Product development and configuration are top-of-mind issues for insurers and unlikely to disappear for the foreseeable future, as many insurers find IT environmental issues tough to overcome, according to “Product Development: Insurer Plans and Priorities,” a new report from Strategy Meets Action.
The top three challenges cited by product developers were: having to make changes that affect multiple systems (63 percent), lacking IT resources to support implementation of the changes (58 percent) and the timeliness of implementing changes in IT system (55 percent), SMA said.
Challenges vary from line to line, the report notes. For instance, commercial lines (48 percent) and workers’ comp (37 percent) insurers are affected more significantly by the frequency of ISO changes. Also, a frequent challenge for personal lines (37 percent) and specialty lines (39 percent) is the impact of changes on other aspects of business; personal lines writers were most affected by the time it takes to receive regulatory approval (40 percent).
Nevertheless, 70 percent of respondents forecasted an increase in product development spending over the next three years, with 20 percent of those respondents planning significant, 10 percent or more, increases in spending.
In terms of the goals for these investments, there is a strong emphasis on “time-to-market” as a top business need, SMA said. Data in the report indicates that the overall average product implementation time is 7.7 months currently; only 2 percent of insurers are able to implement new products and product changes in less than 30 days; and 17 percent of insurers take more than a year to implement.
Breaking down those implementation figures by size, SMA found Tier-2 insurers are the most challenged, taking an average of 11.2 months to implement new products/product changes—a timeframe that almost doubles that of Tier-1 insurers, SMA notes. Yet, Tier-4 insurers are the fastest at implementations; it’s the only group of insurers able to implement changes in less than 30 days in some instances, with an overall average of 5.6 months.
Policy administration systems are considered the most important technical capability needed to support efficient product configuration, SMA said. However, that may not be the case for long. While investments today center more on product workflow management and separate tools to handle product configuration, including rating, document management and policy administration standalone solutions, SMA said a shift away from those solutions is likely in the next three-to-five years. Most respondents said they would be investing more in end-to-end product configuration solutions and core product configuration solutions by then.
Respondents indicated that in terms of product development, “timely implementation of new products” and “timely implementation of product changes” were the two most-required business capabilities. Next were, “ease of product implementation in target system,” “reduce the costs of the implementation process” and “’what if’ capabilities to understand impact on the book of business” rounding out the top five business goals.
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