The Depository Trust & Clearing Corporation (DTCC) says the sale and processing of life assurance and annuities in the United States will be “radically transformed” by its new automated communications links between insurers and their broker-dealer, bank and wirehouse distributors.
The idea is that DTCC will replace manual processing and disparate technologies by a portal and hub which will seamlessly route messages between insurers, distributors and any other service providers participating in the new system – so creating an integrated, common insurance process regardless of the company or product selected.
The service will not actually be available until the fourth quarter of this year. However, it will be demonstrated to delegates to the US insurance industry’s ACORD trade conference on May 19, and launched with a small group of pilot participants in the third quarter.
“Our goal is to allow any insurance carrier to have a seamless connection with any wirehouses, banks and broker/dealers they choose through a fully automated process that makes selling annuities and life insurance products as simple and as easy as selling a stock, bond or mutual fund,” says Randy Grespin, managing director and group business unit executive for DTCC.
Rather than go it alone and build a wholly new solution, which would take many years, DTCC has opted to get to market more quickly by combining the processing capabilities it already provides for insurance products with the systems and services of a number of independent service providers in the insurance industry. DTCC has already reached agreement with BISYS, whose outsourcing business encompasses insurers as well as fund managers and banks. The American CSD adds that two other well-known service providers are in the final stages of completing agreements with it. DTCC will join forces with other service providers “where they offer unique capabilities.”
“Leadership in today’s market requires us to take a broad look at customer needs and bring innovation by leveraging what exists, instead of incurring the cost and delay of creating solutions from scratch,” explains Marc Reiser, vice president, Marketing, DTCC Distribution Services. “We feel that by joining together with leading industry service providers like BISYS, our combined capabilities will help rapidly grow this sector of the market.”
BISYS will provide will provide case management services, including determining the required carrier-specific information and online case and application status tracking capabilities through BISYS Insurance Services ; online capabilities for distributors to both obtain and maintain the requisite distribution licenses through BISYS Licensing Solutions; and licensing and compliance management capabilities, including insurance continuing education courses, through BISYS Education Services. DTCC, on the other hand, will provide overall system integration, cash settlement, a communications network,contract maintenance services and – with the support of BISYS – a product profile repository.
In essence , DTCC is aiming to bring to the sale of insurance products the standardisation and centralisation it has brought to securities clearing and settlement. At present, most insurance in the US is sold through a network of captive insurance agents paid by an insurance company, or through independent agents, or through distribution networks. The process involves an extensive questionnaire being filled out, and an array of medical, background and other checks, often resulting in a period of 30 to 90 days before the underwriting of a policy by a carrier can be completed. “For many distributors, ” says a DTCC spokesman, “the lack of technology, absence of standards and lengthy delays in the process make selling insurance more cumbersome, more costly and less attractive compared to other financial products.”
Once the new solution is in place, distributors will obtain nothing but contact information from the purchaser, and the DTCC-BISYS service will handle all remaining tasks, including scheduling and providing a telephone interview process, doing all follow-up background checks, scheduling and conducting a paramedic visit, and resolving all other issues before handing the completed information on to the designated insurer for underwriting. Other
areas to be covered include education and licensing, a product repository, sales support, and case management. The entire process w ill be tracked and routed electronically, and the current status of a transaction will always be available for viewing by all involved parties.
“Working with DTCC, we believe we can cut the time between the initial sale to the issuance of the life insurance contract to inside of two weeks from the current 30 to 90 days,” says Jose Suquet, president, BISYS Insurance and Education Services. “In addition, because we will make the process much easier and less time-consuming for the broker or bank representatives who actually make the sale, we expect that more insurance will be sold. And by replacing the very intensive manual process with a fully automated one, we believe we can lower the overall costs of issuing insurance policies across the board for all parties, including the end customer.”
“DTCC is an industry-owned organization that is known for providing low-cost, vendor neutral solutions to the industry,” concludes Grespin said. “We have well-established electronic connections to virtually all of the major broker/dealers and banks, mutual funds and a number of major insurance carriers. We have an infrastructure and three decades of experience in linking trading parties. This new solution will allow insurance carriers to greatly expand their distribution of life insurance products, since more brokers and banks will be able to sell it, and more anxious to sell it, because it is automated. In this highly streamlined process, insurance carriers should also realize significant expense reductions compared to the largely manual and paper-intensive process which exists today in their traditional career and independent agent channels. As it validates its efficiencies in the financial services distribution segment, it would be a logical extension for carriers to deploy it for use by its traditional agent force as well. We have great hopes that this new system will literally reinvent the way life insurance and annuity contracts are sold and processed in this country.”