When it comes to designing an insurance product, the insurer has to keep in mind the customer need, preferences, appropriate delivery mechanism, regulatory requirements, and knowledge of local and global conditions even though there is no “one size fits all“ solution.
Pertinently, financial gain or social remedies certainly have to be a constant eye for insurers to succeed in their launches. To attain this, technology plays a vital role in terms of determining premiums and as well as benefits.
To achieve higher scales — let us take a look at some of the factors for product design and some important questions that pave the way or qualify the product in a better way,
a) How comprehensive are the features?
b) Adequate data analyzed?
c) Scientific reason established why the existence of the products really required?
d) Do distributors need special training to sell?
e) Are sales illustrations clear to laypersons?
f) Could distributors explain other products in the market and how these differ from the products of the insurer?
One of the main issues associated with product design is proper communication to lay customers. In addition, there are other issues to be considered such as concerns of shareholders and regulators.
Factors Significant in Product design
1. Target population:- It is highly recommendable to identify the target market and needs of the target population, e.g., the needs of persons living in rural areas will be different from the needs of the urban populations. Segmentation and target definition in an early stage will lead product engineers to predict the ROI closer to the accuracy rate of 95% — to implement the same, customer segmentation in data science can be widely used.
2. Eligibility to Buy
In order to purchase insurance, there are certain conditions to be fulfilled for a potential customer to be eligible to buy insurance. These are,
a) Age:- Insurance companies offer plans right from Infants to Super seniors. In some cases, minimum age and maximum age are the constraints for certain exclusions or loadings.
b) Income:-The insurer may ask for income proof wherever necessary based on the declarations and amount of insurance cover asked by the customer
c) Health:-The insurer may ask for medical examinations and reports, wherever necessary, based on declarations and the amount of insurance cover asked for. However, nowadays tailor-made coverage is updated on a needed basis
3. Laying good provisions of benefits
4. Clear demarcation of the beneficiaries
5. Remedies available in case of any problem or litigations
Bringing right technologies for the product development
- Analytics — for the rate and determination of product scope
- User experience
- Data science
- Cloud computing and so on.
Insurance companies need to think about the following advancements to support the superior success of the product launch and utmost customer satisfaction.
Data Collection:- For efficiency and effectiveness, predictions and cross verifications are essentially required in this process of gathering and measuring information -a company should focus on the variable interest attached to the specific line of business. For example, collecting the catastrophic data and vulnerability caused by the event will be a ready reckoner for a company to come up with prudent underwriting rates similar to the case of marine cargo insurance where it plays across the globe, in which all maritime events are synced periodically. These kinds of data collection are essential for other lines of business like Health, Fire, and Engineering.
Connected insurance:- As in the preface it was mentioned there is no one size fit for all solutions, thereby it is imperative to associate with partners and satisfy the needful customer in a prompt way, not limited to this these connected services will also enable additional revenue to the product revenue likewise the Motor insurance product associated with the Roadside services.
Connected insurance can be more effectively illustrated in Motor, Home, and Health insurance –where it can be connected to IoT devices and understand the usages, the risk associated, and more target-oriented as well.
Automation in Insurance:- Good policy management using prebuilt RPA and Artificial intelligence use-cases can automate insurance policies, identify potential risks associated with legal compliances and also reduce turnaround time for the frequent updates requested by the customer.
Core system modernization:- Running with a legacy system and attaining effectiveness is quite impossible. Even if a system is not upgraded completely, a certain level of modernization is not avoidable. Nowadays, wrappers or middleware systems can take over if complete modernization is not cost-effective.
Digital transformation:- Replacing manual or non-digital information with digital processing is inevitable. Some of the aspects include going paperless, convert the policies or prospects through mobile applications, etc.
Risk Prediction:- This system should also be planned while devising new products in such a way that the health status of the risk, creditworthiness, duplication of any reinsurance retention limits, and other financial limits can be checked.
Fraud detections:- Most companies lose their profits by settling claims in the nature of fraud. In order to avoid paying such false claims, it is very important to have a strong fraud detection mechanism. Statistics say that implementation of such fraud detection mechanisms can stop up to 65% of false claim amount settling by companies.
Efficient customer services:- Finally this is the area where insurance companies need to be more vigilant and skilled enough to cater to the wide variety of customers with less utilization of manpower. Implementation of RPA and Chatbots to a larger extent cater to customers, but to achieve 100% compliance satisfaction, companies should improve their knowledge base or FAQs instantly.