PRODUCT DEVELOPMENT

Personnel Involved in Product Development

Senior-level executives, who establish strategic marketing objectives as part of their strategic plans for the entire company. These strategic objectives become the basis for the product development decisions the company makes. The process of product development requires cooperation among more functional areas including marketing, agency, operations, actuarial, legal, compliance, underwriting, investments, information technology, claim administration & annuity administration.

Product Development Teams

Many life-insurers have formal product development units are staffed by full-time employees with diverse technical backgrounds. In other companies, it’s not a full-time job for anyone. Two important participants in the product development process are Project Sponsor – also called project champion, is a senior level executive who authorizes a product development project and who has an ultimate authority over the project and Project Manager – also called the Project Coordinator, supervises the product development team and controls the day-to-day aspects of the project.

Product Development Process

Can be divided into five steps:

• Product Planning

The development team first gathers ideas for product concepts that appear to fill a customer need.

Sources for idea include

ü  Customers

ü  Producers & Other Sales Personnel

ü  Consultants

ü  Marketing Research

ü  Product Development Team Members

ü  Business & Insurance Periodicals

ü  Marketing Intelligence

Idea Screening is the process of evaluating new product ideas quickly and inexpensively to identify the ideas that warrant further investigation.

To avoid good ideas being rejected, many devt teams rely on established screening criteria.

Concept testing is a marketing research technique designed to measure the acceptability of new product ideas, new promotion campaigns ,or other new marketing elements before a company incurs the expense of actually designing and implementing these items.

• Comprehensive Business Analysis

Is used to ascertain the feasibility & marketability of the proposed product. It includes the following five elements

·         Market Analysis is a study of all the environmental factors that might affect sales of a product. These factors include the nature and size of the target market; the potential appeal of the product to customers & producers.

·         Product design objectives specify a product’s basic characteristics the manner in which the benefits will be provided, applicable fees & charges.

·         A Feasibility study is research designed to determine the operational and technical viability of producing and offering the product and 2) the impact of the new product on the company’s existing products.

·         A Marketing Plan

·         Sales & Financial Forecasts The insurer estimates the product’s financial requirements, potential unit sales, revenues, costs, and profits.

The Product Proposal also called an initial business plan, is an outline of the product’s target market & market potential; technical specifications; and administrative, systems and distribution requirements.

Test Marketing, also known as conducting a pilot program, is the process of selling a product in a limited number of geographic areas and then measuring its level of success.

• Technical Design

It includes creating the contract provisions & language, pricing & benefit structures, producer compensation structures, issue specifications and for life insurance products, underwriting specifications.

• Product Implementation

An insurer establishes the administrative structures and processes necessary to take the product to market. It involves

• Obtaining necessary regulatory approvals of policy forms.
• Designing promotion and training materials.
• Establishing all of the information systems and operational processes and procedures necessary to market & administer the product.

Policy Filing is the act of submitting a policy form and any other legally required forms & documents to IRA in each jurisdiction in which the insurer intends to issue and sell the product.

In US, an insurer must generally file and obtain approval of a copy of a product’s policy form and any other legally required forms. However in Canada, insurers must file policy forms with provincial insurance regulators.

Promotion & Sales Materials

In US, many states have laws patterned after the NAIC Life Insurance Illustrations Model Regulation, which seeks to protect customers and promote customer education by providing life insurance illustration formats, standards for use, and disclosure requirements. Nonguaranteed elements are the premiums, benefits, values, credits or changes under a life insurance policy.

Information Systems & Operational Processes

Implementing a new product sometimes requires the revision of a company’s current information systems and/or the establishment of additional systems.

Education & Training

Issue Instructions are guidelines that show the approved policy forms for each jurisdiction, any variations or options in a jurisdiction’s forms.

Typical training activities include

ü  Explaining the new product’s specific characteristics & provisions.

ü  Describing the intended target market for the product.

ü  Reviewing sales materials designed for the customer.

ü  Demonstrating sample sales presentations.

ü  Teaching producers to use illustrations.

ü  Training producers to fill out & submit applications for the policy.

Product Introduction

The insurer

ü  Implements appropriate information & operational systems and producers.

ü  Provides additional training and educational materials to producers and home office staff.

ü  Places advertising & promotional material.

ü  Distributes press releases.

ü  Stages promotional events, such as visits to agencies & regional offices to encourage sales.

• Sales Monitoring & Process Review

When a product is not achieving expected sales results, product researchers & planners assess the situation and recommend corrective actions. These actions can include

• Redesigning the features and/or price of the product to meet a specific need.
• Revising a life insurance product’s underwriting guidelines.
• Using a different distribution System.
•  Reintroducing the product to producers.
• Introducing a sales promotion program.