INNOVATION XCHANGE AUTOMATION BEYOND THE WIRE HOUSES IN THIS ISSUE INSURED RETIREMENT INSTITUTE FALL 2013 BETTER SERVING MEDIUM & SMALL FIRMS

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1 INSURED RETIREMENT INSTITUTE INNOVATION XCHANGE AUTOMATION BEYOND THE WIRE HOUSES By Jim Ferrell, VP, FireLight Product Management, Insurance Technologies In life, change is constant; but in business, change is planned, measured and must be perceived to provide real value to be adopted. That does not mean that all changes are successful. Without attempts or failures we would not broaden and deepen our efficiencies or be better prepared for the next successful change endeavor. There have been monumental changes in the annuity distribution business over the past decade driven by a vision of what was possible. These changes certainly did not originate through a meticulously planned and measured path, but rather a rapid, engaged and unparalleled collaboration with a core group of industry participants that had a vision of what was possible. I m certain everyone who was involved had decisions and directions they wish they could go back and make again. A Vision All change begins with a vision by someone or a group of people who begin to see past what is and what was, and begin to challenge the industry as to what could or should be. Driven by this vision most annuity insurance carriers have successfully implemented automated electronic straight-through processing of annuity business transmitted through the DTCC in support of the wire house channel. Having played a small role in this tenyear journey, and now having hindsight and a clear understanding of the scope of the accomplishment, the industry should be extremely proud of the change successfully implemented and the value it provided. It is now time as an industry to ask ourselves again, where do we go from here? How do we leverage and broaden the success of what has proven to be a faster, cheaper, and more effective means of processing business at the carrier and wire house level to the remaining distribution channels? How do we bring about the next wave of change? And will you be the someone or part of the group that sets the vision and drives the change? Two Perspectives Let me present the adoption challenge from two different perspectives. First, from a technical perspective, we have overcome huge barriers to automated processing of the annuity business. We now have an industry well versed in the art of automated business processing which we can learn from and leverage. Next, from a business and processing perspective, this is where the rubber meets the road. This is the remaining barrier to delivering automation to the remaining paper-based, check-with-application distribution channels. You may simply ask, why haven t these remaining distribution channels followed the success of the wire house implementations? The answer to this question is extremely varied and complex for each distribution channel. There isn t one reason, but several unique and valid business reasons for each channel. Most challenges have to do with a distribution channel s existing business processes. Then there are the issues regarding recruiting and agent retention in an ever challenging environment. The other main hurdle is the issue of opening up and managing an electronic business processing model along with an existing paper-based model, which often times cannot be shut down. This brings more overhead than the automation value to the distribution channel. All of these challenges, and many others, IN THIS ISSUE Continued on Page 2 Automation Beyond The Wire Houses Just In Time: Eliminating Waste From Appointment Processing E-Signature Automation For Firms Of All Sizes Gaining The Edge In the Fixed and Indexed Annuity Space Insurance and Retirement Services: Automating Replacements Transactions Replacement Automation Solutions 1

2 are all valid business barriers. But we as an industry were facing similar and far more difficult business barriers when we were first looking at the wire house focused solutions. These challenges shouldn t stop us as an industry from attempting to influence and change behaviors. Added Value The reality is simply this, as an industry, we must provide enough business value to the end users of the remaining paperbased, check-with-application distribution channels to influence automation adoption and behavioral change. The current value of electronic processing being offered to the wire channels simply isn t enough to drive adoption to these remaining channels. So we as an industry need to identify what additional value is needed to what s already in place today which will achieve the required value that will drive the desire to make the investment and the subsequent change. What type of value is needed to move the remaining channels toward adoption and toward the realization of real returns on the automation investments? It s been our experience at Insurance Technologies that if you engage and ask the distribution firms about their business processing goals and end user needs they are more than willing to explore and identify what they require. In working through this process we have identified that mobility support is a tremendous value proposition to the end users that can bring about the desire to change. This is quite possibly a one-time opportunity when the appetite for mobile support can be a driving force in behavior change that leads to automation. The introduction of the ipad and its ease of use has forever changed the end user s expectation of what software should be and how we interact with it. Another value identified, which is an absolute must to generate adoption, is providing a business process that is familiar and easy to use to the end user. These remaining distribution channels simply don t have the resources nor the desire to take on a large-scale training and support process. Ease of use cannot be overstated here. The process must be intuitive and not cause processing pain for the field user. Dropping an annuity order simply cannot JUST IN TIME: ELIMINATING WASTE FROM APPOINTMENT PROCESSING require extensive training. As software providers, our focus must be on easing the business process of the end user. If we cannot provide an easy-to-use system then how can we possibly expect change in behavior or adoption? Where Do We Go from Here? So how far is the industry from providing enough value to the remaining paperbased, check-with-application distribution channels across all lines of business to influence adoption and change behaviors to see ROI on the automation investments in place today? We should all be inspired by the challenge ahead and believe the opportunities to provide these end user values are not only possible, but are starting to be realized today at the distribution level through recent software implementations. I welcome your feedback or additional insights you feel I may have missed from your own experiences. Feel free to reach out to me directly at jferrell@insurancetechnologies.com. By Dane David Sprecher, Product Manager, Vertafore Insurance laws and regulations are constantly changing, making it difficult for insurance carriers to stay on top of best practices for licensing and compliance. For example, the Producer Licensing Model Act (PLMA) paved the way for new regulations and interpretations regarding the producer appointment process. Some carriers have looked at this change in legislation as a way to cut costs and improve their licensing process by adopting Just-In-Time (JIT) appointment processing. This process involves appointing producers only when they submit business to sell. This has the potential to save carriers a great deal of money as appointments are expensive to get and maintain. How much can that save? This process works to ensure that carriers only pay state appointment fees for producers who are actually selling their line of products. As many as 80 percent of agents never sell for a given carrier. That means carriers who do not use JIT are paying unnecessary fees for 80 percent of their producer population. At an average of $20 per appointment per year, carriers could save hundreds of thousands and even millions of dollars by adopting JIT. Why JIT is important Besides the obvious cost savings of JIT, ensuring that producers are authorized to sell is a very complex process. Not only do carriers have to maneuver varying regulations by state, but they also must ensure their processes check for proper licenses, lines of authority and appointments before business is sold. Carriers report that an added benefit of Continued on Page 3 2

3 adopting JIT processes is the reduction of risk caused by forcing them to check for proper sales authorizations at the most crucial time, new business submission. A recent webinar conducted by Vertafore found that 82 percent of carriers appoint producers at the time of onboarding, but only 44 percent check for proper appointments at the time of new business. But what happens between onboarding and selling a piece of business? Producers may have let their licenses lapse or proper continuing education credentials may not exist, leading to penalties and fines if carries are only checking at the time of onboarding. In addition, almost 95 percent of carriers are manually fixing problems when discrepancies occur, leading to more time spent on ensuring producers are authorized to sell. JIT processing may be able to reduce fines by enabling carriers to ensure producer sales authorizations before coverage is bound, as well as reduce the labor costs of manually fixing discrepancies. Challenges of JIT The appointment procedure process is dynamic. States have varying regulations, carriers are always changing their procedures and employee turnover leads to loss of expertise. This means that a sophisticated process must be put in to place to be able Today s electronic signature (e-signature) solutions have become an affordable and easy to integrate option that can drive tremendous cost savings at firms of all sizes. Gone are the days when straight through processing (STP) systems were the exclusive domain of elite wire houses and other firms with large budgets. Until recently, smaller firms were limited to manual e-signature systems (where agents have to upload documents, When are authorizations being checked? to transition between appointments during onboarding or new business submission. In addition, onboarding processes, which include getting the producer everything they need to be able to sell a certain carriers product, can now exclude the appointment process while new business processes must be modified to include an appointment request to ensure that the new business submitted is compliance and the producer is authorized to actually sell that particular line. Many have tried to solve these issues insert signer information, place form and signature fields, compose s, etc.) from a number of new vendors offering monthly subscriptions to their cloud services. This one-size-fits-all approach, available solely in the cloud and with limited e-signature method options and no customization to meet workflow requirements, cannot fully meet small firm needs and limits the available benefits from a more sophisticated e-signature solution. To secure a more flexible and powerful solution without breaking the bank, with an expensive IT endeavor or a time consuming manual process, but there are other solutions out there. Make sure you understand the implications of adapting a JIT appointment process. The savings are attainable and real, but processes must be put in place ensure appointments are completed at the right time. To find out more about implementing a sustainable JIT appointment process, contact Vertafore today. E-SIGNATURE AUTOMATION FOR FIRMS OF ALL SIZES By Brett Mendenhall, Director, Insurance Solutions, CIC many smaller firms have turned their attention to Communication Intelligence Corporation (CIC), a global e-signature pioneer whose SignatureOne Ceremony Server STP e-signature solution is processing hundreds of millions of annual transactions for tier one financial services firms. Products and services available under CIC s isign brand can allow even small broker-dealers to benefit from the increased ease of processing, improved agent and client experience, and greater Continued on Page 4 3

4 GAINING THE EDGE IN THE FIXED AND INDEXED ANNUITY SPACE By Chris Pernicano, SVP Solution Strategies, Aplifi In the United States, independent distributors place a large amount of their business using old-fashioned pencil and paper. Because the independent space is comprised of BGA s and FMO s that focus on less-heavily regulated fixed and indexed annuities, this channel has lacked the regulatory impetus that moved the bank and broker-dealer channel to electronic order entry and compliance systems five years ago. As time goes on, regulatory pressure is creeping into the fixed annuity space, and the amount of new business paperwork is growing steadily 20-page-plus document packages have become the norm. More documents mean more chance for business returned from the carrier as not-in-goodorder. Independents are working hard to differentiate themselves in today s marketplace, and are also working hard to partner with broker-dealers who require electronic annuity order entry. All of these factors are finally beginning to turn the tide, so what are the other things that an electronic order entry platform need do to attract the independent? First, it needs to be very easy for the producer. Carrier product rules, automatic forms generation, the availability of e-signature, easy registration, no technical hang-ups, etc. should all be standard. There are three key things that are currently trending in the favor of producer adoption. First, the amount of paperwork is really at the point that it s become a problem. Even the most hardened veteran would like an alternative to 30 pages of forms. Next, as time goes by younger producers are entering the space, and they do expect to be able to do things electronically. Finally the mobile revolution really is happening. The fact that mobile devices are easier to learn than a PC, and the fact that they can save advisors trips to the client are big drivers. The next hurdle is creating a solution that works for the distributor. Here there is often a technical hurdle in that a solution needs to have a truly turnkey offering, with no need for any integration except and a link from a web site. The solution also has to provide the BGA or FMO with insight into their own business this means notifications, e-order review workflow, and dashboards that allow the manager to search and see all of their business. But the largest factor here is definitely cost. In order to crack this nut, there is a solid requirement for a simple turnkey solution that is available at either no cost (read carrier-sponsored) or a very low cost. The final hurdle is creating a solution that works for the carrier, many of which already receive electronic fees for their bank and broker/dealer business and all of which have existing new business and e-policy administration systems. For many carriers, the best solution is to submit business from the independent space with the rest of the e-business that they already receive through the DTCC Insurance Processing Services (IPS). This means that the carrier can leverage their existing investments to process more business. Historically, there has been a problem in that most independent distributors are not DTCC members and could therefore not submit business during the DTCC. The solution is to put up a turnkey gateway that provides these smaller distributors with access to the DTCC pipe. So that s what it takes a solution that works for the carrier, the distributor, and the producer. Luckily, there are viable solutions that are emerging today. All that it takes now is to coordinate the three interested parties in such a way as to create critical mass. Continued from Page 3 cost savings afforded by a fully automated STP e-signature solution. Moreover, these solutions are available both for on-premise deployment or hosted by CIC in the cloud (allowing firms to start in the cloud, scale up to on-premise solutions and seamlessly add functionality as their needs change over time), and include mobile, face-toface, authentication, form filling and other functions that meet diverse regulatory and compliance requirements and can be integrated via API with any software solution on any system. With the cutting-edge technologies available today, why should smaller firms not enjoy the same advantages large wire houses do? With solutions like CIC s isign product suite a wide range of highly secure, flexible and easy to integrate options are available to companies of any size. For more information on CIC s SignatureOne Ceremony Server and isign suite of products and services, please contact Brett Mendenhall, Director, Insurance Solutions ( bmendenhall@cic.com) or Katherine Dease, VP, Product Management ( kdease@cic.com). 4

5 INSURANCE AND RETIREMENT SERVICES: AUTOMATING REPLACEMENTS TRANSACTIONS Automating and standardizing the process for replacing an annuity product from one carrier with a similar product from another carrier has been high on the priority list of insurance companies for some time. Since the exchange of like-forlike replacement of insurance contracts is a common industry-wide transaction, The Depository Trust & Clearing Corporation s (DTCC) Insurance & Retirement Services Replacements Processing (RPL) automation solution has great potential to yield real cost and risk reduction benefits for the industry, particularly for carriers. With the possibility of rising interest rates and new product designs, RPL is perfectly positioned to enable carriers to scale their processing to meet the higher demand, while reducing the delays typically associated with replacement processing. RPL is specifically designed to address the complex communication of pending case status between carriers in a standardized manner, while efficiently moving funds between the carriers and leveraging the unique settlement services of DTCC s National Securities Clearing Corporation (NSCC) subsidiary. The complexity, cost and risk of manually processing exchange requests makes RPL a practicable alternative for any insurance company. DTCC s Insurance & Retirement Services (I&RS) developed and implemented RPL in Recently, Senior Advisory Board members, IRI and its members have confirmed RPL as part of their development agenda in 2014, said Randi Gordon, DTCC Vice President, Product Management. RPL is an important solution for a long-standing operational challenge that will improve the customer experience and reduce processing costs. The Implementation Path RPL leverages ACORD XML messages to standardize the communication of data on product exchanges between participating carriers and distributors. It supports web service movement of required documents and money settlement between carriers. It also provides a separate, stand-alone capability that informs the distributor of the latest pending case status information as replacement requests are processed. With RPL, insurance companies are able to improve the efficiency of the entire replacement process and lower the operational risk between delivering and receiving carriers. How it Works Using a mainframe or Internet connection, participating insurance carriers can transmit replacement request/ notification/status information back and forth through the DTCC Smart Network. The carrier receiving the new business can inform its distributor of the latest pending case status information. This standardized message automation supports more ingood-order replacements. Attachment of replacement documentation also helps unify carrier requirements for in-goodorder transaction processing. In addition, through NSCC s money settlement services, money settlement for surrendered contracts will be consolidated with other transaction obligations into one credit or debit position at the end of the day for each participating carrier. More Information For more information on Replacement Processing, please contact Cory Stark (cstark@dtcc.com) or your Insurance & Retirement Services Relationship Manager. 5

6 Replacement Automation Solutions By Cheri DeBoer-Stinson, Cooperative Technologies Streamlining, standardizing and ultimately automating antiquated replacement processes has become an industry directive with adoption of the DTCC automation solution a major goal. As carriers and distributors map out their future automation plans, they can realize the immediate benefits of reduced turnaround times by implementing incremental solutions that streamline current replacement procedures and support long-term automation goals. Current and automated processes involve workflow follow-ups and the need for ceding carrier routing and replacement information. Cooperative Technologies (CT) robust ceding carrier information provided in its turnkey 1035YellowPages and automated 1035Contact Web Service can be used to streamline current and future processes. Additionally the CT hybrid CT1035 New Business Exchange System (CT1035NB) provides access to the DTCC solution with reduced internal IT development efforts. Reliable Replacement Processing Details: Website, Web-Service and In-House The CT Ceding Carrier Contact and Replacement Requirements Database is an essential component of an efficient replacement process, providing up-todate ceding carrier data pertinent to traditional and paperless transactions. Twenty years of historical information, and robust search logic makes it easy to locate elusive carriers. Provided information helps expedite replacements with surrendering carrier replacement processing locations fax, hardcopy, , XML and attachment rules, addresses, XML routing information, fax and phone numbers, and exchange requirements. Thousands of surrendering carriers, including all annuity, life insurers, top mutual fund companies, major banks, fraternal organizations and large pension administrators are included. IRI provides members with unlimited access to the ceding carrier fax vs. hardcopy details, fax numbers and all replacement requirements for the annuity processing locations of many large IRI member groups/ companies from the IRI 1035YellowPages Lite website. Until automated processes are implemented, financial advisors, brokers/ dealers and issuing carriers can increase in-good-order replacements by having all ceding carrier requirements in place prior to submitting the replacement request. IRI carrier member sign-up is currently ongoing and distributor-broker/dealer member rollout begins next month. 1035YellowPages website provides turnkey access to the full ceding carrier database. 1035Contact Web Service provides carriers that have the infrastructure, which supports automated replacement processing, electronic access to the database. This allows automatic integration of accurate DTCC XML routing details, fax/phone numbers and addresses into multiple systems and interfaces, electronic forms and templates. Automated New Business Replacement Processing CT1035 New Business Exchange System includes an integrated ceding carrier database, used to dynamically tie replacement rules and location information to each transfer and auto-populate letters and XML communications. This replacement-specific workflow system expedites replacements by providing straightforward management of traditional and paperless (DTCC) requirements and communication involved with securing funds. The system facilitates automated processing of paperless replacements following the DTCC, ACORD XML messaging standards. The CT1035NB formats, verifies, sends, and receives the DTCC replacement requests, notifications and status messages along with image attachments to participating carriers and distributors. Integrated state, ceding carrier and in-house requirements for all traditional and paperless replacements provides compliance assurance and increases ingood-order replacements. Additional Information Please contact Cheri DeBoer-Stinson at CStinson@CooperativeTechnologies. com for more information on the CT 1035 Exchange Solutions. 6

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