Automating Replacements Transactions on Track for 2010
Automating and standardizing the process for replacing an annuity or life insurance 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-for-like" transactions represents a sizeable portion of new business in insurance products, Insurance & Retirement Services’ much-anticipated Replacements (RPL) automation solution will yield real cost- and risk-reduction benefits for the industry, particularly the carriers.
The introduction of variable annuity living benefits has increased the volume of replacements, as customers seek to take advantage of their different benefits. At the same time, the paper-based handling of replacement transactions has increased delays as volumes have risen, thus magnifying the industry need for processing scalability and connectivity to manage the business growth. The complexity, cost and risk of manually processing exchange requests, customer demand and regulatory issues have combined to move Replacements through the development pipeline, even during the current market downturn.
"In spite of resource limitations, the carrier community has committed to the development and implementation of this important solution for a long-standing operational challenge that will improve the customer experience and reduce processing costs," said Randi Gordon, DTCC Vice President, Product Management. "Replacements will help insurance companies satisfy customer expectations for a prompt and efficient exchange of policies."
The Development Path
The development of Replacements has been on the horizon at DTCC for some time, but due to a variety of factors, the industry has chosen to prioritize other solutions. However, Senior Advisory Board members have confirmed Replacements as part of DTCC’s formal development agenda, with carriers committing to a scheduled roll-out in 2010.
Replacements will leverage ACORD XML messages to standardize the communication of data on product exchanges between participating carriers and distributors. It will support web service movement of required documents and money settlement between carriers. It will also provide a separate, stand-alone capability that will inform the distributor of the latest pending case status information as the replacement request is processed.
With the Replacements (RPL) web service building toward a pilot beginning in 1Q 2010, insurance companies will soon be able to improve the efficiency of the entire process and lower the operational risk between delivering and receiving carriers.
How it Works
Using a mainframe or Internet connection, 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. The standardized message automation supports more "in-good-order" replacements. Attachment of replacement documentation will also help unify carrier requirements for in-good-order transaction processing.
In addition, money settlement for surrendered contracts will be consolidated with other transaction obligations into one credit or debit at the end of the day to each participant.
The Pilot
Wave I of the pilot is scheduled to roll out in early 2010. Four carriers and one distributor have agreed to participate and are already involved in a requirements plan to develop and display later in 2010. Wave II will involve five additional carriers. Any firms wishing to participate should contact Cory Stark (cstark@dtcc.com).