Preliminary research shows that Social media can play an important role in creation of new products.  Below are few data points in this regard.

1.       Pepsi's Mountain Dew DEWmocracy initiative involved giving consumers the power to lead product innovation. Through a video game, consumers were encouraged to create the next Mountain Dew product. The campaign resulted in the creation of Mountain Dew Voltage which, says Cooper, was "one of the most successful product launches in PepsiCo beverage history.

2.       Procter & Gamble (P&G) has created a community of 600,000 mothers who help cocreate new products and become word of mouth advocates

3.        As far back as 2008, over 60% of online US adults used the internet to research financial products such as student loans, brokerage accounts and credit cards. Of those, over 35% of them applied for these products online

4.       10% of individuals making between $75,000 and $100,000 a year, 9% of those aged 25 to 34, and 6% of men researched insurance policies on social media Web sites 

5.       When shopping for insurance, 35% of 25 to 34 year olds, and 30% of those earning more than $100,000, said they prefer the Internet to an agent.

 On similar lines, social media should be able to influence creation of insurance products by involving the consumers as well as reducing the time to market and cost of launching a new product.

Let us see how this can be done. Take a look at the insurance product creation process. The process involves the following steps

·         Product planning - Getting the new idea for the product.

·         Business Analysis - Conducting feasibility study, market analysis, product proposal, test marketing etc.

·         Technical Design -Marketing and actuarial activities, investment and accounting activities, IT activities, legal and Compliance.

·         Product Implementation - Obtaining regulatory approvals, Designing promotion materials, Establishing IT systems for new products, Enabling sales force, Conduct activities and promotion for product creation.

·         Sales Monitoring -Monitor the performance of the insurance product.

Social media can play a role in the following

·         Getting the new idea for the product - New idea is usually obtained from

o   Customers - Create dedicated community for your customers. Ask them what should be an ideal product. Solicit feedback about the insurance product they have bought

o   Product development team, Company management, Home office staff -   Communities, Discussion forums.

o   Market research - Social media can be one of the source of market research.

o   Competitors' products and activities- Social Listening.

o   Consumer advocacy groups- Social listening.

o   Business/insurance periodicals/Social sites.

·         Test Marketing

o   Use the community created during the idea generation to roll out the new product and listen to their feedback.

o   Invite other consumers to join the community and get their feedback.

·         Product introduction and Promotion

o   Conduct advertising using social media.

o   Conduct a contest about creating advertisement for this product.

o   Ask the community members to write blogs /opinion about the new products at different forums.

o   Encourage them to recommend them to their friends.

As an outcome, I can see that the use of social media probably will reduce time for new idea generation (reducing time to market) and achieve cost reduction. but more importantly it will create a product closer to consumer needs and also help in increasing the trust and transparency between consumers and insurance company.

Did you know that India's largest Life insurer (Life Insurance Corporation of India (LIC) has on average 18% first premium lapse ratio and one of the major reasons for this is the forced selling of policies without caring for matching of products with requirements of the policy holders.

 This can be reduced if the product is closer to consumer needs and that is where social media can play an important role

What is your opinion?

References

·         http://www.brandchannel.com/home/post/Pepsi-Crowdsourcing.aspx

·         http://www.research-live.com/features/feel-the-tremor-effect/2001717.article

·         http://www.infosys.com/iengage/resources/Documents/banking.pdf

·        http://www.insurancenetworking.com/news/social_media_insurance_technology_mintel_forrester_marketing-24410-1.html

·         http://www.freepatentsonline.com/article/Review-Business-Research/190699885.html

The Essential Advantage: How to Win with a Capabilities-Driven Strategy (Booz & Company's Paul Leinwand and Cesare Mainardi)

The emergence of mature service providers with global scale of operations and also in recent times state of the art proprietary platforms that is part of their value proposition significantly changes the value equation for insurance carriers. Most of the operational and systems infrastructure built in the last few decades were based on a paradigm that was centered around executing most of the operations in-house which actually distracts management attention from focusing sharply on core, differentiated capabilities.

For example, if a carrier chooses to compete and I mean really be better than competition (not just be comparable amongst a whole group of peers) based on their underwriting capabilities- they should focus significant organizational energies, financial resources and management bandwidth to continue to make that capability out-distance itself from the competition. Ditto for a carrier that may choose to be just on par from an underwriting standpoint but wants to excel in its distribution capabilities.

In the emerging ecosystem with very mature service providers and partners, insurance carriers need to focus on very select business capabilities that they can make truly distinctive and find the right partners to manage rest of their operations in a cost-effective manner - else, they risk losing ground on multiple fronts to different competitors who beat them on different fronts. Being average or slightly better than average on every front is a sure-fire way to being worse than average from a customer's standpoint and that final value proposition is all that matters when it comes to sustainable and profitable growth.

1.       You are more than likely to fail in the first 2 to 3 iterations while trying agile methodology. So, Start small and go slow to build the experience in agile.

2.       Don't try to make the iterations duration less than 45 days. IF the iteration is too long, benefits of agile are gone. If it is too short , it poses too many risks.

3.       Don't take up agile methodology as an excuse to those who don't like to follow the process. Your team is comfortable with following the traditional processes, but agile is used to cut short some of the long drawn processes.

4.       Key to agile implementation is agility of the people. Not only of your development team - but also of business, infrastructure, testing and other support groups. If all groups are not aligned, you are not likely to see the benefits.

However, with all the buzz around social media being a disruptive force and a game changer, widespread adoption has been rather anemic among all Insurance carriers, more so among Life carriers than P&C carriers. Surveys indicate that while all large and medium carriers are spending more and dabbling in the social media world and that their marketing and sales budgets have experimentation with social media at the top of their agenda, still they have kept their budgets and plans unchanged for traditional channels of marketing, distribution and servicing. And are cautiously optimistic about social media providing them business benefits large enough to reduce spending in traditional channels.What could be the drivers and reasons behind this? Is social media too new and unproven in the Insurance world?

One reason for limited adoption can be attributed to Insurance carrier's low risk appetite and traditionally conservative approach to new business practices and technologies.Or is the worry more around reliability and credibility of information and how and what to use it for? Are carriers concerned about the compliance and regulatory aspects of using information found in the social media world? OR Is the traditionally value conscious Insurance industry really not convinced about the ROI they can achieve with social media?

My subsequent blogs will attempt to explore the opportunities and challenges related to widespread adoption of social media among Insurance carriers around:

• Usage, Reliability and Credibility of information found in the social world

• Compliance, Regulations and Privacy aspects of social media tools

• Measuring value and ROI from investment in social media tools

What do you think? I would love to hear your views and perspective. 

The value of customer focused operations is usually measured along the following lines and business case for the same is justified accordingly

-          Producer or customer demand for competitive service models that meet market expectations (example- self service capabilities) => table stakes, no real justification needed!

-          Customer Satisfaction surveys (example- Dalbar) in addition to benchmarking analysis at industry level => survive as a leading brand, marketing justification!

-          Cost of acquiring new customers vs. retaining existing customers and/ or cross-selling => sales cost based justification!

1.       No single source of data - Presence of disparate systems storing data in multiple systems/data sources. 

2.       Absence of defined processes and systemic support to enable cross selling

In these market conditions, each insurer needs to ponder on the following:  

1.       Do you have a cross selling strategy in your organization?  Is there a measurement mechanism in place?  What percentage of business comes through existing customers?

2.       Are there relevant processes and systems in place which enable and track cross selling?

3.       Do you have a focused effort to provide necessary training and tools to enable people on the field to engage existing customers about new products that are relevant to the customer needs

In my future posts I will dive deeper into each one of the above aspects. In the meantime here are few interesting artifacts which can give you further insight

1)       http://www.insureme.com/insurance-agent/successful-cross-selling

2)       Infosys - Predictive Customer Interaction Management | Offerings | BPM-EAI

3)       8 Ideas for Cross Selling Success - Yahoo! Small Business

Looking forward to hearing your comments and experiential insights on this topic

The reason for this shrinking of the pie seems to be a) movement towards urban areas with abundant public transportation and b) evolution of digital commerce.

With the rapid evolution of technologies, the second aspect above could only accelerate the change in consumer needs vis-a-vis protection. Auto manufacturers are already doing everything possible to get the demographic into a vehicle - ranging from making the vehicle equate to a "computer-on-wheels" to introducing "community cars" for the infrequent drivers.

The underlying question though is - will this trend influcen a change in the personal insurance products? Can the consumer demand an auto-insurance product that he/she pays for on a need-basis? Can the consumer demand a true "personal protection" product that will insure the individual regardless of the risk?

I guess the answer to all the questions above is Yes. It will be imperative for carriers to understand, engage, sell-to and service the new demographic in ways that they have never done before. How they will react and who emerges as a leader remains to be seen. There is no doubt, however, that it is time to get a lot more personal with the consumer base.

What do you think?

With Apple's popular iPhone/ iPod Touch / iPad devices expected to be in the hands of nearly 1% of the global human population sometime in 2011-12, you have to wonder if this is more of a gaming driven user adoption curve or would there be more practical uses emerging for the latest iteration of the device that has been labeled as "magical & revolutionary" by its makers.

One thing is clear- the iPad is the same size as a regular business folio used by many executives and for those too busy to be accessing laptops while on the go, it is going to be an innovative addition to have a notepad sized connected device to carry around all day. A basic behavioral change that will be enabled is for users (both as consumers & business professionals) to be able to access more frequently various news & publications pertaining to their interests. A potential extension which would arise is for a more connected user to engage in higher levels of research into their own product or service needs- while it would not necessarily tilt consumers away from an innate tendency to rely on personal touch (agent/ advisor), it is definitely going to enhance their awareness and also enhance their connection with other similar user profiles.

For financial services firms, the iPad is going to liberate their user segments from the small form factor of the Blackberry & other smartphones for regular transaction capabilities such as account browsing, trades etc. It is also imperative for carriers to enhance their social media vehicles and ensure a platform for consumers to interact with each other and also with potential prospects who would be researching financial services offerings (example- retirement services) prior to any purchase even if such purchase is ultimately done through a personal selling channel.