An increasing demand for annuity products is one of the key drivers behind an initiative to standardize the electronic sales of such offerings. "There will be a huge amount of interest in these products, and the industry needs to prepare for it," says Deb Tucker, vice president of NAVA, the Washington, D.C.-based nonprofit trade association that launched the initiative. "We want to help more people have better tools to sell these products to more consumers."
NAVA's Straight-Through Processing (STP) Standards Initiative, announced in February, is the culmination of a five-year effort to develop data conformity and technology standards to help the annuity industry improve electronic business processes and enhance customer service. Its intent is to streamline the electronic purchasing process for annuities for consumers, insurers, distributors, and regulators.
The STP initiative offers 24 sets of standards around four key areas: suitability, electronic forms, privacy, and records management. "The 24 standards are all around the point of sale of the product," Tucker explains. "This is a defined future state for the industry."
The STP initiative's three goals are to create a set of STP standards for a paper-free process, garner regulatory acceptance of that process, and help companies implement the standards. A coalition of companies, representing more than 30 leading insurers and distributors, on the STP executive council helped develop and approve the operational standards for conducting new annuity business electronically.
"There is a tremendous opportunity for insurance companies to grow the pool of assets that are attracted to the variable annuity industry," says Clifford Jack, executive vice president of Jackson National Life Insurance Company, headquartered in Lansing, Mich., which helped NAVA develop the standards.
Millions of baby boomers near retirement are seeking additional income. For these and other consumers, the STP initiative aims to simplify the annuity purchasing process; provide access to electronic information, reports, and documents; and make it easier to conduct transactions online.
Other drivers behind the initiative include an increasingly intense regulatory environment and recognition that current business processes are cumbersome and inefficient, limiting annuity products' market potential.
"The variable annuity industry has made it very difficult for advisors to transact business due to a lack of automation, a lack of providing electronic information, and the significantly complicated process of filling out applications for variable annuities," Jack contends. "As an industry, if we can make it easier for companies to do business with one another and improve the flexibility of how information is presented, then we can increase our share of the retirement planning market."
In addition to improving interoperability between trading partners, the STP initiative hopes to help carriers and distributors reduce costs, increase productivity, and improve regulatory compliance.
"These standards should help companies meet their regulatory requirements more efficiently because all of the information will be in one data set," Jack says.
The initiative covers all types of annuities. The standards are both technology and vendor neutral. Although most of the required electronic processing technologies, such as electronic order entry and e-signature capabilities, currently exist, NAVA encourages IT vendors to develop additional automated solutions that comply with the standards.
"There's a massive opportunity for technology companies that believe they can provide some value here," Jack asserts.
NAVA and its members spent a huge amount of time and energy creating the standards. According to Tucker, more than 400 people participated in various working groups and task forces to develop them. Members logged more than 3,500 hours of conference calls to discuss ideas and collaboratively viewed more than 30,000 documents on a DocuShare Web site.
With the STP initiative formally launched, NAVA groups now are focusing on recommendations for phased implementation. NAVA also is working with insurance carriers, annuity distributors, and technology vendors to promote and encourage STP standards implementation.
By the end of this year, Tucker anticipates the launch of several pilots as part of the phased implementation of the standards. She has heard many companies will be implementing STP-compliant systems in 2008.
"This is an iterative process," Tucker acknowledges. "By defining these standards, our hope is we can bring conformity, clarity, and simplification to the current process."
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