Insurance today offers a lesson in economics. Traditional product development (supply) is not meeting modern consumer needs (demand). The result is a loss of potential revenue. What is needed is ‘transformational thinking’. (For a definition of transformational thinking and legacy thinking, see my first blog.see my first blog.)

Insurers know that growth in revenues, profits and market share is dependent on their ability to provide relevant, value-adding products and services. The industry is headed to where consumers will decide what to buy, when and how, and they will not want to be ‘sold’ insurance. Product features, price comparisons and the recommendations of friends will often carry more weight than the agent relationship. Purchasers will demand products that meet their requirements and not settle for products that are ‘available’. They will also not hesitate to drop or swap insurers if their experience is poor. This is a difficult challenge for most insurers since new products often take several months to a year from the point of inception to the date they are first available for purchase.

Challenges in Insurance Products Development
The products development lifecycle for Commercial, Personal and Life, Annuities and Retirement products is essentially the same. It includes these phases, a) Initial Idea, b) Evaluation and Assessment of the Idea, c) Product Definition and Design, d) Product Development, and e) Product Testing and Product Implementation. In most insurance companies the product development process has been in place for decades with a few enhancements made along the way. The typical approach often involves manual steps, gathering and sifting through data that are fragmented across systems, physical files and departments. It is usually the task of cross-functional teams that commonly operate in silos, waiting for each other’s approvals at every stage of development. This approach to development is incompatible with today’s purchase patterns.

Transformational thinking can rescue Product Development
Insurers can leverage new technologies to transform their products and services development process. It all begins with transformational thinking and these initial steps:

Reject these ideas:
Toss out any idea or notion that an insurer can successfully compete without making significant changes to its product development and management process. Realize, also, that a new product management system will not fix every issue.

Accept these ideas:
‘Fixing’ product development starts by building a corporate culture that focuses on customers coupled with a strong desire to create innovative products that add real value to lives and companies. But the next step is even more difficult. Accept the idea that your company needs an enterprise-wide digital strategy, including a company-wide information and data strategy. The digital strategy is a pre-requisite to creating a technology-enabled Products Development and Management process. Why is this difficult? This is where consensus must be built. Product managers will need to get senior executives to buy in, and then gather like-minded counterparts into a cross-functional team of Underwriters, Marketers, Salespeople, Actuaries, IT Managers, Operations Personnel, Claims and Customer Service Leaders.

Lead with these ideas:
The effort in launching a Products Development and Management transformation program incorporates the following best practices:

Initial idea – Create and communicate a process for obtaining ideas for new products and services from existing customers, prospects, brokers, agents, intermediaries, affinity groups, producers and employees. Create a single repository of ideas submitted and provide access to all key stakeholders.

Evaluation and assessment of ideas – Create a small, cross-functional team that can act as a clearing house to evaluate ideas. Utilize a process or workflow system and collaborative tools to facilitate virtual decision-making meetings. At a minimum, ideas should be approved or declined based on:
i) Demand, ii) Market, iii) Ability to Underwrite, iv) Distribution, v) Financials, and v) Risks.

Product definition and design –For ideas that have passed evaluation and require data to complete the product design, leverage the following technologies:

• Systems and tools that capture data from social media
• Big Data tools to capture, store, and analyze data on geopolitical risks, environmental, legislative, and regulatory changes, economic shifts, demographic shifts, social changes, and emerging markets. Couple these with customers’ experience from claims, billing and customer services.
• A rules extraction system to extract business rules and products features from existing legacy systems and place them into a rules engine so you can leverage them for new product design.
• A document management system for policy forms, rating tools, and regulatory filing requirements so that they can be re-used for new products or enhancements. Leverage this system to develop a marketing plan.
• Data visualization including geospatial tools to define target markets and segments, and fine-tune risks, including channel conflicts.

Product development – Using the same new technologies, ensure that access is provided to all contributing functional areas to refine product attributes, marketing and distribution plans, and embed quality checks in every phase of the development cycle. Provide information required by Finance to refine revenue and costs projections, as well as comprehensive financial impact projections.

Product testing and implementation – Utilize data modeling to identify test markets and leverage systems to track product testing objectives and results. Additionally, harness systems to provide training to all impacted personnel and agents. Once launched, use systems to capture early feedback from agents, brokers, clients, and data from social media and share it with all stakeholders.

When you look at the entire process, it looks daunting. There are so many variables to consider and so many participants from across the corporate spectrum. However, if there is one universal fact that we are continuing to validate in every realm, it is that silos are dead. Tapping into markets over the next decade is going to require large teams that focus on one thing — building the products and connections that will sell.

About the Author
Sam Medina is a global business transformation executive at TCS, who specializes in advising insurance and healthcare executives on transformational thinking and leadership.

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