DTCC Connection

May 02, 2011 • DTCC Connection

DTCC Strengthens Customer Compliance in the Insurance Sector

by Crystal Bueno


DTCC has developed an enhancement to its Licensing & Appointments (LNA) service – one of the core automation solutions from its Insurance & Retirement Services (IR&S) business – that will help carriers track and confirm whether agents have been trained and certified to sell their specific annuity products.


These enhancements, which will help centralize the verification of completed mandated training, rolled out in April.


Managing state-level regulations

Within financial services, insurance is a unique business because it is primarily regulated at the individual state level – unlike banking and securities investments, which are regulated by federal agencies. This means that insurance firms must deal with up to 50 different sets of state regulations and 50 different state regulatory agencies.


This new education component for insurance agents is a result of the state-level Suitability in Annuity Transactions Model Regulation introduced last year by the National Association of Insurance Commissioners (NAIC). Specifically, all agents must take a four-hour certification course on the fundamentals of annuities, as well as complete product-specific training from carriers for which they solicit annuities.


Each state law has its own specific requirements and training deadlines, and will set its own effective date. There are currently 11 states/jurisdictions that have adopted regulations requiring further annuity education, including California, Colorado, District of Columbia, Florida, Iowa, Ohio, Oklahoma, Oregon, Rhode Island, Texas and Wisconsin.


Nine additional states have proposed regulations. Iowa was the first state to mandate regulations, beginning Jan. 1, 2011, and others are scheduled beginning second quarter 2011.


“Customers on our Senior Advisory Board approached us with this issue late last September,” said Adam Bryan, DTCC managing director, Insurance & Retirement Services. “The looming 2011 deadline posed a serious challenge for the industry, since carriers really had no way to centralize the verification of this producer training.


“We saw an immediate fit within LNA, our service that automates and standardizes the two-way flow of information needed to manage producer authorization information between insurance carriers and distributors. We quickly formed a customer task force, and started to work through how we could accommodate these new data requirements with a service enhancement to LNA.”


Phase I enhancements

In Phase I of the project, which was fast-track tested for two weeks in April, I&RS built enhancements to LNA that can take a standardized delimited data file feed from the education vendors who provide this producer training, and translate it into the industry-standard LNA format. The new data fields built into the LNA system will then be able to accommodate this training data, so carriers can quickly verify if the agents have been trained and certified.


Some distributors and carriers are using vendors to support their training efforts. The vendors are not required to become members of DTCC’s subsidiary, National Securities Clearing Corporation (NSCC). They also will not be charged to provide training completion data, nor are they required to actually build LNA.


“We wanted to eliminate any possible barriers for the vendors to engage with us,” said Lana Macumber, DTCC director, Insurance & Retirement Services, Strategy and Business Development. In the next iteration of the project, I&RS will extend these enhancements to the LNA Access Platform, the standalone online reporting tool that distributors use to enter, edit and retrieve various sets of pre-defined required licensing and appointment data.


DTCC is currently working with seven education vendors, including Kaplan, PinPoint (partnering with the Life Insurance and Market Research Association), QuestCE, RegEd (partnering with the Insured Retirement Institute), Sircon, SuccessCE (partnering with the National Association for Fixed Annuities) and WebCE.


Phase II enhancements

In the next phase of the project, targeted for early 2012, I&RS envisions being able to provide real-time producer authorization messaging for point-of-sale and transaction processing. By leveraging ACORD XML for producer authorizations, I&RS would be able to navigate these messages to and from requestor to end carrier. @


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