Insurance sales without the paper trail

The mountain of paper advisers create when they sell an insurance policy or annuity contract is about to shrink.

A subsidiary of the Depository Trust and Clearing Corp. today is launching Attachments, a technology platform designed to reduce paper processing for insurance carriers and their distribution networks.

The service comes from National Securities Clearing Corp., the DTCC unit that operates several similar automated links, including FundServ, which is the industry standard for processing and settling mutual fund orders.

Along with the policies and contracts themselves, Attachments will streamline the exchange of the digital or imaged documents, signatures and forms that are required in the processing of annuity and life insurance contracts. This so-called unstructured information accompanies most insurance transactions.

“This is a very important development and addresses what is probably the most painful point in the operations for a broker-dealer,” said Doug Dannemiller, a senior analyst in the wealth management practice at Aite Group LLC. “Having a DTCC-sponsored process will have a tremendous impact on the operational efficiencies in the independent-broker-dealer marketplace,”

Citing Aite research, Mr. Dannemiller explained that gross commissions on annuity products ac-count for about 30% of a typical independent broker-dealer’s annual revenue; he added that LPL Financial produced about 40% of its 2008 revenue from selling such products.

Sean Cunniff, research director at The Tower Group Inc., a financial services consulting and analysis firm, agrees with Mr. Dannemiller’s assessment.

“Processing insurance and annuity paperwork, most all of it by hand, has been the bane of the insurance and brokerage industries,” Mr. Cunniff said. “Reducing expenses could make the lives of advisers and their clients a lot happier and infinitely more efficient.”

Analysts said efficiency will increase simply as a result of parties’ no longer having to fax or mail paper documents. Over the long run, technology will also allow for better transparency and tracking of documentation, which should prove a boon to all parties in meeting regulatory and compliance requirements.

An industry standards expert, who asked to not be identified, highlighted one important aspect of the service — its ability to attach to each document standardized metadata, which are transported along with the policy.

The data, encapsulated in machine-readable tags using XML, include identifiers labeling what the document is, its purpose and its origin.

Standardizing those data elements allows participating insurance companies and brokerage firms to process many different kinds of policies in the same way.

In an interview, Adam Bryan, managing director of DTCC’s insurance and retirement services unit, said development of Attachments took just six months because many industry standards had already been established.

“[Attachments] is very consistent with the [Insured Retirement Institute] and their whole straight-through-processing model, and we have built it to [Association for Cooperative Operations Research and Development] standards as well. We’re going to see substantial strides in the whole STP arena and reduction in the not-in-good-order that is seen so prevalently in the industry today,” Mr. Bryan said.

He declined to comment on the expense of developing Attachments, but he noted that 15 client companies are currently using it.

Cathy Weatherford, president and chief executive of the IRI, said her organization is excited about the technology sees it as a major milestone for both the retirement income industry and the broader insurance community. She said it is a big step along the path to the industry’s goal: straight-through processing of all documents, with no manual processing.

“The ability to know what a document is, and where it fits into the work flow, enables automated processing and richer archiving of document information,” Ms. Weatherford said.

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TRACKING SPENDING

Cashflow Insite is a new online service that tracks spending and borrowing of clients of financial advisers.

Betting that the site will become an integral feature and valuable addition to the practices of financial advisers, the founders are offering it free to advisers’ clients.

To use it, clients download a small program from cashflowinsite.com, then go to their banking website, where there is usually an option to download data to Microsoft Money or Quicken. The Cashflow Insite program automatically intercepts the download and sends the data to its website, where transactions are categorized and made accessible to the adviser if permitted by the client.

“A key component of providing accurate financial advice is understanding a client’s cash flow needs. Our collaborative solution between adviser and client provides this capability without placing a time burden on the adviser, and strengthens their relationship in the process,” said David Kuik, a technology consultant and co-founder of Neuralus Inc., which owns Cashflow Insite.

Advisers pay $45 per month for the service, allowing them to offer it to up to 100 clients. The site is integrated with Redtail Technology Inc., a popular customer relationship management application.

The site also has completed testing of integration with account aggregation providers ByAllAccounts and CashEdge Inc. Once those are available, the downloading of client data will be entirely automated. Neuralus also has signed a contract with a major independent broker-dealer for use by its advisers.

It isn’t the only company tracking personal spending online that is interested in the adviser market.

Aaron Patzer, chief executive and founder of the popular consumer site Mint.com, said that he believes that greater access by consumers to all their financial data represents a plus for advisers. He believes that the growth of Mint — which now serves 1.7 million users — and its acquisition by Intuit Inc. for $170 million show that web-based technology is changing financial services marketing.

“The growing number of tools available can be a great boon for financial advisers. The tools not only take a lot of the grunt work out of their jobs, but it gets a whole new set of people interested in and working with their money,” Mr. Patzer said.

E-mail Davis D. Janowski at [email protected].