Aparadigm shift in the way business is conducted.' ‘A revolution bigger than Java and XML put together.' ‘The next generation of web-based communications.' Web Services have been described as all these things and more by industry gurus from all sectors. But beyond the hype, it seems that many serious technology companies are becoming seriously excited about the technology and its potential benefits for business. For the first time in the recent history of information technology (IT), the concept has united the entire industry, with all the major players backing it and investing heavily in its development. This includes many archenemies of the new economy: Sun, Microsoft, IBM, Oracle and HP are all rushing to be amongst the first wave of pioneers in the field. So what does the phrase Web Services really mean? And why should the insurance industry take notice?

Simply put, a Web Service is a function or a piece of information that is made available over the web. Using Web Services, an insurer or broker will be able to communicate with its subsidiaries, its clients or even prospective clients by exposing any information or any source of information to a third party, via a standard web-accessible interface. Until now, disparate e-business applications and legacy systems have presented such major interoperability issues that the wealth of opportunities offered by the internet has not been fully realised. In a recent research note, the research group Gartner maintained that over 80% of mission-critical systems in every industry remain isolated from the web. These interoperability problems are multiplied when trying to integrate services provided by partners, distributors or remote parts of the operation – or services provided in different languages, different computer languages or via different transport mechanisms. A Web Service overcomes these problems, problems that have been very expensive to resolve by means of traditional IT. Web Services perform functions which could be anything from a simple request for information to a complicated business process. These could include data Web Services such as premium quotations, invoices or claims processes, or a complete activity such as a procurement function or a risk trade.

Figure 1 illustrates how Web Services work using XML – extensible mark-up language – to ‘request' a service and to ‘provide' that service. Because all Web Services are handled via a standard, secure web protocol, there are no interoperability problems, and Web Services are easily integrated with existing proprietary and legacy insurance systems. In this example, the parent company can obtain up-to-the-minute information from its subsidiaries without changing the existing systems or adding to the workload.

Organising Web Services
In the future, Web Services will be seen as part of a company's intellectual capital and will be protected as any other asset. Internal directories will be established that allow authorised users to discover pre-built Web Services forming the building blocks to complete solutions. For example, if a business analyst is looking to develop a claims management system within his local office, he will first research the company's Web Service directory to see if a similar project has been undertaken anywhere else in his group. He will then identify the individual services that make up the solution and will ‘pick and mix' the services he wants for his new system. Using this approach, he only needs to develop those elements that are unique to his project. Any new Web Services he builds along the way are uploaded to the company's directory and become available for the next project.

More importantly to the insurance industry as a whole, international, shared directories of services will begin to be seen. These directories of industry-specific Web Services will organise those non-competitive building blocks that can benefit all.

Continuing the example: our business analyst wants a simple diary service as part of his new system. He searches the internal Web Service directory, finds one that has been created by a friendly software company and downloads the service (perhaps for a fee). These industry directories will help establish standards throughout the industry and lead to greater efficiency and lower transactional costs.

Business impact
Web Services offer a new level of interoperability and a simplified way to construct applications. This enables effective business-to-business collaboration that can be applied to several business initiatives. Some of the key benefits include the ability to:

  • deliver e-business applications with greater functionality – by lowering the entry barriers to integrating with different systems, applications have a much broader array of resources they can realistically draw upon;
  • run global IT organisations – since the interoperability benefits of Web Services extend across the web, IT managers can integrate globally and manage locally;
  • efficiently cope with mergers and acquisitions – mergers and acquisitions introduce expensive integration issues that often result in sacrificing services. Different organisations that in the past have invested in incompatible technologies can interoperate easily via Web Services;
  • create more efficient process flows – by enabling straight-through processing across multiple vendors and partners, Web Services can eliminate manual steps between participants that introduce errors, delays and additional expenses, and automate transactions from end to end;
  • develop new products and services for customers – companies can integrate business services in creative ways to form new products and services. A business that manufactures and sells equipment may additionally offer insurance coverage for their products, for example, using Web Services linked to partner insurers. This increases customer satisfaction and removes the need for customers to leave the manufacturer's website; and
  • offer software as service – businesses can avoid the tedious and costly problems associated with installing, maintaining and managing software on local machines. With Web Services, a company can rent the functions it really needs and access them across the internet.

    Web Services make the business potential of the internet a reality.

    Service-oriented future
    Gartner predicts that within four years, 60% of all new business applications will use a service-oriented architecture. This means an explosion in Web Services across the board. Insurance and reinsurance carriers and intermediaries will become a part of this, once they have witnessed the ability to effectively migrate even very complex business processes and applications to the web. As with all emerging technologies, support must be provided for any user of any application on any device, whether it be a PDA (personal digital assistant), WAP phone or a PC. The importance of the emerging standards, such as XML and UDDI (see box for glossary of terms), means that an investment in this technology is future-proof. All the major players in the industry (including Microsoft) are backing the same technology – an unprecedented development which cannot simply have been caused by the US Department of Justice intervention.

    The use of the word ‘legacy' when talking about the systems that are currently running the insurance industry often portrays a dusty old boiler that has to be replaced before it explodes. In reality, the systems that are in place invariably work well in performing the functions for which they were designed. Web Services offer the chance to revitalise these systems and link them together wherever they are in the world. Web Services are not a panacea for the technology woes of the insurance industry, but they are as close to one as we are likely to get.

    The standards and technologies behind Web Services

  • XML – extensible mark-up language, developed and backed by the World Wide Web Consortium, is the cornerstone of Web Services. XML is the universal format for structure documents and data on the web. www.w3c.org
  • SOAP – Simple Object Access Protocol. SOAP is a protocol that describes how to encode a request for a Web Service and results of the request as XML documents. SOAP requests may be delivered to Web Services over any internet transport (e.g. HTTP – hyper text transfer protocol, or SMTP – simple mail transfer protocol). www.microsoft.com/soap or ww.silverstream.com/webservices
  • UDDI – Universal Description, Discovery and Integration of business for the Web. UDDI registries are public web-based registries that permit enterprises to publish the details of their Web Services so that they can be discovered by prospective trading partners (similar to the Yellow Pages). Any organisation even remotely involved in Web Services will already be listed at:www.uddi.org
  • WSDL – Web Service Description Language. WSDL enhances SOAP by describing the interface and deployment details of a Web Service, including the business documents and protocols supported by the service. www.w3c.org ebXML – Electronic Business XML. The ebXML Messaging Specification encompasses a set of services and protocols that allow an electronic business client to request services from electronic business servers over any application-level transport protocol, including SMTP, HTTP and others. ebXML defines a general-purpose message, with a header that supports multiple payloads, while allowing digital signatures within and among related messages. Although the header is XML, the body of the message may be XML, MIME or virtually anything digital. ebXML uses the SOAP as its messaging layer. www.ebxml.org

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