatives have been cross-domain and international in scope from the beginning. We have found far more commonality in business processes and conceptual data models than we expected and are consciously building a glossary of terms and an architecture which will enable software developers in all domains and geographies to utilize these new Standards to build using the newest technologies to meet our collective needs.

With a career in insurance spanning four decades, you’ve no doubt seen the industry go through its ups and downs. Is there one piece of wisdom that you would give to your peers embracing the insurTech movement?

Yes… EMBRACE IT!! I have spent the majority of my career working with corporate entities and, while there is much to be said positively about the corporate insurance world, innovation and agility are not words that leap to mind. For the past five years, since my initial involvement in helping to create the first ACORD InsurTech Innovation Challenge, I have consciously shifted my focus and energy to work with Startups.  Their ingenuity, drive, and enthusiasm are infectious and that is an infection which our industry desperately needs. Unfortunately, most corporate firms relegate these game-changing technologists to working in corporate innovation labs or with special teams isolated from their operational units… when those are the very people and processes that need to be “infected”. We don’t have time to dabble with this. Get moving!!

Take out your crystal ball: What do you think the commercial insurance industry will look like in 10 years?

If I were imprisoned tomorrow for 10 years and suddenly released, I believe the commercial insurance industry would look to me much the way it does today… on the surface. I don’t expect that any of the major sectors (agents, wholesale brokers, MGAs, primary insurers, reinsurance brokers, or reinsurers) will have disappeared. And, I expect that many of the new entrants (i.e. digital brokers, virtual insurers) will look a lot more like their analog analogues than they do today. However, I know that insureds will have instant digital access to their data in a mobile form, maybe via Musk brain implants, but more likely via AR (augmented reality) wearables with superb voice-recognition capabilities. And, I pray that our industry will have implemented the new Digital Standards and DLT Standards to ensure seamless, fully automated and instantaneous data sharing among our various systems. I don’t expect that the whole insurance ecosystem will be running on a giant digital ledger in the cloud, but I have no doubt that proofs of insurance will be!


SantaSentner

Frank Sentner has been providing technology solutions to the insurance industry for 43 years. His consulting practice is focused on improving the business processes of insurers, insurance brokerage firms, and insurance technology solution providers. He has managed policy, billing, and claims system replacement projects for insurers and has provided strategic consulting for ACORD, insurance brokerage and insurance technology firms. Frank is a mentor at the Hartford InsurTech Hub and an advisor to InsurTech Hartford and numerous InsurTech Startups. One of Frank's favorite things outside of work is putting his prodigious beard to good use around Christmas time, playing a lot of gigs in his Santa suit.

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