CSIO Talks Z-Codes and Data Insights in Canadian Underwriter

By: Monica Hanna, Business Solutions Delivery Lead, CSIO | Canadian Underwriter, October 2019

Standardized data may not generate a lot of media fanfare, but it plays a major role in making our lives easier. Take the example of a grocery store: the items you buy come with a standardized barcode. Why is this important? Managed barcodes allow stakeholders all throughout the supply chain to use the same ‘language’ when they’re talking about an item. This form of standardization enables systems to talk to each other about the same food item with little or no human intervention required.

Everyone benefits from this. Customers have a seamless, hassle-free experience making their purchases. Manufacturers, distributors and store owners attain valuable data insights regarding product inventory, customer purchasing behavior and marketing opportunities. Like the success of the barcode in the grocery sector, the insurance industry benefits in the same way by using Centre for Study of Insurance Operations (CSIO)’s EDI and XML standards.

CSIO’s standards are the complete source for data elements that are used to exchange information for personal lines, commercial lines, and claims. Using the same data standards, brokers and insurers are able to exchange the correct information between their customer management systems. Data elements such as a policyholder’s name, for example, won’t be confused with the name of the broker. The standards are designed to cover business messages such as eDocs, auto, property, liability, crime, claims and billing.

The reality for brokers

Despite the existence of a complete source for standardized coverage codes, many insurers still use proprietary “Z-codes” to identify coverages on a policy. These codes fall outside recognized industry standards. Commonly used for temporary purposes or legacy system workarounds, Z-codes are no longer needed, nor are they a quick and easy solution. Too many Z-codes are representing coverages today, creating obstacles for brokers to process, run accurate reports and access an insureds information.

Why is this a headache for brokers?

Brokers need rich data about their customers. More data means clearer customer insights and the opportunity for brokers to drive business forward by identifying opportunities to upsell insurance. 

The use of Z-codes, however, impedes this possibility. For example, a broker that wants to promote a complementary product to their customers who already have flood insurance, would have trouble searching their databases and generating an accurate report for people who have flood coverage. Why? Because some insurers may use a custom Z-code for flood coverage instead of the standard industry code. As a result, the broker will have incomplete and inaccurate data, denying them an opportunity to identify new sales leads, affecting both the brokers and the insurers book of business. 

Value of standardized coverage codes

Organizations need a better way to get value from their data and stay at the forefront of innovation. Insurance is no different: brokers must tailor their products to customers’ needs. With the use and implementation of standardized coverage codes, all stakeholder can realize the following benefits:

  • Accurate reporting
  • Targeted marketing
  • Improved customer experience
  • Operational efficiency
  • Seamless data exchange

“In today’s competitive and changing insurance marketplace, data-driven business insights are critical,” says Bob Armstrong, owner of WW Smith Insurance Ltd. “Leveraging clean data, meaning no Z-codes, makes it possible to analyze your book of business in a new way, allowing you to proactively create value for your customers.” 

Faster to adopt standard industry codes

CSIO’s National Standards Working Group meets monthly to review and approve submitted requests for new codes to reflect changing business requirements and emerging technologies. These meetings give members a frequent, agile process to get standard codes, rather than introducing a new Z-code. As products evolve and information needs change, the data standards used to transmit insurance information between brokers and insurers must be updated. Over the last three years, the working group has introduced close to 400 new codes. The number of working group members has tripled in that time, showing a commitment by the industry to make changes and remain compliant with the standard. There is significant momentum in the industry for carriers to become Z-code free. Currently, 25% of CSIO member insurers have received Z-code free certification. That number was only 7% two years ago.

Eliminating Z-codes

CSIO works with insurers to analyze their Z-codes and help identify which ones can be replaced with standard codes going forward. All of this means brokers can expect to see a sustained decline in Z-codes that promises better customer data in their Broker Management Systems.