The insurance industry is changing at a pace that would have been unimaginable just a few years ago, and it is the customer driving much of this change. In personal lines and, increasingly, commercial lines, insurance customers are no longer satisfied with one-size-fits-all product offerings; they now expect products that are tailored, not just to their specific market segment, but to their individual needs.
New competitors are working hard to meet these changing customer demands. A 2013 Accenture survey reports that 23% of consumers would be open to buying insurance products from Internet giants such as Google and Amazon.com. Today, Walmart and Overstock.com are offering property and casualty insurance, and an entity called Google Compare Auto Insurance Services has obtained licenses to sell insurance in more than half of the states in the country.
The pace of change means that insurers must be able to identify and respond quickly to rapidly emerging risks. In commercial lines, for example, some insurers have moved quickly to add cyber security and financial crime coverage to standard business-owner packages. They have established actuarial standards, set pricing and put rating and processing systems in place, in as little as 3 to 6 months instead of the 12 to 18 months that has been recognized as the "normal" speed for the development and launch of new products. Other insurers have moved quickly to create new products in areas ranging from travel insurance to appliance warranties.
An insurer with the ability to identify customer demands–and quickly introduce products to meet those demands–can improve its customer acquisition and retention rates and can create competitive advantage, even in a crowded marketplace. This can contribute to top-line growth.
Our own analysis indicates a positive correlation between product development capabilities, innovation and top-line growth. Companies with a higher number of product introductions enjoyed a higher average growth in direct premiums written (DPW) over the five-year period from 2008 to 2013. In fact, insurers with fewer than five new product introductions per year saw a decrease in DPW over that same five-year period.
Getting the right products to market more quickly is not easy. Companies seeking to accelerate the pace of product innovation face many challenges including the difficulty of forecasting customer demand; the barriers posed by regulatory compliance; and the need to set prices at the right levels. Many insurers lack an understanding of comprehensive needs; or, if they do understand the customer, they fail to integrate these insights into the product development process.
Next page: Insurers should focus on these four areas to get the right products to market more quickly
We have identified four key areas upon which insurers should focus to get the right products to market more quickly and effectively:
- Operating model. A sound operating model that supports the product development lifecycle is important to improving the speed with which new products are deployed. A sound operating model includes a clear organizational structure that establishes ownership, accountability and decision-making responsibilities at all levels; active participation and cross-collaboration in product development across functions and business units such as underwriting, actuarial and IT; and proper governance to facilitate continuous leadership commitment and sponsorship of specific ideas.
- Product development process. Being best in class at developing new product ideas and delivering them to market quickly requires an end-to-end view of the product development process, with clearly defined activities and deliverables at each point. Ideally, the product development process should be consistent, repeatable and streamlined, and should align organizational accountability with product innovation goals.
- Product architecture. In many cases, carriers face the challenge of a large portfolio of products, where the architecture for each group of products has been separately created and maintained. This can lead to high implementation and maintenance costs, longer timelines to introduce or update products, and decreased transparency in the product development lifecycle. In our experience, the use of a product model—providing a structured way to organize product information across the enterprise—can reduce both time to market and product development costs.
- Technology enablers. New tools and technologies can reduce implementation timelines but also can reduce the time needed to make product updates based on market and/or regulatory needs. In particular, an integrated development environment can support both the customized and centralized organization of product architecture, as well as collaboration capabilities linking business units, IT and other functions.
Insurers facing changing customer expectations, new competitors and disruptive technologies can establish and maintain a vital competitive advantage by identifying and developing new products and bringing them to market quickly to meet demand. While the P&C market is always competitive, new opportunities appear every day. Insurers able to spot these opportunities, develop the right products and move quickly from concept to market can become leaders in this new competitive landscape.
Cindy De Armond is a managing director in Accenture Property and Casualty Practice and leads the Policy Business Service in North America.
John V. Mulhall is a managing director in Accenture's Insurance Strategy practice, and leads the Product and Underwriting Strategy practice globally.
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