The Business Intelligence Value of your Insurance & Retirement Services Data

Editor’s note: At DTCC, our collaboration with the industry represents the foundation of our efforts to build an electronic environment for insurance processing. It is being planned and implemented through a strong partnership with carriers, distributors, clearing firms and solution providers. We are pleased to include articles in IQ that reflect the point of view of our partners on issues of general interest to the industry. If your firm is interested in being part of our IQ Forum, please contact your relationship manager.

by Paul Nowak, President, Lansare Corporation

Has your organization thought about the business intelligence (BI) value of your DTCC Insurance & Retirement Services data? If you’re not tapping into this data, you’re missing opportunities to preserve client relationships, grow your book of business, and protect your firm’s reputation. By mining your I&RS data, you can deliver actionable business intelligence to internal users in sales and compliance.

Why Now?

You’re probably weary of hearing about the economy. But the reality is that every day you see it reflected in staffing cuts, tighter budgets, and perhaps even greater regulatory scrutiny over your functional area. Despite this, the current business climate provides an excellent opportunity to strengthen your market position and improve operations. A BI program utilizing your I&RS data can help you gain an advantage while competitors are scrambling.

First, clients are looking for guidance about financial matters in these turbulent times. You can provide guidance while rebuilding their trust through meaningful, personalized communication. Your I&RS data is rife with information about the client including recent life events, policy events and transaction activity that reflect their unfolding lives. This data should be mined and delivered to advisors regularly so they have a reason to reach out to clients. In doing so, you instill confidence in your firm and its products.

Second, you’ve probably been asked to do more with less these days, which means getting the most out of every asset at your disposal. One of your most important assets is client data. Your I&RS data is an excellent source of client information, and a business intelligence initiative is one way to unlock its value.

Finally, you’re likely feeling the burden of increased regulatory scrutiny. You can conduct ongoing surveillance of post-sale activity within your book of business by putting your I&RS data files to work within a BI initiative. You can monitor your data for potentially risky activity and demonstrate sound business practices that protect your clients’ interests.

Why I&RS Product Data?

The fundamental goal of any BI initiative is to deliver the right information to users so they can make decisions and take action. The “right” information is high-quality data that is accurate, consistent, timely and complete.

Data Accuracy:The BI value of any data set is reduced as errors increase. I&RS data files are subject to rigorous data processing and validation standards by your firm and DTCC. Your I&RS product data is a clean, reliable data source and well-suited to a BI effort.

Data Consistency: The BI value of your data is affected by the degree to which various data elements and the business rules surrounding the data are clearly defined and consistently applied. DTCC has outlined data definitions and standards for you to follow. Meanwhile, your organization has probably compiled a data glossary providing additional detail for custom fields specific to your organization. Your I&RS data has well-defined definitions and rules that are readily understood and easily shared among users, making it a perfect source of business intelligence.

Regularity: The BI value of your data is enhanced if users can rely on data updates occurring on a regular basis. Since your I&RS data files are processed on a predictable schedule, they are set up for a BI initiative.

Missing Data: The BI value of your data is diminished when data elements are missing from the file. Chances are your firm is not utilizing every placeholder within each I&RS product file specification. For example, your firm may be foregoing product and rider-specific information because it isn’t (or wasn’t at the time) pertinent to you or your counter-party. Fortunately, the I&RS product file specifications are designed to accommodate additions and changes. So your primary objective should be to derive as much BI value from the data as it exists today, with the goal of adding new data elements over time.

What You Can Do

We’ll use the PVF (Positions and Valuations File) and FAR (Financial Activity Reporting) services to illustrate the BI value of your I&RS data, while focusing on the needs of two different user groups within your organization – sales and compliance.

Paul Nowak, President, Lansare Corporation

PVF is one of three file types DTCC classifies as Positions and Valuations (POV). In general, Positions and Valuations allows carriers to send contract details to distribution partners on a regularly scheduled basis (daily, weekly or monthly). PVF is structured to provide users with a fully refreshed set of information on their entire book of annuities and life insurance contracts, including contract party details, contract service features, current contract values, underlying fund values on variable products, and updated agent information.

Financial Activity Reporting (FAR) allows carriers to provide their distribution partners with detailed transaction information on annuity and life insurance contracts. FAR contains the transaction record of the flow of funds into and out of the contract that impact contract value, such as premiums, disbursements, partial withdrawals, rebalancing activities, etc.

PVF and FAR for Financial Advisors

Let’s face it, advisors are hungry for leads. An excellent source of qualified leads is your existing book of business. But tapping into this lead source requires more than just randomly picking up the phone. Your advisors need legitimate reasons for contacting clients, and you need to make event-driven outreach part of the sales culture of your firm. You can accomplish both objectives by systematically mining PVF and FAR for life events, policy events, and transaction activity that may signal a change in the client’s financial needs, and then sharing these events with advisors. Sample life events that can be extracted or derived from PVF include birth dates and age-related milestones, change of address, and beneficiary updates. Policy events include contract anniversary dates, out-of-surrender dates, the end of guaranteed interest rate periods, or other rider maturity dates. Transactional activity including changes in systematic deposit or withdrawal patterns or a large one-time deposit or withdrawal may indicate a change in personal financial condition. Also, a client’s investments in various sub-accounts can be monitored for changes or imbalances relative to original investment objectives. In any case, you can use PVF and FAR to tap into these events and help advisors unearth selling opportunities.

Using PVF and FAR for Compliance

Most organizations have good processes in place to manage compliance during the sales cycle. However, you still have compliance needs after the sale has closed, such as Anti-Money Laundering provisions. Your firm can use PVF and FAR to assist in monitoring for suspicious activity and ensuring compliance with these rules.

But there are many other compliance activities that aren’t as readily apparent. For example, what if the insured’s personal or financial situation changes, and a product that was considered suitable at purchase may no longer appear that way to regulators? And clients sometimes forget why they bought your product when their situation changes! You need to head off these events before they become client-servicing issues that impact profitability and damage your reputation. You can use PVF and FAR in conjunction with basic business rules and data analysis techniques to uncover these potential risks and manage them proactively.

Also, front-end compliance and suitability programs don’t address macro trends that may exist throughout your book of business. For example, do you have a good snapshot of which advisors and which branches sell the most to seniors? Are there advisors engaging in repetitive sales practices regardless of client needs, or is there an office whose clients predominantly select the same one or two sub-accounts for their variable annuity? These and other compliance scenarios can be managed by tapping into PVF and FAR, and coupling them with simple rules that allow you to conduct surveillance on a regular basis.

Your I&RS data files are great assets that you can put to work through a BI initiative. These high quality data sources can deliver relevant, timely information to users, and can help you grow sales, preserve client relationships, and manage risk.