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October 09, 2003 at 08:00 PM
Custom-Build Your Products And Private Label Programs
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Building a successful term life product offering in todays market requires managing four important performance drivers: mortality, reserves, expenses and service.
Direct writers have long used reinsurance to help manage mortality risk, which continues to be a mainstay for reinsurers and direct writers alike. Post Triple-X, the guideline that establishes reserving for level premium term and UL products, direct writers began seeking help from reinsurers to manage financial risks and strain as well. Today, reserve management can be as important as mortality risk management in terms of the value of a reinsurance solution.
But how much expense management support can reinsurers provide to direct writers trying to manage or create a term portfolio? Quite a bit, actually. More than that, these value-added solutions can provide cost reduction, improve a companys competitive positioning and change the fundamental value proposition of being in the term market.
These services typically attach to a core reinsurance arrangement with pricing factored into the reinsurance piece of the solution. They can improve the retail effectiveness of client companies as well as generate additional reinsurance volume.
For the past decade numerous direct writers have been partnering with reinsurers who provide product design and development along with core reinsurance services.
By outsourcing product design and development, direct writers can leverage a reinsurers strengthsespecially mortality experience, risk selection, lower overhead and strong capital management capabilities. More recently, reinsurers have expanded beyond product consulting and development services.
While case underwriting and policy administration services have been available for some time, it was primarily to offer clients already in the term market a defensive strategy: keep pricing closer to market leaders, reach an acceptable level of return and keep infrastructure costs down. The solutionusually created via an alliance of reinsurer, third-party administrator and direct writerwas attractive to direct writers who provide term as a non-core product to satisfy the demands of a distribution channel.
Private label capabilities have improved greatly over the last few years, and the flexibility they now offer make them attractive to a much wider target audience.
Reducing cost and satisfying distributors remain major benefits of the solution, but other incentives are motivating many firms seeking a private label today. These motives include entering a new market, recasting their brand with an extremely competitive product, plugging a corporate gap such as underwriting or administrative services, or implementing a niche strategy for market differentiation. In this market client companies are just as likely to be non-life financial institutions as they are to be traditional life insurers.
An enormous challenge in designing a flexible private label delivery program is putting together all of the pieces to execute the very complex series of transactions necessary while maintaining service and cost levels that enable competitive product pricing. At a minimum, these services include:
Market analysis;
Product design and development;
State filing services;
