5 Best Practices to Redesign Your Insurance Product Development Process Successfully
Every insurer has a diverse portfolio of products to sell and service. If your product fills a niche with limited competition, is in demand, or you do better than your competition, you’re golden. We find that so many insurers struggle to define their process for getting to and maintaining that “sweet spot.” If your company is looking to redesign its product development process, you can increase the likelihood of arriving at your own product “sweet spot” by integrating these five best practices into your strategy.
- Secure the right executive sponsorship, backing and support
I know… this seems to be a standard mantra these days in any blog post, article or whitepaper to do with projects. Is it easier said than done? Probably. Is it necessary? Absolutely.Securing the right sponsorship for any process development or redesign project is absolutely crucial. Without it, projects can flounder and eventually lose steam no matter what great ideas are being generated or level of energy and organization a team has. The right executive sponsor should provide the authoritative support, funding, and credibility the project will need to be successful. Look to your chief product officer, chief actuary, or head of product development to start.
- Assign a champion and a ‘Know-it-All’ team
Once executive sponsorship is in place, assembling a class-A team should be next in line. First, someone to ‘champion’ or drive the product process to be developed needs to be designated. This should be someone who knows enough about the product development cycle to be dangerous, but also knows how to delegate and manage the product development process timeline, its team and solicit innovation.Second, a team to redesign the process needs to be allocated. ‘Know-it-alls’ in this context don’t signify people who are full of themselves, but is a collection of people who can skillfully represent each stage of the company’s product development life cycle AND are creative, knowledgeable and open-minded enough to explore new design theories. Include representatives from Operations, Technology, Compliance, and Marketing as members of this core team.
- Come up with a game plan
Call it what you will… Governance Model, Team Charter, Success Framework – the plan should reflect the entire team’s input on
- the challenge or opportunity facing them (depending on your outlook)
- the components and flow of the product development process model
- how the model will be administered
This will establish boundaries and guidelines that the team will work within that they collectively created and put the rubber stamp on.
- Align the product development process with the company’s strategic goals
This best practice seems to be common sense, but amazingly it is so often overlooked. Many times, teams involved in large, high-impact, enterprise-wide projects do not even know what their business unit’s strategic goals are, let alone the company’s. Ideation, development, and delivery of products are sure to be embedded in the company’s strategic goals and objectives. Similar to the best practice on securing executive sponsorship, if strategic alignment is not taken into consideration, the project could end up being directionless and ultimately flounder or fail. A strong suggestion here is for the team to come up with a core, manageable (6-8) set of process design principles that consider the company’s relevant strategic goals and objectives.
- Share the process: communicate!
As tiring as the term ‘transparency’ may be, it is indeed a friend, not a foe. Communication is critical to any process redesign, and it would be wise to expect resistance if you’re redesigning a product creation and delivery model. Expect to ruffle some “but that’s the way we’ve always done things” feathers. Make sure your team has a strategy and a communication plan for sharing what’s happening before, during, and after the process model redesign with impacted parties. The old adage ‘tell them what you’re going to tell them, tell them, tell them what you told them’ is very effective in this best practice.
Any process redesign effort is going to experience bumps and challenges because the goal is ultimately to introduce change, which, let’s face it, most people resist – even ‘good’ change. However, these best practices will help your organization embrace the new process more readily and seamlessly, and six months down the road, the new process will have become the process that will catapult you to your own “sweet spot.”
Dive even deeper into the challenges of product development and expansion. Watch the recording of the webinar “Overcoming the Hurdles of Product Portfolio Expansion” that is jointly hosted by NEOS and Milliman.
Insurance in the USA – How Insurance Carriers Are Embracing Digital Transformation
By Ernst Renner. Managing Partner
Never before has the insurance industry seen a time of such dramatic change. For decades, the insurance industry has continued along a consistent path of underwriting, pricing, receiving and reserving, paying claims, and administering policies. At its core, insurance will likely always be this way; however, now insurers must respond to the demands of a changing population who expect carriers to support retail-style processing. For property and casualty insurers, and life and annuity companies, this will be a tectonic shift in their sales models, operational processes, and the underlying technology.
Some of the most visible technologies to consumers are payment methods. As product designs trend toward simplicity and customization, carriers must think of innovative ways to provide payment options, even as their sales channels evolve. This article will provide a view of emerging trends from carriers and the key decision points influencing direction to embrace the digital economy. We will look primarily at personal insurance and life/wealth management insurance products.
Customers Expect a Seamless Experience
A fundamental paradigm of the current and future customer-base is the expectation of a seamless experience, from insurance product research, to enrollment and purchase. Established as the norm by retail industries, this expectation has now flowed through to insurance.
Customers expect to conduct their own research, query their personal networks and make a purchasing decision without having to engage with a third party until the very end of the buying process, if at all. For insurance, this puts the agent in a new role with new expectations. When in need of more complex or wealth management products, customers conduct their own research prior to engaging an agent for quotes and enrollment. They expect to move from research to quote and then to enrollment without indeterminate wait times or extra hurdles and hoops.
As a natural extension of this seamless “retail insurance” engagement model, customers will expect payment options beyond writing a check or scheduling a monthly withdrawal from their checking account. They demand security, flexibility and choice of payment options to accompany their insurance purchase.
Personal & Commercial Insurance
Personal insurance is probably best suited for modern payment options given the relative simplicity of the products and the underwriting process. These insurance carriers have been switching their sales models to direct-consumer in the hopes of making the purchase of auto, home, and property products faster and simpler (and also more profitable by dropping out commissions). Progressive and Geico have set the standard when it comes to direct-to-customer sale strategy. Traditional insurers have been playing catch-up.
Personal insurers are somewhat more flexible in regard to payment collection. All carriers support traditional payment which is the plain old paper check or automated clearing house (ACH) payments. Most accept debit or credit transactions and a few innovative companies, such as Esurance and Progressive, have ventured forward to accept PayPal. Since personal insurance options are considered “retail products,” carriers must find ways to accept digital forms of payment.
The future for personal insurance payments lies in secure digital wallet transactions. Personal lines carriers will begin to add in on-the-fly or per-use insurance, which will create a more transactional environment that will need speed and security. Digital wallet transactions will become necessary.
The small business segment for commercial insurance is also emerging as a formidable group of customers with demands similar to individual insurance consumers. With a diverse set of needs, but perhaps clearer internal financial processes, small businesses are looking for integration, simplicity, and security. Currently, options are mostly limited to ACH and checks.
Options such as Intuit, which integrates with internal accounting software, should be strongly considered. Other payment options that integrate with accounting packages will be attractive to small business customers.
Life and Investment Products
For the more complex products like life insurance, annuities, and retirement plans, it’s more difficult for consumers to operate independently. From suitability requirements, to fund selections, these products do not easily lend themselves to online research and selection by the average person, making the direct sales approach a challenge for the carriers in this business. In other words, the need for a middleman (the agent) is still there, although we see signs of disruption emerging, with life insurance products specifically.
So, what to do? Insurers are developing simplified issue insurance products and looking for ways of bundling products with life events, such as lifestyle activities. For example, John Hancock has become the first US insurer to offer discounts to its customers who wear Internet-enabled fitness trackers.
The actual payment of policies varies, with almost all large and middle market insurers offering at least EFT (electronic fund transfer), credit, or debit card payment options. Certainly, plain old checks are still largely used.
Payment dramatically changes in the life insurance industry where investment and long term growth and protection are the primary concerns. Products like universal and whole life will likely always be sold through a party with the advice and guidance of a financial planner, but these are generally targeted to a subset of the overall customer base. The payment options for life and annuity products will likely max out at EFT, ACH and, perhaps, debit card transactions. Credit card processing fees are too prohibitive for use with higher-end life insurance or annuity products.
Direct sales of simpler types of products will demand a wide range of easy payments. Insurers in these markets must accommodate a wide range of options including PayPal, peer to peer, payment sites, electronic check, credit card, debit card, and others. Since these channels tend to be less price sensitive, however, insurers can price the product to absorb the cost of these various payment options for lower premium amounts.
What about the cashless society?
Online wallets like PayPal, Google Checkout and Amazon Payments may have the largest potential for impact in the insurance industry, offering a level of separation from the customer’s personal accounts to the actual transaction. This form of payment option from Google and Amazon is another aspect of worry for insurers who have been traditionally burdened with commission-based sales, high overhead and antiquated backend systems and processes. Amazon and Google have already figured it out and would be able to blend payment processing seamlessly with the more serious challenge of underwriting and enrollment approval.
Other major constraints to payment innovation in the US insurance market are regulatory mandates such as anti-money laundering, securities issues, state sales practices, and ERISA for retirement products. The constraints imposed will make it a challenge for future digital currency (e.g. Bitcoin), private crowd funding, or similar innovations to take hold.
For the most part, the decision to buy any form of insurance is rarely a snap decision that requires immediate purchasing satisfaction. Direct Carrier Billing or “DCB”, where you purchase items through your mobile phone carrier, carry huge finance charges (40% – 60%) passed along to the carrier. That is simply a non-starter in the insurance industry. With the exception of per-use personal insurance products in the future, the need for immediate insurance purchase and payment will remain low.
Call to action: digital transformation is a must-have for insurers
In closing, payment option trends will continue to “go digital,” requiring insurance companies to modernize and transform their businesses. In order to embrace digital transformation, carriers must supply their staff with intelligent “smart data” applications that maximizes insight and understanding to properly measure risk for their customers. Collection of data from wearables, property, and social media via the Internet of Things will further inform both insurance customers and carriers. User experience and processes must be adjusted to accommodate for an ever-growing digital community that expects a seamless issuance process, flexible payment options, and security.
One Millennials Perspective on Purchasing Retirement Products
I was recently asked to read a whitepaper that a coworker wrote on How to Reach Millennials with Your Retirement Planning Opportunities. He asked because I am a Millennial (I often try to hide that fact because immediately people think all I want is social media, to take selfies, and that I make them feel old) and I attended the Retirement Industries Conference. He wanted my perspective as a part of the generation that is giving the retirement industry so much worry. To quote my coworker, “To effectively reach Millennials, retirement services companies have a lot to do, and it won’t be easy,” but he also says, “There is no reason to wait to begin courting Millennials.” I love that phrase because that is great way to describe the relationship between consumers and organizations. Just like dating, I want to be courted when buying retirement products. I want time invested in the relationship, I want to build trust, support each other and, of course, if you cheat on me or lie I do not ever want to talk to you again. I encourage you to read his whitepaper for as I read, I could not help but nod my head at his suggestions for retirement services companies based on the social characteristics of my generation. You may not agree with some of his and my points but I will share my millennial’s perspective on a few of his points.
- He made one recommendation for insurers to “Train your agents to be advisors that will tell the truth, and deliver value beyond simply offering a product.” I cannot agree more with this suggestion. At least for me, I want to think of my agent as there for me, not just their bottom line. I even just accidentally proved my point with calling it my agent.Once I find someone I really trust to keep my best interests at heart, is doing their job because they believe in its value (note also in the whitepaper is Millennials increasing focus on civic virtue – spot on!), and can make the process easy for me I will be extremely loyal. For instance, I am in the process of buying my first house and started working with an agent by happenstance because she was linked with the house.Why is she so great? She is always available (which makes a great real estate agent), calls to explain upcoming processes, and advises me on who else to work with and big decisions. In the future, I can only hope she will be available when I need more real estate guidance because now I don’t want to work with anyone else. An additional note, she texts me (so it doesn’t disrupt my day but still calls with complicated topics), sends me digital documents to sign that automatically sends me copies, and handles interactions with other people in the process. Retirement services organizations should take note on that seamless process! Which leads to my next point:
- Mobile doesn’t mean social to me – I don’t want to buy online, I want to find resources online to educate me on the process. Will a company’s stellar twitter post make me buy products from them…no. However, I do want an online presence. If I could get access to educational resources (e.g. what to avoid, next steps after deciding to take action, and things to watch out for), testimonials from people I can relate to assuring me the process is painless, and to someone to start talking to about the products I would be inclined to consider a purchase. But, don’t make push a button to request an agent – I want to pick my own. One idea could be putting up profiles to allow me to find someone I can relate to, making it less intimidating.
- “Millennial consumers will be harder to find, and retirement service companies will need to do a better job finding groups of Millennials that will respond to product offers.” Would you believe that I have never been approached to by retirement products? I have a 401K because our office manager explained it to me and stressed the importance but I would be interested in more. My fiancé who is self-employed has never been approached. (Thank god, he did the research on his own). Those two examples show we are prime targets and the industry is not finding us. Could insures work with colleges and send graduates (after a year or two – you don’t want to depress them, they are having enough trouble as it is) an invitation to discuss retirement plans?
I am sure this was more than you ever wanted to know about a Millennial’s perspective and dilemma on the retirement product buying experience but if not reach out to me in the form below. We can share horror stories of trying to be an adult or I can shed even more Millennial light if you are the one trying to tackle sales to my generation.
How Longevity Challenges the Life Insurance Industry
We recently attended the Life Insurance Conference where Governor Dirk Kempthorne presented a general session that could not have been timelier. May 2nd was National Life Insurance Day, the anniversary of the first day life insurance was made available for purchase in the US. The conference was held in Washington D.C, which Kempthorne used as the background for his presentation.
He began by naming the places we should make sure to visit during our time in the Capital City. Of the long list, he mentioned Mt. Vernon where the bust of President Washington was and the chambers where the first Titanic hearings were held among other places. It was becoming a long list until he began to explain the significance of every place he implored us to visit in terms of life insurance. It was fascinating.
The famous sculptor of that iconic bust of George Washington was only able to travel to America when a life insurance policy was secured, providing death benefits to the King of France. Those chambers held the beneficiaries of life insurance policies held by travelers lost, paid out only a week after the ship sank.
He concluded his speech by telling the crowd of life insurance professionals that throughout challenges in history, as an industry, insurers have been there for Americans. Insurers face even greater challenges today with life insurance enrollment being at a long time low and the average person living longer. Longevity is the next challenge facing the industry which he was sure will be tackled.
Why is longevity such a challenge for insurers?
- Longevity risk exists due to the increasing life expectancy trends among policyholders, and can result in payout levels that are higher than what a company or fund originally accounted for. Insurer will need to explore ways to address this through either reinsurance options or more conservative pricing models.
- Products will need to meet the changing needs of the consumers. Having options to address items like living benefits to cover long-term care or income protection riders to help ensure the policyholder won’t outlive their income will become more important. Products may need to be created to provide more lifetime benefits instead of just death benefits.
This year marks the 256th anniversary of American life insurance, which is pretty remarkable. This particular insurance product is so important that it is older than America itself, and you as an insurer are a modern member of this cornerstone service. As you reflect on that humbling fact, take a few minutes to think about how you will solve the longevity problem and ensure that this industry remains stable, helpful, and widely available.
06 Apr 2015
Involuntary Impacts of Voluntary Insurance
I know what you’re thinking. Not another article about the impacts of ever-increasing healthcare costs or strategic cost-shifting tactics used by employers still in recession recovery mode. Worse yet, how about another smarmy passage on the virtues of managing the anxieties introduced by impending healthcare reform or on financial stress in general for that matter. No, this article is written for that stalwart group who must make sense of these issues and put them into an insurance context while providing the products and services that we’ve come to count on when we need them most. This group is, of course, the employee benefit insurance carriers. For them incorporating voluntary insurance products into their overall offerings is well…. involuntary in the current climate.
So, what does a typical carrier face when considering offering voluntary products?
In many respects, incorporating voluntary coverages into your product set is a great opportunity. Traditional voluntary offerings supplementing a core benefits package allow employees to customize based on need. Employers (customers) purchase plans that fit their needs while employees (also customers) get appropriate coverage. Additionally, non-traditional voluntary offerings (legal, pet, etc.) open the market to product innovations seldom seen in the insurance industry.
Alas, the dark side of voluntary product offerings lies in the education, enrollment, claims processing and policy administration activities required to support them. With a voluntary product set, carriers must manage cases at the participant level instead of the traditional plan and class level. For many carriers, this introduces participant detail into legacy processes and systems that they may not have been designed for.
Overall, carriers with successful voluntary offerings have business architectures that:
- Offer a balanced plan for employers by identifying the correct mix of voluntary and traditional employer provided plan features to achieve their objectives. Every plan is different. How much of which benefit costs need to be shifted? Will your voluntary offerings be held separate from your traditional offerings or will they be offered as “power-up” options in a more integrated plan? What impact will the plan have on employee satisfaction? Are your underwriting and product modelling tools positioned to support this?
- Position employees to make the best decisions by providing education and insights so that they can identify and manage individualized risks. Traditional plans have handled these decisions for employees in the past. Under a voluntary plan, employees will need the tools to help them balance their own risk and affordability. Are your product education tools and materials suitable for audiences beyond the corporate benefits specialist?
- Invest in underwriting, policy administration, and claims systems and processes to support what has the potential to become a much more complicated plan, class, and participant configuration. Underwriting is complicated by the individual profiles that make up the subset of participants who opt for every voluntary feature in every combination. Billing and claims processing are similarly affected. For carriers, voluntary offerings necessitate a shift in maintaining detailed participant information from enrollment to claims events. Indeed, incorporating voluntary features drives carriers to answer questions such as: How flexible is your product model? How extendable are your legacy systems?
- Address the increased complexity of enrollment in a manner that allows carriers to tie the bulleted items above together, efficiently. Whether enrollment is handled by the carrier or by an enrollment partner, voluntary features require enhancements to enrollment tools and materials. They also drive the need to channel detailed participant information into the back-office systems that otherwise wouldn’t happen until a claim was filed.
Obviously, each of the four broad topics listed above represent a small feat in summarization. In the real world, insurance providers face intimidating enterprise specific complexities with daunting necessities for success that drive the ever-elusive competitive edge. At NEOS, we believe that for providers, voluntary products are a reality of the contemporary market. The journey they represent can be significant and, as with all such journeys, the best first step is to be sure to know where you’re starting from as well as establishing where you’d like to go. In the end, one always influences the other.[/vc_column_text][/vc_column][/vc_row]
24 Nov 2014
Things Insurers have to be Thankful For
There may not be a table big enough, but if the 2.5 million people in the insurance industry got together this thanksgiving then they would have plenty to be thankful for. Annuity sales, for a variety of reasons, are currently soaring. The industry, which just recently weathered a recession and a very active span for catastrophes, is nonetheless looking exceptionally robust as it breaks all-time policyholder’s surplus records. Most exciting of all, insurers looking to innovate and cut costs can look to a landscape of technology options that have stabilized and matured significantly in recent years.
Plump, Juicy, Annuity Sales
Sales of annuities, particularly fixed annuities, have been red hot. Fixed annuities sales are up almost 40% over the first two quarters of 2013 according to Insurance Newsnet. Typically annuity sales in the first quarter dip significantly compared with the fourth quarter, but this year the energy carried over into 2014, with only a slight dip of around 4%. The baby boomer demographic wave has contributed to this tremendous increase, as well as the increase in annuities slant towards fixed products. NEOS attributes better sales to better products, which are being designed and supported by better technology. “The products coming out these days are better targeted to the market, and some of them, especially in indexed annuities, would not have been as easy to implement in years past,” says Dan Kohler, senior consultant at NEOS.
Fresh, Homemade, Policyholder’s Surplus
Policyholder’s surplus, often seen as an indicator of the robustness of the P&C industry, hit record highs. A recent A.M. Best report indicates that policyholder’s surplus increased by $20 billion in the first half of 2014, pushing the overall number to $683.1 billion. This means, among other things, that insurers can feel comparatively quite well assured of their ability to meet future losses. NEOS senior consultant Dan Kohler argues that, “The fact that rising profits and increasing values of investment portfolios have managed to push this number to its record high despite considerable catastrophe losses is a heartening sign of resiliency.”
An Abundance of Stabilized and Matured Technology Investment Opportunities
Technology is providing insurers with some appetizing options for lowering costs, improving pricing, engaging with customers, deploying innovation, and improving distribution effectiveness. According to a report by Insurance & Technology, three quarters of insurers used predictive analytics in their pricing, and all insurers with over $1 billion in personal insurance employed it. Telematics are becoming more useful to insurers and palatable to consumers. NEOS managing consultant Steve Leigh asserts that, “Automated underwriting processes among life insurers have begun to come into their own, with successful implementations cutting costs and improving results.” Meanwhile, according to Leigh, increased investments into core system replacements, emerging technologies such as social media, mobile, gamification, digitalization, and others will yield increased business value over the next several years.
Overall, insurers are in a relatively good place, and they have promising opportunities to look into in to help them try to keep it that way. What will these promising trends bring for the industry through the end of 2014 and in to 2015?
27 Oct 2014
Insurance Horror Stories: Read if you Dare
This month at NEOS, in keeping with the frights and thrills of the season, we asked some of our staff to divulge their own horror stories from working in the insurance industry. We heard back on a host of different topics, from customer service terrors to project management difficulties. We’ve chosen the three that frightened us the most. Read on, if you dare.
Rise of the Angry Customers
An auto, home, and life insurance company was experiencing rapid growth in the volume of calls to the customer service center at the same time that it was developing a new IT system. The project consumed much of management’s time and attention, leaving issues in operations to flounder. Managers recognized the need to act. The company responded in exactly the wrong way: by reducing customer service center hours in a misguided attempt to keep frazzled employees from becoming overwhelmed. Customers began spending at least 30 minutes on hold every time they would call in, often times never reaching a representative. Now employees were dealing with high volume and angry customers. Extending hours and hiring more customer service representatives could have helped mitigate the situation.
Change Management Abandoned
A large life insurance company was building a new system to manage the licensing of annuity and life insurance agents. The project was slated to take a year, but as the final months of the project drew near, the project manager repeatedly pushed out the system completion date without changing the implementation date. Meanwhile, employees in Training and Development were building online system training. With each system change, the training team needed to make corresponding updates. When the system was finally pronounced complete, employees had two weeks to build training, jeopardizing the system adoption and proper usage by employees at large. Placing more emphasis on the change management component of the project could have reduced stress among employees and ensured a smoother transition to the new system.
A leading auto, home, and life insurance company was unable to keep pace with growing sales. They wanted to improve their ability to handle the growth and decided to invest in a system that could help realize that goal. However, once talks of a new system came on the table, other goals started to surface. For example, the new system should be able to handle current sales and help drive future growth. These aspirations were all important things for the company to consider, yet management failed to prioritize which issues needed to be addressed first. Attacking all of their problems at once made it challenging to allocate resources properly and identify dependencies. Lack of prioritization also made it difficult for them to articulate what they really wanted their new system to be able to do beyond the end goal. The company ended up relying on a vendor to determine the best path forward, ultimately spending time and money on a system that couldn’t do everything they wanted. If they had properly assessed and prioritized their needs, they could have come out of the forest of system development with a system that met their needs.
These and other horror stories could have been avoided, or at least minimized, with more attention on project, change, and business process management. Sometimes consulting experts with an objective eye or leaders with more experience in project success is what a team needs to spot problems in a project or a process. Bear in mind our insurance industry horror stories to keep from being spooked on your next project; avoid the tricks and enjoy the treat of a project well done.[/vc_column_text][/vc_column][/vc_row]