The economic landscape has been a challenging one to navigate for some time and while there were hopes for a speedy recovery following the pandemic, the reality is that the UK economy has taken yet another blow with the onset of much higher inflation, rising interest rates and the escalating cost of living.
While the economic outlook for Europe remains uncertain, the global insurance market is proving resilient – Swiss Re has forecast a total premium volume of more than US$7 trillion for 2022. As we head towards the fourth quarter and into 2023, this growth is expected to continue; however, insurers will still need to keep a sharp eye on inflation, from both a claims and premium pricing perspective.
Motor premiums, for example – as reported in the latest EY UK Motor Insurance Results – are expected to increase by 18% in 2023, meaning consumers are going to seek out policies that offer the best value.
For insurers, relying on brand loyalty alone won’t be enough to keep customers on board. Their product offering needs to be relevant, transparent, timely and of good value – without exception.
To achieve this, insurers need the ability to build new business lines quickly and efficiently. Whether this is bringing to market home insurance products via an app, pet insurance with different levels of cover, or even multicover insurance with self-service portals, families can help lower the cost of their premiums by combining motor and home insurance on one policy. It’s all about having a good understanding of which products customers actually want and need – relevance is critical.
Speed to market
Getting new products to consumers quickly, however, involves a number of elements working seamlessly together – infrastructure, regulatory compliance, pre-packaged content, and flexible technology. This is where building a product factory can help.
Delivered through a SaaS-based insurance platform, product factories enable insurers to innovate new, market-relevant products by reusing common base product definitions across their portfolios (see New Trends of Cloud Services – SaaS, IaaS, PaaS, Serverless).
Using low-code configuration tools, insurers can establish a set of base products which can be used as the foundation for product variations in order to tailor coverage for specific consumer needs. Not only does this mean insurers can avoid creating a massive library of products that are expensive and time-consuming to maintain, but it means they can stand out from the competition.
By adopting a product factory approach, insurers also gain the ability to define and maintain a robust inheritance model that allows common elements and definitions to be reused across products, different lines of business, and even coverages.
This is referred to as ‘product inheritance’, where any changes made to an item are automatically inherited by the line of business and coverage level unless the definition is overridden to break inheritance.
The process for implementing a product factory will vary by insurer; however, there are general best practices that can be used.
On the business side, three areas of focus include:
- Staffing – using a capacity model and managing to business priority
- Change management – disciplined communication of product changes is critical to end user communities
- Innovation focus – attaining world class efficiency and speed is a journey; a constant focus on innovation and improvement is key
On the technical side, three areas of focus include:
- Product hierarchy – design for reuse and commonality across products
- Product rationalisation – achieving efficiency through product standardisation, diverging only to align with an insurer’s true market differentiators
- Automation – leveraging automation in development, regression testing and deployment/release management
The benefits of implementing a product factory include:
- Increase in underwriter productivity
- GWP growth
- Decreased cost of enhancements
- More avenues for innovation
- Cost reduction from going paperless
- More efficient marketing
- Reduced delivery times
- System elimination
With single point of change capability products, a change in product features, rates, forms, rules, user interface and workflows can be propagated to every product based on the modified product. With this ability to rapidly scale up product release and launch in multiple markets, an insurer can rapidly adapt to regulatory and macroeconomic changes, enter new growth markets, and position itself strongly against competitors without having to redesign the entire product (see BlackRock`s Global Macroeconomic & Invest Outlook).
Confidence to deliver
In a time when digital makes the world go round, working with insurtechs – like Duck Creek – and utilising product factories, can help insurance providers deliver the right products, to the right people, at the right time.
Developing a product factory isn’t an overnight accomplishment; it is a journey, a process that evolves over time as insurers find the right balance that works for them. And it isn’t just about the tech either.
To be successful, insurers need to build partnerships between different divisions; they need to have product development and business teams working together in tandem to determine common elements used across products, and to architect a product hierarchy that supports rapid product deployment to meet business goals.
AUTHOR: Andrew How – Senior Sales Director Duck Creek Technologies