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Insurance Services: Automating Fund Transfers
As the last stages of the pilot for the Fund Transfers service move into full production, Insurance Services at DTCC is traversing new terrain on the road to automation for the insurance industry. With connectivity established and the fine-tuning of the application nearing completion, the pilot phase is scheduled to ramp up to full production in late May.
Fund Transfers is Insurance Services’ inaugural product offered in a web-based platform rather than the traditional data-track, mainframe environment. It also represents the first of several services being developed using ACORD XML standard data messaging in a real-time environment.
“Fund Transfers is our first service that leverages web-based technologies to give customers greater ease of use, while moving the industry further toward straight-through processing,” said John Ziambras, DTCC managing director and general manager, Insurance Services. “We plan to add two more services in the web environment over the next 18 months.”
This newest capability in the family of Insurance Services products automates the processing of fund reallocations within a variable insurance product, a process about which regulators have expressed concern regarding potential unethical business practices in broker-initiated transfers of funds. The new service will enable distributors to monitor representative-initiated transfers and reduce the risk of unauthorized transactions and the monetary penalties that can follow regulatory violations.
Collaborating to get there
The countdown to the Fund Transfers rollout has involved obstacles overcome and lessons learned. Since the beginning of the pilot phase in the fourth quarter of 2007, Insurance Services and its pilot firms have used a strong collaborative process to deal with web connectivity issues and all the other developmental challenges that come with new product specifications and a new data format in a different electronic environment.
“Carriers Genworth Financial, ING, Pacific Life and Prudential and broker/dealers Merrill Lynch and Smith Barney have worked diligently on the task of fine-tuning Fund Transfers,” said Craig Gurien, DTCC product manager, Insurance Services. “They have made major contributions to a product and a process that will help the industry more effectively handle growing regulatory requirements,” he said.
Using their proprietary or vendor-supported platforms, distributors and carriers can use this new service to automate the entire process of submitting a fund transfer, including acceptance or rejection of the request. Any agent that initiates a fund transfer can now be required by the distributor to complete the transaction through a centralized, supervised system that connects through DTCC. The carrier, distributor and agent will then share the same information and process, ensuring compliance with and an electronic record of the transaction trail from first inquiry to final approval or rejection.
Anatomy of a pilot test
The early weeks of the pilot project dealt with the establishment of connectivity between DTCC and the test firms – a task that posed unique challenges for each firm. Once connectivity was resolved, the distributors and carriers developed and exchanged “test scripts” – sample transactions of fund transfers – that involve “perfect case” scenarios or “reject” scenarios.
The reject scenarios contain errors in the form of missing data fields and improper data formats that could be identified by DTCC. They also contain information that must be evaluated by the carrier for adherence to business rules, such as a request for a transfer of funds that exceed the amount available in an account.
“Piloting a new product requires constant communication and great attention to the details of implementation,”said Randi Gordon, DTCC vice president, Product Management, Insurance Services. “Our project team spends countless hours with the firms’ operations and technology people resolving issues great and small so that when the time comes for full production rollout, we have a service that is ready for use, producing benefits and return-on-investment for our customers.”
Now that test accounts and contracts have been exchanged, Insurance Services and the pilot firms are preparing to go into full production in late May, with more distributors and carriers expected to implement the service as its benefits become fully apparent. @