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DTCC Announces Largest Fee Reduction For Insurance Services in Its 10-Year History
Senior Advisory Board of Major Carriers and Broker/Dealers Guiding Expansion
New York, February 13, 2008 - The Depository Trust & Clearing Corporation's Insurance Services business unit has announced the largest fee reduction in its 10-year history and the second one in six months. This latest reduction, which was effective January 2, 2008, is projected to save customers $6 million in 2008 alone.
"DTCC's at-cost business model brings real savings to our customers at a time when technology costs are a key concern for the insurance industry," said Leonard Schmitt, head of customer relationship management, Insurance Services. "We are able to provide the reductions through a combination of disciplined focus on cost controls, productivity and collaborative development of services with our customers. As our volumes grow and generate greater economies of scale, we reassess our fees and return excess revenues to participants."
The historic fee reduction eliminates all file fees associated with insurance products. These fees of $15 per file have been linked to the older core products, including Insurance Services' largest-volume service, Positions and Valuations (POV), along with Asset Pricing (AAP), Commissions (COM) Applications and Subsequent Premiums (APP/SUB) and Financial Activity Reporting (FAR). With the end of file fees, customers will pay only per transaction costs for the services.
Insurance Services experienced record volumes in 2007, expanding its family of automated connections and data exchange solutions between carriers and their broker/dealer, bank and other distribution partners who market insurance products. Last year, for example, Insurance Services processed nearly 3 billion POV records and settled Annuity Premium and Commission transactions valued in excess of $20 billion.
Fee Reduction a Benefit of Collaboration
Insurance Services acknowledges the contribution of its Senior Advisory Board, composed of senior-level representative of 13 carriers and 11 broker/dealers, in helping guide an expansion of services to the industry. The SAB, established by IS in 2007, provides a new avenue of collaboration with the industry in the automation and standardization of a traditional, manual processing system for insurance products, similar to the benefits that DTCC has brought to the mutual fund industry. The fee reduction illustrates the effectiveness of DTCC's collaborative efforts in leveraging proven technology and expertise to drive down customer cost and increase processing efficiency for the insurance industry.
The earlier fee reduction on July 1, 2007 for the POV service would have been approximately $3 million in savings on an annual basis. POV automates and standardizes the transmission of annuity, life and other insurance product contract details from carriers to distributors, providing them with information on all assets under their management, including key contract data, current values, service features and parties to a contract.
About Insurance Services
Insurance Services connects the insurance industry through an automated, centralized and standardized framework for data exchange and money settlement between product manufacturers and distributors. Insurance Services are provided by DTCC's National Securities Clearance & Settlement subsidiary. In addition to Positions & Valuations, core services affected by the file reduction automate key transactions prior to the issuance of an insurance contract while others provide compliance reporting on contract transactions throughout the contract life cycle. Current core services include:
- Applications & Subsequent Premiums (APP/SUB): transmits annuity applications as well as subsequent premium additions from distributors to carriers, providing same-day money settlement for both transaction types.
- Commissions (COM): delivers information from carriers to distributors on commission and compensation payments and provides same-day money settlement.
- Financial Activity Reporting (FAR): allows distributors to receive details from carriers on a daily basis regarding financial transactions such as disbursements, rebalances and asset allocation changes, and helps companies comply with anti-money laundering and other regulatory requirements.
- Asset Pricing (AAP): transmits the unit values for the underlying funds in variable annuity and life insurance products from carriers to distributors on a daily basis.
Members of the Senior Advisory Board helping to guide DTCC's efforts include:
Aegon/Transamerica, AIG/Sunamerica, AXA, Edward Jones, JPMorgan Chase, Genworth, The Hartford, ING, John Hancock, LPL Financial Services, Lincoln Financial Group, Merrill Lynch, MetLife, Morgan Stanley, National Financial, Nationwide, Pacific Life, Prudential, PCA/Raymond James, Smith Barney, SunLife, UBS, Wachovia, Wells Fargo Investments.