Product development for the 21st century
The insurance market is constantly changing, but product development is struggling to keep up.
Only 19% of insurers surveyed recently claim to bring products to market quickly enough to keep pace with market change. This slow rate of progress means a raft of missed opportunities. So how can insurers become more agile? Product development is the right place to start.
The traditional model of product development
The traditional process of product development comes from necessity. Every stage is undertaken with methodical precision. A common belief is that changing the process to be more efficient would come at the expense of quality. Until now, this fear of increased risks has prevented any sort of innovation.
The design, modelling and analysis phase of product development requires collaboration between the business teams and actuaries, but this communication is not fluid. The business team identifies potential products, and the actuaries build models and assess their profitability. This means that the mathematical accuracy of the actuaries sits between the product developers and the models by necessity, creating a linear process.
The models themselves are built on legacy systems that are slow and complicated, using outdated technologies. These systems slow down all business processes from product development to sales, while creating disconnected silos of information.
How should it look?
It is time to challenge the assumption that product development cannot be rapidly accelerated without sacrificing quality. At this point, with the level of pain we are seeing, disruptive technologies are inevitable. It’s just a question of how effective they are and how they fit into good process.
A new model needs to be adopted, one where the design, modelling and analysis phase of product development is more collaborative. The business team needs to be able to test out new products, and compare scenarios in real time. Actuaries need to be able to contribute and monitor this process to ensure precision and best practice. This is the only way successful products will be developed fast enough, without sacrificing accuracy. It should look a little more like this:
New technology not only forces efficiency, it also facilitates it. There’s no sufficient justification for outdated legacy systems anymore. The power of cloud computing is now supported by an equal level of security. Simple, effective tools are being developed for this cloud environment by people who understand the pain points of the industry.
A broader view
Product development seems the obvious choice for improvements in efficiency. Speeding up this essential part of the business process will create a snowball effect. Efficient product development will allow for faster product to market, more responsive sales, and proactive business development.
Of course, insurance providers need to ensure that any changes to process are done with as much planning and forethought as possible. Blind innovation helps no one, and change is always going to be painful, but urgency is still called for. This is a time of opportunity. Any insurers who can propel themselves into the future, while maintaining complete clarity of vision, will be the real competitors going forward.