DTCC Announces First-Time Fee Reduction For Insurance Services

by Karen Gregory

DTCC's Insurance Services business announced on May 21 the first fee reduction in its history, reflecting growing usage of its services. Insurance Services automates linkages and data exchange between carriers and their broker/dealer, bank and other distributor partners that market insurance products.

"Working in collaboration with the insurance industry, we have been able to bring the benefits of cost efficiency back to our clients," said John Ziambras, DTCC managing director and general manager, Insurance Services. "With volumes rising, we expect to further drive down costs and pass those savings along to our customers in the form of future fee reductions."

Ziambras added that the fee reduction is part of DTCC's at-cost business model, which requires a continual reassessment and "right-sizing" of fees to ensure full cost recovery and to then return excess revenues to customers as volumes grow.

$2 million in customer savings
The fee reduction affects Positions & Valuations, Insurance Services' most heavily used service, and it is effective July 1, 2007. DTCC expects the fee reduction to save the insurance industry in excess of $2 million during the first 12 months.

The reduction follows Insurance Services' record year of performance supporting the annuity and life insurance market, with volume for this service alone reaching 2.7 billion transactions in 2006, an 18% increase over 2005 and a 50% increase over 2004.

Positions & Valuations automates and standardizes the transmission of annuity and life insurance contract details from carriers to distributors. It provides them with information on all assets under their management, including key contract data, current values, service features and parties to a contract. It is also used as a tool by the industry to comply with regulatory requirements, such as anti-money laundering and "Know Your Customer" statutes.

Customers respond
Jonnie Smith, senior vice president of Annuity Operations & Administration, John Hancock Financial Services, said, "John Hancock's annuities and life insurance businesses have increased dramatically in recent years. Therefore, reducing the fees for Positions & Valuations allows our firm to take advantage of the scale we enjoy today. When the industry set out to automate annuity and insurance processing, DTCC committed to lowering overall costs through its centralized technology infrastructure. They are delivering on that commitment, and we are very pleased with their decision."

John Hancock is the U.S. division of Manulife Financial Corporation.

"Ten years ago the industry engaged DTCC to mainstream insurance processing due to its history of containing and reducing costs over time; this fee reduction affirms we made the right decision," commented Esther Stearns, president and chief operating officer, LPL Financial Services. "LPL continues to expand its utilization of Positions & Valuations, and this substantiates our commitment to automate the transfer of post-trade information to advance industry efficiency."

Usage-based fees
The fees for Positions & Valuations are based on levels of usage and calculated for every 1,000 transactions:

• For 4 million and over, the new fee will be $2.00 vs. $3.50, a 43 % decrease.
• For 2 million to 4 million, the new fee will be $3.00 vs. $3.75, a 20% decrease.
• For 500,000 to 2 million, the new fee will be $4.00 vs. $4.50, an 11% decrease
• Transactions under 500,000 remain at $8.00. @