Question: Why do insurers struggle to launch products and how can underwriters differentiate themselves in the crowded market place and achieve better economics.
Insurance carriers have always needed to develop innovative products, get them to market in a timely fashion and manage risk. Those are key ingredients to enjoy ongoing success, top line growth and market share.
Keys to survival
With the fight for new customers growing more competitive, carriers’ focus on achieving differentiation in the market while creating acceptable economics has taken a seat at the head of the table. Today, developing targeted products, getting them into distribution, attracting the right customers for those products, and keeping them satisfied are also keys to survival.
Insurance underwriters participate in many roles, but few are as important as product development. Streamlining the underwriting process has become a critical component to attracting buyers and reducing dropout rates while maintaining sound financial footing for the health of the organization.
Determining the risk profile, creating specific underwriting rules, developing a targeted application form and identifying relevant exclusions are critical pieces to the product development process. Carriers are adopting new technologies and using analytics to help manage known and ever evolving risks while addressing the changes in what the market wants and the products available. Underwriters can differentiate themselves, make an impact on both the top and bottom line, and keep an insurance company relevant through better information, tools and technologies which lead to more precise positioning of products.
- Companies can improve targeted marketing with a deeper understanding of current and potential customers to reach under-penetrated segments
Insurance companies have access to enormous amounts of data, much of which is stored on internal computer systems. There is a significant and increasing amount of publicly available data, and customers and prospects are more willing than ever to share data about themselves when asked. The ability of an insurer to capture relevant data from numerous sources, make it consistent and consolidate it in meaningful ways help capture market share.
The use of analytics is helping insurance companies figure out which demographic is buying certain products as well as help them understand where gaps in product availability exist, create a product that meets that need, and directly market it the people that match the demographic. This can allow an insurer to capture a market before other companies know a potential market exists.
Identifying an underserved market segment, creating a customized product to meet their needs, and getting the product into agents’ hands can increase sales, improve customer satisfaction and drive a more productive agency force.
- The bundling of new and existing products to create an innovative, relevant product mix including accelerated new product launches
Carriers are always looking for ways to improve their customer relationships. Data shows that people who have a life insurance policy with a company are less likely to switch insurers. That means the ability to bundle products can address market needs as they arise and improve overall customer stickiness at the same time. However, this requires a systems infrastructure that supports multiline capabilities as well as coverage independence. It also requires thinking about the operation in a whole new way. From an underwriter’s perspective, it requires juggling several skills: the ability to price each component separately, understand the savings from multiple products for the same insured, the related discounting that can be offered to provide a stronger overall product and better position in the market, all while slowing down the revolving door of customers dropping coverage and leaving.
- Testing product changes quickly to get immediate feedback to allow for changes midstream to ensure that the needs of particular niches are met
Time is money, especially when it comes to getting a targeted product to market ahead of the competition. The ability to design and test a product, gain timely market feedback, make adjustments as required and deliver the final product can mean the difference between a successful campaign and one that fails to deliver on expectations.
From a product development viewpoint, tools and processes need to be in place to support immediate feedback and potentially rapid-fire changes during the market testing process. Keys to success here include a feedback mechanism, and in particular, a platform that allows adjustments to various product rules; and an architecture that supports product evolution over time as product performance assumptions are validated or adjusted.
- Staying abreast of major regulation changes and how to introduce those into the affected products
Insurers must be aware of the frequently changing regulatory environment. The laws and regulations that are in place across all products and locations, and whether a company meets those obligations are continuously moving targets. These issues impact the underwriting decisions and process (and many other areas).
For example, the role of credit reports in underwriting decisions, special considerations for marketing insurance over the internet, and the use of social media are all issues being resolved currently. Insurers and solution providers need deep line-of-business expertise to monitor and interpret the regulations at a high level.
Some providers have succeeded at working with groups of like-minded companies in a formal process to share ideas, investments and interpretations of existing and upcoming rules.
We are in an era where large market segments are simply not buying insurance. The ability to understand their needs and wants, and the insurance industry’s ability to deliver targeted products to meet them, is critical to the long term viability of specific insurers and the overall market. The underwriter’s role in delivering viable products has never been more critical. The adoption of new technologies, new thought processes and a more detailed knowledge of the market can help a company remain relevant.