Catherine Smola, President & CEO | Canadian Underwriter, October 2017
Standards are an often invisible, but essential, part of everyday life – from electrical outlets to currency to traffic lights, they provide way for a large number of people to go about their business confident that they are “speaking the same language” as everyone else. Within the p&c insurance industry, Centre for Study of Insurance Operations (CSIO) data standards perform a similar function: defining thousands of elements of an insurance policy (coverages, endorsements, discounts, etc.) and assigning each one a unique code that carrier and broker computer systems use to exchange data quickly and efficiently.
Carriers and brokers transmit policy data and eDocs to one another using CSIOnet, the secure data exchange platform connecting over 2,000 trading partners daily.
Standards are continually evolving, however, and much in the way that new words constantly emerge and enter common usage before being added to the dictionary, sometimes carriers introduce a code that nobody else uses. These codes, known as Z-codes, can often create more work for brokers, whose broker management system (BMS) is typically programmed only with the standardized codes. In some cases, a carrier uses a Z-code even when a standard code exists, effectively creating a duplicate code one already in common use.
The Z-code system, intended for insurers to cover off exceptional circumstances in auto and habitational policies, has inadvertently led to a large number of non-standard Z-codes in everyday use.
Reasons for this vary, including the following:
- Insurers use Z-codes as a workaround for legacy system issues;
- A perception that Z-codes are the most expedient method; and
- Some insurers are not familiar of the existence of a standard code that covers the same situation as a Z-code.
Over the past 12 months a total of 67 million codes were sent on CSIOnet, 16% of which (10.7 million) were Z-codes. Some insurance companies rely on Z-codes more often than others, with the heaviest user sending them 48% of the time – one company used a particular Z-code almost three million times alone.
The challenge for brokers is in how their BMS interprets and manages these codes. In some instances, a broker must manually intervene when their BMS downloads an unrecognized code from CSIOnet. In others, Z-codes can impede a broker’s ability to process and access policy information in their own system, since identical coverages may be coded in multiple ways. This can prevent them from running comparisons on their customers, running reports and identifying at a glance who has different types of coverage.
“If you want to query your system and say, ‘How many of my homeowners’ policies have the earthquake endorsement?’ your ability to query your system is compromised because of Z-Codes,” says Ted Harman, president at Accent Insurance Solutions. “The quality of data is compromised because not every insurer is using the same code for whether they have earthquake on a policy or not.”
Harman cites an example of one insurer using a Z-code for its earthquake endorsement while another uses an industry standard code. “You would have to have a directory of all of the different codes the different insurance companies use to be able to extrapolate the data across your whole client base to understand who has the earthquake endorsement,” he says.
Sean Christie, chief information officer and vice president of information services at Gore Mutual Insurance Company, and Jennifer Morrison, senior business analyst, information services for the insurer, explain the issue using the analogy of moving into a new house.
“Imagine the exchange of policy information between an insurance company and a brokerage as moving data from one house to another,” Morrison says. “If the insurer’s boxes of policy information are all labelled “miscellaneous,” a broker must open up every single box to figure out where the boxes should be placed in the new house. But if insurers use standard codes recognized by the industry, they can identify data under more specific categories - such as coverages, discounts or surcharges. This way, when an insurer uses a CSIO code and sends that information to the broker, it’s like putting everything into the right spot. With a Z-code, brokers have to open it up, look at it and see where it belongs, so it creates additional work for the broker.”
More than 20 insurers are now working with CSIO to start reducing and/or eliminating their Z-codes. The process may involve mapping Z-codes onto previously existing CSIO standard codes for the same coverage. If their Z-code does not duplicate an existing code, they may formally submit a standards maintenance request to formally add that code to the standards. Once approved, the code is circulated to all carriers and BMS vendors for programming into their system.
While eliminating Z-codes does not retroactively clean the broker’s legacy data, doing so results in immediate benefits to brokers and significantly improves a their ease of doing business going forward.
CSIO members meet monthly to submit, review and approve requests for new codes. These meetings ensure that members have access to a frequent, agile process to address emerging business needs with standardized codes rather than introducing a new Z-code.
For any company, the ease or complexity of reducing their current use Z-codes depends on a variety of factors. One is the number of Z-codes a company uses; the fewer currently in use, the less time is required to eliminate them. A company’s size may also be a factor, as national companies with offices in many provinces may use multiple codes to cover off circumstances unique to each region. Codes for a “disappearing deductible” discount, for example, may be different across Canada because the deductible is different in each province.
Mergers and acquisitions may also play a role in Z-code clean-up. “If three companies amalgamate, the codes from all of these companies need to be considered,” says Debbie Smith, vice president of business solutions delivery-guidewire at Aviva Canada. “When you bring in new business through a merger or acquisition, you may be required to honour their codes.”
At the same time, major IT projects can serve as an opportunity for carriers to review and eliminate their Z-codes – as was the case for Aviva Canada and its migration to the Guidewire platform. The Canadian Guidewire Users Group announced its successful completion of initial testing of Guidewire’s Broker Connectivity Accelerator this August, prompting some insurance companies to clean up their Z-codes. The Accelerator is designed to standardize the way insurance brokers send transactions to insurance companies and receive complete responses in real time.
“For us, part of the motivation for getting rid of Z-Codes is our work on the Accelerator project,” adds Smith. “For the upload of data between the carrier and the brokerage to be successful, we need to reduce or eliminate the Z-codes. “The Accelerator needs to be able to find codes that are in the CSIO standard for the upload to be successful.”
Insurers are also motivated to get rid of Z-codes for the simple reason that they want to make business processes easier for their broker sales force.
“We want to make it easier for brokers to do business with us,” says Christie. “We are making a commitment to keeping these Z-codes cleaned up and implementing the appropriate CSIO standard code as quickly as we can.”
The use of Z-codes is expected to continue to decline over the coming months, bringing further efficiencies to carriers and brokers, improving the ease of doing business for the broker channel.