Donald F. Donahue, DTCC’s President and CEO, recently gave the keynote address at the ACORD Insurance Data and Analytics Summit in New York, NY, on April 25, 2012. The topic of Donahue’s speech, “The Gold in the Data Hills: Mining it, Refining it and Using it,” touched on several areas where DTCC is playing a new role in the data business. Excerpts from Donahue’s speech are reproduced below.
Data without understanding, data without analysis, is just raw material. The sheer volume of data now accumulating, and the sheer amount of detail needed to understand today’s financial markets and instruments, represent a real burden on and challenge for us and our clients.
Turning data into information, and finding ways to help our clients and their customers understand what the data means and how to use it, is becoming a major adjunct to our business. In fact, while DTCC has always been a transactions business, the value we add now lies increasingly in how we leverage the data we derive from those transactions… and in how we mutualize access to and the costs of core data bases in order to deliver to our clients market intelligence, risk control, compliance solutions and cost reductions.
So what I’d like to do today is talk about the role we play as an infrastructure organization in helping the financial industry to handle its massive data management challenge. I will focus on the kinds of data we tend to gather, how we standardize its collection and transmission, and how we capture and warehouse this data in ways that serve the entire financial services industry spectrum, including your companies, not to mention regulatory agencies.
As today’s conference suggests, we’re hardly the only business working harder and harder to capture and digest data. In today’s world, accepting that challenge is a given. But perhaps some of our experience will give you food for thought as you ratchet up data capture, analysis and distribution in your organizations.
Frankly, there’s nobody in the industry positioned like DTCC Insurance and Retirement Services to extract and provide metrics to the market based on actual transactional flows. We currently receive and process some 2.4 billion reports on annuity contract positions a year, plus millions of other kinds of insurance and annuity transactions, which means we have at our fingertips a huge amount of insurance industry information and market intelligence.
With the baby boomer population aging, annuity product sales are increasing. To remain competitive in this growing business, companies need more sophisticated and robust market analytics. As one example of what we’re able to do with our mountain of data, we recognized the opportunity we had to put an innovative, elegant and easyto- use client-interfacing “wrapper” on the vast amount of annuities data aggregated through our daily processing routines, and to make this wrapper available specifically for our insurance clients.
Last year we launched DTCC’s Analytic Reporting Service for Annuities as a fully hosted, web-based solution — available online anywhere, anytime — to provide accurate, timely data and much desired transparency to the annuity businesses. The service, naturally, also includes insight on financial inflows and outflows that are processed through DTCC.
Because the data in our Analytic Reporting Service is based on actual transactions— specifically, the millions of annuity transactions centrally processed by DTCC — firms can make more informed business decisions and identify key trends about sales, sales effectiveness, product management, marketing and compliance.
Clients can also rank and benchmark their business, comparing information and trends from their own transactions with the aggregated data of all participants, which can help firms understand similarities and differences, and identify further opportunities. Data is refreshed on a monthly basis, and is generally available in the middle of the following month — a turnaround time about one sixth or less of the reporting lags of three months or longer that the industry used to endure before we started the service.
This approach — centralizing, consolidating and helping to interpret the data — can also be particularly effective for clients who need ready access to satisfy more stringent regulatory and compliance requirements. As you are all well-aware, insurance firms face a growing number of regulatory requirements at both the state and federal levels.
Like nearly all the financial service industry, the insurance industry needs to prepare for what this escalation of regulation will mean to its business. We all need to understand how to manage these new regulatory expectations, and firms need to ensure their sales and services fully comply with the regulatory changes sweeping the industry.As we know from past experience, mitigating risk and increasing transparency are critical for sustainable growth in today’s more demanding regulatory environment.
And we believe that bringing greater automation and standardization to the insurance industry is perhaps the best way to adapt to the ever-changing regulatory landscape. When the cost of technology development is weighed against the potential cost-savings of automation, firms need to think strategically over the longer term. Cost savings from automation now can generate more capital for future technology development.
Just as the initial release of the Analytics Reporting service was developed with the active input of an advisory group of our member firms, we currently have a working group of firms continuing on the project. They’re tasked with thinking through how the Analytic Reporting service might be further enhanced beyond the research and marketing intelligence to also provide the kind of in-depth transactional reports that are required by industry regulators.
This is a real paradigm shift in business analytics and data: clients do not have to store or manage the data, nor do they have to develop applications. As a neutral, industry-owned compiler of insurance data, DTCC is the source, the host and virtually, the data cloud.
In our role as an infrastructure organization, we have been tackling two other data initiatives intended to create more uniform and globally recognized data bases or approaches to data. Both of these will have an impact not only on securities firms but eventually on many companies throughout the world, including virtually all public companies.
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