Product Development Strategies for Insurance Carriers
Decline in growth opportunities has forced insurers to look outside their traditional products and markets for sustained and profitable growth. Product innovation has climbed further up in the list of priorities for today's insurer. I think the following are some of the key drivers that necessitate speedy and efficient introduction of new insurance products in the market
• Increased customer needs and expectations
• Demands from distribution channels
• Increased competition in the insurance marketplace
• Heightened regulatory scrutiny and compliance requirements
It is common knowledge that demand for new and creative insurance products is only going to intensify in the coming years; but the ability of insurance companies to cost-effectively respond is diminishing. While IT legacy systems may pose significant challenges, other areas like poorly managed product introduction processes as well as inefficient product testing related activities contribute to the problem. I believe that insurers should address speed to market challenges holistically at both the process and technology levels.
Process
• Managing the overall process
• Promoting collaboration between stakeholders
• Encouraging customer participation in the product creation process
Technology
• Externalizing product rules and attributes
• Analyzing the impact of product rules externalization
• Integrating the externalized rules environment with legacy applications
Insurers should strive towards process improvements through well-defined and communicated best practices and close monitoring of standard metrics. This will result in predictable development time frames, improved quality and better measurement of results. On the technology front, insurers should consider taking a more active role in adopting new technological advancements for business betterment.
Though it seems to be daunting task, I strongly feel that a well defined strategy backed by well-developed business case will provide significant competitive advantages to the carriers.
Please share other strategy aspects insurance carriers should be looking into to launch the right product at the right time in the market.
Comments
One aspect worth adding to the above:
Insurance companies will also increasingly look at improving the quality and effectiveness of needs analysis (through appropriate POS solutions) that agents present to prospects. This will enable insurance company agents to position their existing life products (like cash value) better before the client from the perspective of
1.Flexibility towards long term care funding/pensions payouts/estate planning etc.
2.Income tax deferrals
Posted by: venkatakrishnan ramachandran | August 26, 2009 4:38 AM
I would like to see this from the consumers point of view – what they are looking for - Insurer’s strategy will depend a whole lot on that. For a moment if I forget that I am an IT professional working in insurance space and pretend that I am looking for an insurance product, I would probably look for following things
1. Financial Stability – Do not want to live with the fear in future whether my investments will loose digits in next financial crisis. I would look forward to what my insurance company is doing to ensure the stability and what others are saying about it
2. Variable Life to Standard Life – Variable life products gained a lot of market-share in last decade due to growth in equity market. However, the great recession has also shown the other side of the story. I would think Standard Life products backed by (stable) General Accounts will regain the lost grounds from Variable Life products backed by (higher risk) Separate Accounts.
3. Inflation Threat – Federal government has spent trillions of dollars in bail outs. One side effect economists are fearing is an inflationary trend. Which actually helps US from foreign debt and trade spread perspective but will affect the savings of US citizens as well. I would think consumers would like to shield their savings from the threat of inflation and demand for CPI/COLA/ Inflation indexed products will go up.
4. Tax Increase – There is a fear that the tax will go up in future, especially if you are in the higher income bracket. If insurers can come up with some products which would help savings tax, through deferral, reduction or avoidance, that’s going to attract a lot of high end consumers. Another blogger has also commented on this.
Posted by: Souvik Roychoudhury | September 4, 2009 8:30 PM