IRI Ops & Tech License & Appointment Working Group THE STATE OF LICENSE & APPOINTMENT PROCESSING

Transcription

1 IRI Briefing Paper IRI Ops & Tech License & Appointment Working Group THE STATE OF LICENSE & APPOINTMENT PROCESSING IRI Ops & Tech License & Appointment Working Group Chairs: Tim Owen, VP, Product Management, Vertafore Sircon Solutions Jeanann Smith, Director, Product Management, Insurance & Retirement Services, DTCC IRI Liasson: Jim Young, CFP, PMP, Vice President, Operations and Technology, Insured Retirement Institute (IRI)

2 Change Control and Revisions Revision Revision Date By Description 0.5 May 15, 2015 Tim Owen Initial draft. Jeanann Smith 0.6 July 13, 2015 Tim Owen Jeanann Smith Incorporate WG feedback from initial draft and restructured next 0.7 July 30, 2015 Tim Owen Jeanann Smith steps section. Incorporate WG feedback on ACORD 821 form. 1.0 October 12, 2015 Tim Owen Jeanann Smith March 14, 2016 Tim Owen Jeanann Smith Jim Young Incorporate feedback from faceto-face meeting in Nashville. Update ACORD forms. Re-Structured Recommended Next Steps, Minor Edits, Added Contact Information, Anti-Trust and About IRI Addendums

3 Table of Contents Change Control and Revisions... 2 Executive Summary... 4 Background and Problem Statement... 5 IRI Initiative to Address LNA Automation Issues... 5 Relationship to IRI s Straight-Through Processing Initiative... 6 Where We Are Today... 6 Recommended Next Steps... 7 Recommendation 1 Create L&A Reference Model... 7 Recommendation 2: Review Existing DTCC LNA Standard and Consolidate or Remove Unneeded/Unused Portions... 7 Recommendation 3: Map the ACORD XML and DTCC EDI Standards to Each Other... 7 Recommendation 4: Create Reference Model Test and Certification Process... 8 Recommendation 5: Create and Implement a Test and Certification Facility... 8 Recommendation 6: Implementation Timeline and Approach... 9 Appendix A Appointment and Termination Reference Model Appointment Process: Appointment Confirmations: Termination Process: Just-in-Time Appointing Process Standard Usage Appointments Appointment Request and Status Confirmation Flow Model Appointment Request/Confirmation Business Scenarios & Expected Results Appointment Terminations Termination Request and Status Confirmation Flow Model Termination Request/Confirmation Business Scenarios & Expected Results Licensing & Appointment Date Definitions Usage by Appointment & Termination Transactions Appendix A Appointment and Termination Data Examples Appendix B Working Group and Task Force Contact Information Appendix C Anti-trust Policy and Caution Appendix D About IRI Copyright Insured Retirement Institute (IRI). All rights reserved. 3 Page

4 Executive Summary In the last fifteen years, various initiatives have been implemented by industry organizations including DTCC, ACORD, NAILBA, and SILA, to improve distributor to carrier licensing and appointment processing efficiency. These initiatives aim to provide standardized and streamlined processes within the industry and have provided benefits, but limitations have been discovered along the way. Thus far, adoption of the automation standards is limited to top distributors and carriers with main distributors as a key distribution channel. These standards have not been as effective as previously hoped due to this lack of adoption, which is a result of the high cost of implementation, delayed return on investment, and the inconsistent interpretation of these standards. In , IRI began addressing these issues by re-initiating the license and appointment automation group to improve consistency in standards to reduce implementation and ongoing maintenance cost and consequently drive adoption up. Adoption of these automation standards will allow carriers and distributors to effectively and efficiently interact to improve this critical business process; however, in order to accelerate adoption, more work is needed to complete this initiative. A more prescriptive, scenario-based reference model would improve how carriers and distributors should utilize these automation standards. Carriers and distributors will then have a more clear and specific guide for how to most effectively implement these standards.

5 Background and Problem Statement In order to sell insurance and annuities you have licensing and securities registration credentials and those requirements vary by state. Distributors also have different roles and responsibilities than carriers, which requires distributors to communicate efficiently with the carriers regarding representative license and securities registrations in order to for a carrier to complete their diligence and sales authorization process, including appointments. Carriers need to respond to distributors efficiently with authorization and changes to authorization to sell. The advent of just-in-time (JIT) appointing and regulatory changes and rules around producer licensing have made the process more complex over time. Numerous initiatives including DTCC, ACORD, and SILA to name a few, have been completed to attempt to standardize and streamline the distributor to carrier communication process. Due to the complexity of the state rules and the various carrier and distributor interpretation of the rules, standards and best practices have met with modest adoption and at high cost. Examples of standards and best practices include: DTCC license and appointment LNA EDI standard, published in partnership with ACORD ACORD 821 Producer Information Form, as well as ACORD 876, 877, and 877CA for background check authorization and disclosure forms which replaced ACORD 758, 817, 818, and 819 forms ACORD XML license and appointment message standards and associated data standards SILA agency-carrier best practices handbook NIPR--ACORD state license and appointment message and data standards NIPR proprietary state license and appointment transaction standards In addition to these many standards, there are different technical approaches taken, for example: XML schema and XML DTD, flat-looping files, and multiple data element standards. In addition, there are numerous proprietary vendor, carrier, and distributor independent solutions. There has been significant effort industry-wide to automate the communication between distributors and carriers to facilitate getting representatives authorized to sell in the various jurisdictions. These initiatives, while to some extent effective for the large carriers and distributors, have had limited adoption across the broader industry reducing overall efficiency and return on investment. IRI Initiative to Address LNA Automation Issues To address the current challenges with adoption, efficiencies, and return on investment, in 2013, IRI created the LNA Automation working group led by the DTCC including distributor, carrier, and solutions provider participants. The initial focus of the working group was to create standard usage scenarios and a best practice implementation model for appointment and termination transactions. The LNA Automation working group identified the underlying business scenarios driving producer appointments and terminations. The group then worked to find best practices and define expected processing standards for each scenario. Specifically, the working group: Identified and standardized key industry transaction types for adding, deleting, and verifying registered representatives licenses and appointments. Copyright Insured Retirement Institute (IRI). All rights reserved. 5 Page

6 Merged DTCC License & Appointments Working Group with IRI Working Group, in order to facilitate efficient and focused attention across all industry players through one working group. Completed work on transaction specifications that will be components of a straight-throughprocessing standardized workflow, which will be defined in subsequent working group cycles. Relationship to IRI s Straight-Through Processing Initiative IRI has created standards for a fully electronic process for completing all types of annuity sales transactions. Its objective is to optimize speed and efficiency, while ensuring compliance for annuity transactions. Information is electronically communicated from one party to another throughout the order entry, submission, delivery, and settlement process without manually re-entering the same pieces of information repeatedly over the entire sequence of events. The guiding principles of this initiative include: Customer suitability: industry standard for adopting procedures involving state insurance laws in suitability. Electronic processing: automated and electronic systems required for contracts and forms in all transactions in which is periodically audited and updated to ensure compliance and overall efficiency and reduced cycle times. Privacy and Security: maintenance and sharing of private identification information must be secured to verify a customer s security. Records management: standards for record keeping and the need for all records to be clearly audited to assure full compliance with applicable requirements. Where We Are Today License and appointment standards as well as automation initiatives have delivered real benefits to carriers offering and distributors selling annuities. Despite these real benefits, adoption of these standards and their automation remains limited to top distributors and carriers that have distributors as a key distribution channel. As a result of the limited adoption of DTCC LNA and other standards, the industry has failed to fully realize the benefits of such standards and automation. The reasons for low adoption include: The complexity of licensing and appointing due to a state-based regulatory system. Continuous new and changing regulatory requirements. For example, annuity and carrier-specific product training requirements that did not exist when the last revision of the STP document was written. Interpretation differences between carriers and distributors of these rules and requirements. The roles and responsibilities between carriers and distributors and associated process differences including JIT appointing from one carrier to another, and process requirements to do business with one distributor versus another. Legacy carrier and distributor systems that were not designed primarily for automating licensing and appointing processes. The prioritization differences between carriers and distributor for licensing and appointing processes versus other core system and modernization initiatives. The first two challenges listed are difficult to address due to the regulatory system in the U.S., however, the next four challenges can be addressed through more effective and prescriptive standards. The result of these challenges is to drive the cost of initial automation and ongoing maintenance up, which reduces the overall return on investment and lengthens payback period for

7 LNA automation initiatives. Essentially what exists today is distributor to carrier relationship-specific automation. As a result, carriers have adopted DTCC LNA usage when demanded by their key distribution relationships. In addition, adoption of the LNA standard is often partial further reducing overall benefits to the participants. To address this automation cost and complexity challenge, DTCC created a lighter-weight online solution called LNA Access to get higher adoption on the distribution side. LNA Access has met with moderate success, but due to the required double entry of rep information benefits are limited when compared with true end-to-end automation from carrier and distributor rep management systems. Recommended Next Steps Recommendation 1 Create L&A Reference Model If a key goal is to implement an authorization verification check at the various points in a straight through process for annuities, then the industry needs a reference model for how to communicate license, appointment, and education/training related information between carriers and distributors. Such a reference model would allow carrier, distributor, and vendor IT professionals to create efficient and effective automation. Another approach could be an industry-wide centralized authorization verification service that would eliminate the need to transfer and reconcile data between each carrier and distributor. The initial effort to create the business scenario based reference model occurred in the L&A working group cycle. In that cycle, the working group created a scenario based approach to DTCC LNA appointment (AI Initial Appointment, AA Additional Appointment, AC Appointment Confirmation) and termination (TR Representative Termination, TA Appointment Termination) transactions. See Appendix A for the draft reference model scenarios completed by that working group. The working group needs to review and approve the draft. Subsequent working groups will address other DTCC LNA transaction types, as well as update scenarios as needed. Recommendation 2: Review Existing DTCC LNA Standard and Consolidate or Remove Unneeded/Unused Portions The current DTCC EDI LNA standard was created in the late 90 s / early 2000 s. Business and regulatory requirements drove the standard including the transaction types. Since then, the business and regulatory environment has changed, therefore impacting adoption of specific portions of the standard. Consequently, certain transaction types such as Team transactions (TS, TC, TT), Renewals (REN), Qualifying Officer / DRLP Change (QO), License Initial (LI), and License Additional (LA), were never fully utilized so the working group should review whether these transactions are needed and if not, remove them. In addition to the potential reduction of unused transactions, there have been some discussions around consolidating appointment transactions (AI/AA) to reduce rejections associated with how carriers process these requests. Recommendation 3: Map the ACORD XML and DTCC EDI Standards to Each Other In addition to the DTCC LNA EDI standard, ACORD also has published their L&A XML standard. Both standards exist to serve the specific segments or sub segments of the market and have a role to play in license and appointment automation industry-wide. The intent, however, of a business Copyright Insured Retirement Institute (IRI). All rights reserved. 7 Page

8 scenario driven process is to create a model that any standard and technical format can be based on. Each specific standard should have a standard flow and format for each transaction, but should be independent of technology and have room for various approaches of technical implementation. To make the XML and EDI consistent with each other, the working group recommends that ACORD and DTCC map the standards to each other and base reference implementations around standardized business scenarios. Recommendation 4: Create Reference Model Test and Certification Process A reference model defines in scenario-based detail, the process associated with getting a rep authorized to sell. For example, getting a distributor rep authorized to sell a specific carrier product in a state or group of states. Once the scenarios are defined, a reference carrier implementation and a reference distributor implementation would be created so that each part can test and certify using the appropriate counter-party reference implementation. This testing and certification process would be done at a scenario level. Implementing a new carrier to distributor LNA relationship would be a matter of flipping a switch. Ongoing changes to the reference model scenarios would require updates to the reference implementation and re-certification. Versioning may be required to allow each relationship to adopt new reference implementations. See Figure 1 for a graphical representation of this process. Reference Model Simulator and Verification Process Example: Initial Appointment Scenario 1 Carrier DTCC & ACORD Distributor Simulated Request Scenario (AI) Request Scenario (AI) Carrier System Response Scenario (AC) Reference Model Simulator Reference Model Simluator Simulator Verification (AI pass/fail) Distributor System Simulator Verification (AC pass/fail) Simulated Response Scenario (AC) Figure 1 Recommendation 5: Create and Implement a Test and Certification Facility Once the identified business scenarios have been approved by the working group and appropriate examples and validations have been identified, ACORD and/or DTCC should incorporate a validation in its service to ensure that both sides of the transaction receive valid requests and responses. To do that, though, the working group needs to identify when a business scenario request and response is being used versus the classic request and response process during the transition period where these coexist. In order to facilitate the different validation and usage behavior, an optional identifying field specifying the business scenario in the transaction may be needed. In addition, the working group

9 recommends that DTCC and ACORD collaborate to implement a testing and certification framework for license and appointment automation. ACORD has recently initiated test harnesses and certification processes beginning with ACORD XML standards and DTCC EDI standards will follow. In future working group cycles, ACORD will collaborate with DTCC and the working group to incorporate EDI LNA standards into their test certification facility (TCF). For more information on the TCF and how it applies to the proposed reference model simulator/test harness and certification/verification process, please review Figure1. Recommendation 6: Implementation Timeline and Approach The working group recognizes that transitioning to a business scenario based reference model and implementing a test and certification process and facility will take years to implement due to budget cycles and carrier distributor priorities not always lining up. However, the intent is to have the industry adopt a business-scenario driven approach to drive costs down and adoption up for license and appointment automation. Once adopted, carriers, distributors, and solution providers can then certify their approach to make it easier to establish and implement business relationships using automation. The working group also recognizes that there will be a period where the current standard(s) and the business scenario driven process will need to coexist. To ease the transition, the working group should lay out a recommendation for a timeline and approach to transition to the scenario-driven approach. Copyright Insured Retirement Institute (IRI). All rights reserved. 9 Page

10 Appendix A Appointment and Termination Reference Model Appointment Process: The Appointment Request will be used to electronically initiate, via DTCC s Licensing & Appointments (LNA) service, an initial appointment (authorization to sell) request for an agent/producer with an insurance carrier. A Distributor initiates the transaction to the Carrier to request the initial appointment. The transaction will be used in conjunction with the Appointment Confirmation transaction type (AC) which allows the Carrier to confirm the transaction electronically back to the Distributor. This response will mimic other appointment confirmations communications and will not specifically indicate that the appointment status is related to an AI or an AA, although if the distributor provided a control number on the original request, the carrier will return that control number within the AC response. Any new appointment request will include all the basic agent/producer information required in the producer entity loop as well as the license and appointment loop. Initial appointment (AI) transaction will be used to appoint a new producer only with the insurance carrier by the distributor. Distributors adding additional state appointments or line of authority will use transaction code (AA). The Additional Appointment (AA) request will be used to initiate additional appointment requests for an agent/producer that is already appointed in at least one state for a particular distributor firm. Appointment Confirmations: The Appointment Confirmation (AC) transaction will be used by Insurance Carriers to confirm the status of an appointment requested through DTCC s LNA service (AA, AI). For transactions submitted through DTCC, the insurance carrier will send an appointment confirmation (AC) based on the requested appointment state and lines of authority (LOA) with the distributor s original DTCC Control Number. In addition, the confirmation transaction is also used to confirm an appointment completion that was submitted outside of DTCC s LNA service, and may also be used to communicate status changes initiated by the carrier or state (e.g. state appointment renewal, termination for cause by carrier, pended for CE, etc.). Termination Process: DTCC s LNA service allows either the insurance carrier or distributor to initiate a termination request and the transaction type will be Terminate Appointment (TA) or Terminate Producer (TR) for both Carrier and Distributor. The request may be due to reasons such as firm decision; agent/producer moved resident state, state requirements, or carrier policy. If the terminate request is generated by Distributor through the NSCC, the carrier will respond back to the distributor with a TA or TR transaction (whichever is applicable) for confirmation process. This response will include the Original NSCC Transaction Number. Terminate Appointments (TA) will be used when one or more agent/producer appointments are being terminated, but the producer affiliation with the firm remains active. This could be due to the producer still holding at least his/her active resident state licensing/appointment, or due to a producer s change in residence state (whereby the producer is pursuing a new resident state licensing & appointment.) The TA transaction may be used to notify the recipient to terminate a specific line of authority or a full state appointment. TO terminate a full state appointment, each line(s) of authority must be sent to recipient. Terminate Producer (TR) will be used to reflect the termination of the agent/producer s affiliation with the distributor. This transaction will indicate that all active appointments under the producer s affiliation with that distributor have been terminated or will be terminated with the transaction request. Please note: An insurance carrier may choose not to terminate appointments with the state at this time; however, they will sever the affiliation to the distributor on their system. The insurance carrier will confirm a TR transaction request by the

11 distributor with a TR transaction and state reason of confirmed (CF). The insurance carrier may initiate a TR transaction for reasons such as for cause or new affiliation instructions were received from a new distributor Just-in-Time Appointing Process More and more firms are supporting just-in-time appointments (JIT). Insurance Carrier determines, along with their distribution partners, which states they will allow for and process JIT appointments. As standard usage, the distributor will send all appointments to the carrier, regardless of whether or not the state is a JIT state. The carrier, according to the rules established, will either hold the appointment until business is submitted (JIT) or submit the appointment to the state immediately (non-jit). For JIT appointments, the carrier will return an AC (appointment confirmation) transaction to the distributor with a PS (pending-can sell) status. This will indicate to the distributor that the producer is eligible to sell the carrier s product. Once business is submitted in a JIT state, the carrier will trigger the appointment to the state and fully activate the producer. Upon full activations, an AC transaction will be sent to the distributor to indicate an active appointment status. Standard Usage Appointments Appointment Request and Status Confirmation Flow Model The Appointment Request will be used to initiate an initial appointment request for an agent/producer with an insurance carrier. A Distributor initiates the transaction to the Carrier to request the initial appointment. The confirmation process allows the Carrier to confirm the transaction back to the Distributor. Any new appointment request will include all the basic agent/producer information required in the producer entity loop as well as the license and appointment loop. Initial appointment (AI) transaction will be used to appoint a new producer only with the insurance carrier by the distributor. AI or AA Request AI or AA Request AI or AA Reject AC Appt AI or AA Reject DISTRIBUTOR DTCC AC Appt CARRIER Status - Pending Status Pending AC Appt Status - Active AC Appt Status - Active Appointment Request/Confirmation Business Scenarios & Expected Results Copyright Insured Retirement Institute (IRI). All rights reserved. 11 Page

12 Business Scenario 1 Entire L&A Transaction Rejected Upon receiving an appointment request (AA/AI) from distributor, an insurance carrier rejects the entire transaction back to the Distributor for the reason of Producer s date of birth (DOB) is incorrect. Insurance carrier will reject entire appointment transaction back to the distributor. Transaction Type = Appointment Initial/Appointment (AI/AA) Transaction Effective Date = Effective Date reflects the date on which the transaction was rejected by the insurance carrier. Transaction Status (6104) = RJ (Rejected) Transaction Reason (6105) = DB (Date of Birth Incorrect) Business Scenario 2 Appointment Request in Good Order Requested Immediate Appointment Upon receiving an appointment request (AA/AI) from distributor. The appointment request states an immediate appointment by using the Immediate appointment indicator (6521 = Y). The appointment confirmation (AC) is sent by the insurance carrier upon completing the appointment. Upon confirming request is in good order, the carrier will confirm the affiliation with the distributor via the FINRA website, and process the appointment with the state. An appointment confirmation (AC) will be sent back by the carrier regardless of immediate appointment or JIT state to the distributor. The expected appointment confirmation (AC) status will be as follows: Transaction Type = AC License State/Regulatory Territory (6502) = only confirm on State as requested by distributor Appointment LOA = only confirm on LOA as requested by distributor Appointment Status (6601) = Active Appointment LOA Status Reason (6602) = FR (Firm Request) Appointment LOA Status Date (6603) = Status Date reflects the as of date on which the status became effective or changed by the insurance carrier. Appointment LOA Effective Date (6604) = the date of the appointment in which the state recognizes that the producer is authorized to sell. (OPTIONAL) Appointment LOA Expiration Date (6605) = If the state has an appointment expiration date it should be provided. (OPTIONAL) Business Scenario 3 Appointment Request in Good Order Just In Time (JIT) Appointment State Upon confirming request is in good order, the carrier will confirm the affiliation with the distributor via the FINRA website, and process the appointment with the just-in-time (JIT) state, the appointment will be set to process upon receipt of new business. An appointment confirmation (AC) will be sent back by the carrier to the distributor. The expected appointment confirmation (AC) status will be as follows: Transaction Type = AC License State/Regulatory Territory (6502) = only confirm on State as requested by distributor Appointment LOA = only confirm on LOA as requested by distributor Appointment Status (6601) = Active or Pending Can Sell

13 Appointment LOA Status Reason (6602) = FR (Firm Request) Appointment LOA Status Date (6603) = Status Date reflects the as of date on which the status became effective or changed by the insurance carrier. Appointment LOA Effective Date (6604) = the date of the appointment in which the state recognizes that the producer is authorized to sell. (OPTIONAL) Appointment LOA Expiration Date (6605) = If the state has an appointment expiration date it should be provided. (OPTIONAL) Business Scenario 4 Appointment Request in Good Order Restricted State Upon confirming request is in good order, the carrier will confirm the affiliation with the distributor via the FINRA website, and submit the appointment to the state. An appointment confirmation (AC) will be sent back by the carrier with a pending status (PD) when paperwork is submitted to the state, and will send a follow up appointment confirmation (AC) transaction with active status (AC) once the state has confirmed the appointment. The expected appointment confirmation (AC) status will be as follows: Transaction Type = AC License State/Regulatory Territory (6502) = only confirm on State as requested by distributor Appointment LOA = only confirm on LOA as requested by distributor Appointment Status (6601) = Active (AC) Appointment LOA Status Reason (6602) = FR (Firm Request) Appointment LOA Status Date (6603) = Status Date reflects the as of date on which the status became effective or changed by the insurance carrier. Appointment LOA Effective Date (6604) = the date of the appointment in which the state recognizes that the producer is authorized to sell. (OPTIONAL) Appointment LOA Expiration Date (6605) = If the state has an appointment expiration date it should be provided. (OPTIONAL) Business Scenario 5 Appointment Request in Good Order Non-Appointment (License Only) State Upon confirming request is in good order, the carrier will confirm the affiliation with the distributor via the FINRA website, and since no appointment is required, an appointment confirmation (AC) with an active status (AC) will be sent back by the carrier with the carrier s active can sell date. The expected appointment confirmation (AC) status will be as follows: Transaction Type = AC License State/Regulatory Territory (6502) = only confirm on State as requested by distributor Appointment LOA = only confirm on LOA as requested by distributor Appointment Status (6601) = Active (AC) Appointment LOA Status Reason (6602) = FR (Firm Request) Appointment LOA Status Date (6603) = Status Date reflects the as of date on which the status became effective or changed by the insurance carrier. Appointment LOA Effective Date (6604) = Effective Date reflects the date on which the transaction was processed by the insurance carrier. (OPTIONAL) Business Scenario 6 Carrier Generated Appointment Confirm Upon Appointment Status Change Copyright Insured Retirement Institute (IRI). All rights reserved. 13 Page

14 In the previous scenario #3, the carrier will respond with a Pending Can Sell status on the Appointment confirmation (AC.) upon receipt of business by the insurance carrier, the carrier will send another appointment confirmation, with the same control number, with a status of Active. The expected appointment confirmation (AC) status will be as follows: Transaction Type = AC License State/Regulatory Territory (6502) = only confirm on State as requested by distributor Appointment LOA = only confirm on LOA as requested by distributor Appointment Status (6601) = Active Appointment LOA Status Reason (6602) = FR (Firm Request) Appointment LOA Status Date (6603) = Status Date reflects the as of date on which the status became effective or changed by the insurance carrier. Appointment LOA Effective Date (6604) = the date of the appointment in which the state recognizes that the producer is authorized to sell. (OPTIONAL) Appointment LOA Expiration Date (6605) = If the state has an appointment expiration date it should be provided. (OPTIONAL) Business Scenario 7 Appointment Request Producer Moved to New Firm When the carrier receives an appointment request and the rep is already appointed on their system with a different distributor, if applicable, the carrier should terminate the old distribution affiliation and build a new distributor affiliation and transfer the existing appointment to the new affiliation. The carrier will respond with a confirmation (AC) back to the old (if LNA user) and new distributors. This will allow the new distributor to update their internal system to indicate the appointment is active with the appropriate state effective date, and will also provide the old distributor with a producer termination notice Regardless if new distributor sends an initial appointment (AI) or an additional appointment (AA) request, the carrier will review the FINRA site to confirm the rep s new affiliation before setting up a new appointment with Firm B. An appointment confirmation (AC) will be sent back to new distributor upon completing the affiliation transfer. *Please note: Some carriers view the AI/AA per relationship with the Firm, so they would want the initial appointment (AI) transaction or a rep had an appointment on their system at some point but has terminated for any reason; they want the additional appointment (AA) indicator. This will be extremely hard for the distributor to know how to submit the request. Standard response is to process the appointment request and respond with a confirmation. If the old distributor participates within the DTCC LNA service, a producer termination will be sent to inactivate the producer with that distribution affiliation. The expected appointment confirmation (AC) termination (TR) transactions will be as follows: New Distributor confirmation: Transaction Type = AC License State/Regulatory Territory (6502) = only confirm on State as requested by distributor Appointment LOA = only confirm on LOA as requested by distributor Appointment Status (6601) = Active Appointment LOA Status Reason (6602) = FR (Firm Request) Appointment LOA Status Date (6603) = Status Date reflects the as of date on which the status became effective or changed by the insurance carrier. Appointment LOA Effective Date (6604) = the original date of the appointment in which the state recognizes that the producer was ready to sell with the carrier. (OPTIONAL)

15 Appointment LOA Expiration Date (6605) = If the state has an appointment expiration date it should be provided. (OPTIONAL) Business Scenario 8 Appointment Request - Duplicate Request for Producer Appointment request is received from distributor for same producer, state and line of authority and from the same distributor. What is the standard response from the insurance carrier? If the rep is already appointed on the carrier s system with the same distributor, in the same state, for the same lines of authority, the carrier should respond with a reject back to the distributor for duplicate request. This will allow the distributor to update their internal system to indicate the appointment is active with the appropriate status effective date. The expected appointment confirmation (AC) status will be as follows: Appointment Status (6601) = AC = Active Appointment LOA Status Reason (6602) = FR (Firm Request) Appointment LOA Status Date (6603) = Status Date reflects the as of date on which the current status became effective or changed by the insurance carrier. Appointment LOA Effective Date (6604) = the original date of the appointment in which the state recognizes that the producer was ready to sell with the carrier. Business Scenario 9 Appointment Request In Good Order Two States are requested but one is rejected An insurance carrier receives an appointment (AI) request for a producer. Two states (MN and WI) are included in the request. The resident state can be processed (MN) but the producer cannot be appointed in the non-resident state of WI. What is the expected result? The transaction will be processed over confirming in good in order. However, the following appointment confirmation (AC) status will be reported by the carrier: License State/Regulatory Territory (6502) = only confirm on State as requested by distributor Appointment LOA = only confirm on LOA as requested by distributor Appointment Status (6601) = Active Appointment LOA Status Reason (6602) = FR (Firm Request) Appointment LOA Status Date (6603) = Status Date reflects the as of date on which the status became effective or changed by the insurance carrier. Appointment LOA Effective Date (6604) = the original date of the appointment in which the state recognizes that the producer was ready to sell with the carrier. (OPTIONAL) Appointment LOA Expiration Date (6605) = If the state has a non-perpetual and state has an expiration date on the appointment (OPTIONAL) License State/Regulatory Territory (6502) = State as requested by distributor Appointment Status (6601) = Rejected Appointment LOA Status Reason (6602) = LE (License Expired) Appointment LOA Status Date (6603) = Status Date reflects the as of date on which the status became effective or changed by the insurance carrier. Appointment LOA Effective Date (6604) = Blank (OPTIONAL) Appointment LOA Expiration Date (6605) = Blank (OPTIONAL) Copyright Insured Retirement Institute (IRI). All rights reserved. 15 Page

16 Appointment Terminations Termination Request and Status Confirmation Flow Model The insurance carrier or distributor may initiate a termination request and the transaction type will be Terminate Appointment (TA) or Terminate Producer (TR) for both Carrier and Distributor. The request may be due to reasons such as firm decision; agent/producer moved resident state, state requirements, or carrier policy. In addition, the insurance carrier may initiate a TR transaction for reasons such as for cause or new affiliation instructions were received from a new distributor. TA or TR Request TA or TR Request TA or TR Reject TA or TR Reject DISTRIBUTOR DTCC CARRIER TA or TR Confirm TA or TR Confirm Termination Request/Confirmation Business Scenarios & Expected Results High Level Details for Business Scenarios: Producer: John Smith (more than one producer may be used, but for sample sake) Current Affiliation: Distributor A Licensed in OH = Life, Health, Annuity (resident state) Licensed in MI Life, Annuity, Disability Business Scenario 1 Terminate Transaction (TR) Received for Producer In Good Order Initiated by Distributor A Upon receiving a terminate producer request (TR) from distributor, insurance carrier processes the termination request and responds with confirmation. Insurance carrier will return the TR transaction back to the distributor:

17 Transaction Type = Termination Producer (TR) Transaction Effective Date (6103) = Effective Date reflects the date on which the transaction was processed by the insurance carrier. Transaction Status (6104) = CF (Confirmed) Transaction Reason (6105) = FR (Firm Request) *Condition for 6105: For TA; Transaction Reason (6105) is required, if transaction status is Rejected (RJ). If 6104 is space or filled with anything other than RJ, the field is optional for Carriers. Business Scenario 2 Terminate Transaction (TA) Received for Producer In Good Order Initiated by Distributor A Producer has not renewed his Michigan (MI) license terminate all lines of authority for MI. Upon receiving a terminate appointment request (TA) from distributor, insurance carrier processes the termination request and responds with confirmation. Insurance carrier will return the TA transaction back to the distributor: Transaction Type = Termination Producer (TA) Transaction Effective Date (6103) = Effective Date reflects the date on which the transaction was processed by the insurance carrier. Transaction Status (6104) = CF (Confirmed) Transaction Reason (6105) = FR (Firm Request) *Condition for 6105: For TA; Transaction Reason (6105) is required, if transaction status is Rejected (RJ). If 6104 is space or filled with anything other than RJ, the field is optional for Carriers. Business Scenario 3 Terminate Transaction (TA) Received for Producer In Good Order Initiated by Distributor A Producer is dropping his authority for Health in Ohio (OH). Distributor A submits a terminate appointment request (TA), insurance carrier processes the termination request and responds with confirmation. Insurance carrier will return the TA transaction back to the distributor: Transaction Type = Termination Producer (TA) Transaction Effective Date (6103) = Effective Date reflects the date on which the transaction was processed by the insurance carrier. Transaction Status (6104) = CF (Confirmed) Transaction Reason (6105) = FR (Firm Request) *Condition for 6105: For TA; Transaction Reason (6105) is required, if transaction status is Rejected (RJ). If 6104 is space or filled with anything other than RJ, the field is optional for Carriers. Business Scenario 4 Terminate Transaction (TA) Received for Producer In Good Order Initiated by Distributor A Producer is dropping his authority for Health in Ohio (OH). Distributor A submits a terminate appointment request (TA), insurance carrier processes the termination request and responds with confirmation. Copyright Insured Retirement Institute (IRI). All rights reserved. 17 Page

18 Insurance carrier will return the TA transaction back to the distributor: Transaction Type = Termination Producer (TA) Transaction Effective Date (6103) = Effective Date reflects the date on which the transaction was processed by the insurance carrier. Transaction Status (6104) = CF (Confirmed) Transaction Reason (6105) = FR (Firm Request) *Condition for 6105: For TA; Transaction Reason (6105) is required, if transaction status is Rejected (RJ). If 6104 is space or filled with anything other than RJ, the field is optional for Carriers. Business Scenario 5 Terminate Producer (TR) Received for Producer Producer Found Distributor Affiliation Does Not Match Requesting Firm Upon receiving a terminate producer request (TR) from distributor, insurance carrier rejects the entire transaction back to the Distributor for the reason the producer is no longer affiliated with the requesting distributor. Insurance carrier will reject TR transaction back to the distributor: Transaction Type = Termination Producer (TR) Transaction Effective Date (6103) = Effective Date reflects the date on which the transaction was processed by the insurance carrier. Transaction Status (6104) = CF (Confirmed) Transaction Reason (6105) = MV (Producer Moved) *Condition for 6105: For TA; Transaction Reason (6105) is required, if transaction status is Rejected (RJ). If 6104 is space or filled with anything other than RJ, the field is optional for Carriers. Business Scenario 6 Terminate Transaction (TR) Received for Producer Producer Not on Carrier System Upon receiving a terminate producer request (TR) from distributor, insurance carrier rejects the entire transaction back to the distributor for the reason the producer is not on the carrier s system. Insurance carrier will reject TR transaction back to the distributor: Transaction Type = Termination Producer (TR) or Termination Appointment (TA) Transaction Status (6104) = RJ (Rejected) Transaction Reason (6105) = PF (Producer Not Found) *Condition for 6105: For TA; Transaction Reason (6105) is required, if transaction status is Rejected (RJ). If 6104 is space or filled with anything other than RJ, the field is optional for Carriers. Business Scenario 7 Terminate Transaction (TR/TA) Generated by Carrier Lack of Production The termination is generated by the insurance carrier due to the producer s lack of production. This is typically handled by the insurance carrier at the time of the appointment renewal. Insurance Carriers do not return a Termination status for just-in-time (JIT) appointment that was only ever in a Pending Can Sell status.

19 *Please note: Not all distributor will accept or process terminations at the agent/producer level that are generated or initiated by the insurance carriers. Insurance carrier will reject TR transaction back to the distributor: Transaction Type = Termination Producer (TR) or Termination Appointment (TA) Transaction Effective Date (6103) = Effective Date reflects the date on which the transaction was processed by the insurance carrier. Transaction Status (6104) = GC (Generated by Carrier) Transaction Reason (6105) = IP (Inadequate Production) *Condition for 6105: For TA; Transaction Reason (6105) is required, if transaction status is Rejected (RJ). If 6104 is space or filled with anything other than RJ, the field is optional for Carriers. Business Scenario 8 Terminate Producer (TR/TA) Transaction Generated by Carrier For Cause The termination is generated by the insurance carrier due to notification by the state due to a number of reasons (fraud, lack of Continuing Ed (CE) completions, etc.) or by receiving an alert from the state or via the PDB. This is typically handled by the insurance carrier at the time of the appointment renewal *Please note: Not all distributors will accept or process terminations at the agent/producer level that are generated or initiated by the insurance carriers. However, it is expected the insurance carriers should send a termination notification. Insurance carriers may also send a termination letter direct to the rep/producer. Transaction Type = Termination Appointment (TA)/ (TR) Transaction Effective Date (6103) = Effective Date reflects the date on which the transaction was processed by the insurance carrier. Appointment LOA Transaction Status (6601) = GC (Generated by Carrier) Appointment LOA Transaction Reason (6602) = SN (State Notification) *Condition for 6105: For TA; Transaction Reason (6105) is required, if transaction status is Rejected (RJ). If 6104 is space or filled with anything other than RJ, the field is optional for Carriers. Business Scenario 9 Terminate Transaction (TR) Generated by Carrier FINRA Securities License Inactive The termination is generated by the insurance carrier due to an FINRA alert indicating the producer s securities license became inactive. This may be for either fixed or variable lines of authorities (LOA). Transaction Type = Termination Producer (TR) Transaction Effective Date (6103) = Effective Date reflects the date on which the transaction was processed by the insurance carrier. Copyright Insured Retirement Institute (IRI). All rights reserved. 19 Page

20 Transaction Status (6104) = GC (Generated by Carrier) Transaction Reason (6105) = SR (would like a FINRA specific status reason) *Condition for 6105: For TA; Transaction Reason (6105) is required, if transaction status is Rejected (RJ). If 6104 is space or filled with anything other than RJ, the field is optional for Carriers. Business Scenario 10 Terminate Appointment (TA) Transaction Generated by Carrier State Notification The termination is generated by the insurance carrier due to notification by the state due to producer s Michigan (MI) appointment (all lines) has lapsed. Insurance carrier will generate a terminate appointment (TA) for all lines. *Please note: Not all distributors will accept or process terminations at the agent/producer level that are generated or initiated by the insurance carriers. However, it is expected the insurance carriers should send a termination notification. Insurance carriers may also send a termination letter direct to the rep/producer. Transaction Type = Termination Appointment (TA) Transaction Effective Date (6103) = Effective Date reflects the date on which the transaction was processed by the insurance carrier. Appointment LOA Transaction Status (6601) = GC (Generated by Carrier) Appointment LOA Transaction Reason (6602) = SN (State Notification) *Condition for 6105: For TA; Transaction Reason (6105) is required, if transaction status is Rejected (RJ). If 6104 is space or filled with anything other than RJ, the field is optional for Carriers. Business Scenario 11 Terminate Appointment (TA) Transaction Generated by Carrier Line of Authority Revoked The termination appointment is generated by the insurance carrier due to notification by state of Michigan that his Disability line of authority has been revoked. Insurance carrier will generate a terminate appointment (TA) for the disability line of authority only. *Please note: Not all distributors will accept or process terminations at the agent/producer level that are generated or initiated by the insurance carriers. However, it is expected the insurance carriers should send a termination notification. Insurance carriers may also send a termination letter direct to the rep/producer. Transaction Type = Termination Appointment (TA) Transaction Status (6104) = GC (Generated by Carrier) Transaction Effective Date (6103) = Effective Date reflects the date on which the transaction was processed by the insurance carrier. Appointment LOA (6600) = DS (Disability) Appointment LOA Status (6601) = TR (Terminated) Appointment LOA Status Reason (6602) = SN (State Notification) *Condition for 6105: For TA; Transaction Reason (6105) is required, if transaction status is Rejected (RJ). If 6104 is space or filled with anything other than RJ, the field is optional for Carriers.

21 Business Scenario 13 Terminate Appointment Transaction (TA) Terminate Resident State Distributor submits a terminate appointment (TA) to terminate the producer s residence state. The insurance carrier will process the TA but will also process all non-residence state appointments and will send the appropriate responses. If the termination is due to a producer s move of their residence state, it is expected that distributor will not send a termination (old state) nor an appointment (for new resident state) but only an address change. Carriers will handle the move based on the change of resident state. *Please note: Insurance carrier may send a producer level termination (TR) or individual appointment termination for each non-resident state (TA). Transaction Type = Termination Producer (TA) Transaction Effective Date (6103) = Effective Date reflects the date on which the transaction was processed by the insurance carrier. Transaction Status (6104) = CF (Confirmed) Transaction Reason (6105) = FR (Firm Request) License State/Regulatory Territory (6502) = only confirm on State as requested by distributor Appointment LOA = only confirm on LOA as requested by distributor Appointment LOA Transaction Status (6601) = TR (Terminated) Appointment LOA Transaction Reason Code (6602) = FR (Firm Request) Appointment LOA Status Date (6603) = Effective Date reflects the date on which the appointment termination takes effect. Transaction Type = Termination Producer (TA) Transaction Effective Date (6103) = Effective Date reflects the date on which the transaction was processed by the insurance carrier. Transaction Status (6104) = CG (Carrier Generated) Transaction Reason (6105) = CD (Insurance Company Decision) License State/Regulatory Territory (6502) = only confirm on all other states based on resident state being terminated. Appointment LOA = only confirm on all other states based on resident state being terminated. Appointment LOA Transaction Status (6601) = TR (Terminated) Appointment LOA Transaction Reason Code (6602) = CD (Insurance Company Decision) or TBD (create a new reason code) Appointment LOA Status Date (6603) = Effective Date reflects the date on which the appointment termination takes effect. *Condition for 6105: For TA; Transaction Reason (6105) is required, if transaction status is Rejected (RJ). If 6104 is space or filled with anything other than RJ, the field is optional for Carriers. Business Scenario 14 Terminate Appointment Transaction (TA) Terminate Resident State Carrier Generated The appointment termination is generated by the insurance carrier due various reasons. This may be for either fixed or variable lines of authorities (LOA). Copyright Insured Retirement Institute (IRI). All rights reserved. 21 Page