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More And Faster: Life Insurers Accelerate Product Development

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With new life insurance products and features coming out at a break-neck pace over the last several years, life insurers may have felt like they were on a treadmill, with the speed slowly but steadily increasing.

The carriers’ growing reliance on independent distribution requires them to stay ahead of–or at least keep up with–their competitors if they want to stay on the shelf. Improving speed to market has therefore become a key component of life company strategy.

What have companies been doing to address this ever-increasing challenge? LIMRA conducted a study over the last year to find out.

On average, companies introduced 3 new products, revised 3 products and changed the rates on 2 products in the year leading up to the study. That’s 8 product development efforts of varying complexity underway over the course of a single year. And several companies had more than double that number.

Given the ever-shorter shelf life for products (2 years or less for about half the companies’ term products), it’s not surprising that companies are searching for more effective ways to deliver new products to market.

Developing a new product takes time. The more complex the product, the more time it takes.

For example, on average, a new term insurance product takes 7 months from idea to launch (see chart). That just includes “Day 1″ systems functionality (Day 1 is what a company needs to have in place before the product is released). Adding “Day 2″ functionality adds another 3 months to the process.

To repeat, that’s just for term insurance. A new variable life product takes nearly 10 months from idea to launch. Add “Day 2″ and it’s more than a year.

The study also documented all the various steps in the process, when each step typically starts and how long it lasts. Updating IT systems takes the longest, followed by developing marketing plans and materials and product pricing.

These time frames include state filings, but not approvals. The approvals add still more time to the process. For companies selling in all or nearly all states, getting approval for a new product can add 7 months to the process.

Of course, companies don’t have to wait for approvals in all states to launch a product. Companies, on average, will launch when they have 33 state approvals. Most companies have key states they really want to have before launch. The top 3 states? California, Texas and Florida.

Despite all the challenges, the product development process goes according to plan half of the time.

Companies reported major deviations from plan just under a quarter of the time. When deviations occur, the most common cause is design/pricing issues (cited by 9 in 10 companies). IT issues and changing organizational priorities were noted by about two-thirds of companies.

But going “according to plan” isn’t enough if “the plan” isn’t achieving desired results. Nearly all companies studied had implemented new approaches to the product development process within the past year. The most common change was to have a more formal process, with better planning up front including all the key stakeholders, more controls and sign-offs along the way, quicker identification of problems and ultimately fewer surprises.

New technology is also playing a role. A number of companies said they have introduced automated testing tools to speed up the process.

It’s too soon to tell whether these efforts will result in better products, delivered faster. But now that there is a baseline, checking back in a year or two should reveal if these new approaches have achieved their desired results. Stay tuned.

Elaine Tumicki is a LIMRA corporate vice president and heads up Product Research. Her e-mail address is [email protected].


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