The pace of competition in the life insurance and annuity industry is moving at breakneck speed. With sales of annuities slowing primarily due to uncertainty about the U.S. Department of Labor’s fiduciary rule, insurance companies are hunting for innovative technology solutions to speed the introduction of annuities to market.
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A number of other institutional challenges are also contributing to this concern. Traditional sales channels of independent insurance agents continue to be the norm, despite efforts to kick-start innovation for new consumer demand models or direct sales channels. The process for purchasing products is long and laborious which leaves a sour customer experience taste. Huge legacy systems don’t allow for data integration, further stymieing advances in customer service. And financial structures and mindsets are rooted in a web of complexity, not providing room for digital transformation investments and expenditures to take hold.
Approaches for effective transformation through technology provide an important roadmap. As the development of new tools and technology platforms proliferate to ease this transition, it’s imperative that carriers understand the most impactful steps for new product introduction success to take hold. With that in mind, here are three technology strategies that should help issuers change their culture to evaluate, develop and launch new annuity products faster to get a jump on the marketplace.
1. Consider embracing a green field strategy.
The times, they are a changing. Historically, implementing transformation processes meant carriers needed to overcome obstacles with minimal options that at the same time didn’t go far enough.
In addition, carriers’ laboratory for innovation was padlocked as creativity was expressed and executed in a vacuum. Transformations could take years to foment, let alone be put into action, often disrupting business as usual with elevated costs amid risky methods with limited effective outcomes. On average, 50% of the ventures succeeded.
Fast forward to today when carriers can turn to another solution when considering how to bring transformation to life. A “Greenfield” approach, which opens up an endless wealth of opportunities for carriers, allows them to work inside a partner’s existing administration ecosystem to augment their existing knowledge base with additional external perspectives, while teaming up to activate a fast and low-risk transformation. By selecting and collaborating with a partner that has a well-established and leading-edge ecosystem and policy administration competency, employing a “Greenfield” approach allows carriers to launch a new Tier One ecosystem within nine months and new products in just 90 days. This trend is taking root as many carriers are increasingly creating internal divisions or spinoffs to tackle these initiatives.
2. Be a first mover.
Not many people think of insurance companies as fast pioneers of innovation, radically transforming industries in huge quick strides. These companies have been more comfortable in the role of following other organizations with me-too products and garnering significant benefits without exposing themselves to huge immediate risks.
However, a plethora of challenges are mounting at carriers’ doorsteps, including competition, regulatory issues, changing customer demographics and the hunt for profitable growth. To face these hurdles, insurers must turn to areas ripe for innovation such as product development, distribution and communication to grow.
Amidst the overall market uncertainty, for carriers to be first to market, it’s essential that their game plan is smoothly actionized. Having an approach and culture of experimentation and accepting a “fail fast” mentality are vital for driving innovation. These are not daily mantras to be recited; they unite as a seamless strategic approach for progressive insurers to drive their business and their customers’ businesses into the future, and as a result, generating enhanced brand awareness and likeability as opportunities arise.
3. Experiment or bust.
In today’s tumultuous environment, the only constant is change. The days of insurers bringing a product to market and selling it in the same manner for a decade do not exist anymore. What we see in the current climate is that products often become obsolete in no more than 10 months as market conditions rapidly change and customer needs morph in fleeting movements.
Thus, experimentation offers a North Star. Yet, the blowing winds of change with regard to new product development don’t portend a greater need for product complexity. Simplification is king. Standardization of product features and processes is desirable. Yet, as highlighted above, experimentation and speed to market should become the norm and true differentiation can create a market advantage.
The era of innovation through experimentation has arrived. Customers are more opinionated and vocal in what they are looking for as their needs are dynamic and constantly evolving. As such, carriers must not assume they know which products will be successful and which will not. Success will come to those who test, market and sell products simultaneously.
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