Annuities Carriers Cooperate On NAVA STP Initiative To Improve Service Levels

Under the NAVA STP initiative, carriers such as Jackson National Life are looking to improve service levels and processing times, which could eventually change the way they view competitive differentiation.

Processing time is widely viewed as a major roadblock to success in the annuities business, especially as it relates to the influx of business opportunities presented by the retirment of baby boomers. To overcome the challenge, insurance carriers are collaborating through the National Association for Variable Annuities (NAVA) to develop and implement straight-through processing (STP) standards to improve service levels for distributors and potential investors. The Reston, Va.-based industry group is seeking to eliminate the "artificial administrative barriers" that slow the new-business process for annuities, explains Rob Dearman, assistant VP of broker-dealer and registered investment advisers systems, Jackson National Life ($80 billion in assets).

Even as the annuities market continues to grow, opportunities are missed because the new-business process is markedly more difficult than it is for mutual funds and other financial products, according to Robert Nilsson, VP of marketing and market development at eLynx, a Cincinnati-based electronic document and data delivery service provider involved with the NAVA STP initiative. "Seventy-six million [baby-boomers] are potential consumers of these products," he says. "Paper-based products are not going to be able to fulfill this business need."

Ultimately, a fundamental shift in how carriers view competitive differentiation in the annuities market could take place as a result, suggests Jackson National Life's Dearman. "The competitive differentiators will change as we commoditize the operational processes," he contends. Dearman primarily is responsible for technology solutions for the Lansing, Mich.-based carrier's large broker-dealer network, National Planning Holdings (NPH). He's also highly involved with the NAVA STP initiative.

In December 2006, the NAVA STP initiative's executive council approved 24 standards that essentially defined the process for doing new business electronically. It was a key step in eliminating the paper-based processes that drastically slow the annuities process and often make other financial products, such as mutual funds, more attractive to potential investors.

"[Annuities] bring a value proposition to the table that is truly unique. ... It's the only way you can get an insurance contract to ensure a return on your investment," explains Dearman. "If a rep was looking at either a mutual fund or a [variable annuity], you want him to evaluate the suitability of that product based on the investor's need, not on how much time it was going to take to fill out the paper."

All for One

The industry is so focused on overcoming this challenge, Dearman notes, that carriers are sharing previously confidential information. At a recent NAVA STP conference in Atlanta, for example, "We had competitors come in and talk about how they justified the cost [of moving toward STP] in their 2008 budget," he says. "These are things that, as competitors, we never talked about with each other in the past. We are now openly sharing for the good of moving STP forward."

That, Dearman says, is evidence of a shift in how carriers view competitive differentiation. "Instead of having carriers focused on how many pages are in an application, how many minutes a customer has to stay on hold or how a budget is written, [they] are focusing on how they're going to design products that meet investor needs and how they're going to provide great service," he asserts, noting that many annuity carriers and distributors will launch STP pilots in early 2008 as the next step in the NAVA initiative.

"The customer experience is the biggest driver in all this," eLynx's Nilsson says. "Once you get done analyzing it, the way we do business today as consumers is the opposite of the paper process [in place for annuities]." In order for the annuities industry as a whole to compete with other financial services, particularly for baby boomers' business, "You need more of an industry solution," as opposed to a solution for technology capability leaders, he adds.

For those carriers that are unable to implement full STP programs, Nilsson recommends a hybrid process that embraces the STP standards but allows for paper-based opt-outs at certain stages of the process. "Straight-through processing is the holy grail," he says.