Product complexity has become a lightning rod for criticism by certain insurance and financial pundits.
Consumers, advisors, lawyers, regulators, legislators, courts and others have complained that insurance and annuity policies have become too confusing, have too many moving parts, feature too many options, have too much fine print, leave too many gaps in coverage, and so on.
I’ve said some of the same things right here in this column.
But product complexity is not the main thing that befuddles people who pine for simplicity and ease of doing business. The big culprit is something more amorphous–business complexity.
Business complexity refers to the huge and spaghetti-like infrastructure that births and undergirds insurance and financial products. It includes not just design, pricing and distribution but also marketing, technology, management, business relationships, reinsurance and a host of other systems and forces.
Complexity has become integral to the way the business is done.
Consider: During a recent interview, Francois Gadenne, chairman of the Retirement Income Industry Association and also president and chief executive officer of Retirement Engineering Inc., Boston, said one-product solutions will not work in a world where many people live 20 or more years in retirement.
Retirees need comprehensive and flexible approaches that incorporate multiple financial sectors and solutions, some of them delivered via all-new business models, he said.
In other words, retirement today is more varied and complex than for prior generations and the solutions need to wrap around that.
So too in financial sectors such as life insurance.