Insurers and the Evolution of Insurance Product Development
As client experience matters the most in all industries, customer-centricity, speed, and flexibility are essential in insurance product development. Insurers are increasingly focusing on creating products and services that are convenient, fast, and personalized to meet these demands. With the advent of digital channels, there has been a significant push among insurance companies to modernize their businesses. This has led to the introduction of innovative new insurance products and a rework of legacy product-driven business models.
New Realities and Challenges
The insurance industry is coming to terms with the new reality where traditional risk management approaches must adapt to emerging risks. Insurers are prioritizing the modernization of product and service development, which includes understanding and responding to market expectations driven by customer experience. However, this process is not without challenges, as new risks emerge and traditional coverage requires updates to stay relevant in an evolving landscape.
Strategic Product Development
Developing insurance products or making modifications that cater to both the market and the company’s strategic goals requires a careful balance. Insurers often prioritize what the market is demanding, then combine that with what the company wants, and finally consider where the industry and technology are heading. Often, these modifications are subtle and consumers might not fully understand the full impact.
Homeowners and Auto Insurance Changes
A noteworthy example of this is the dynamic changes in homeowners and auto insurance over the past five years. While many consumers might not be aware of these changes, they have had significant impacts on insurance pricing and coverage.
Homeowners Insurance
Homeowners insurance underwent significant changes in how it rates and covers the roof. While clients might not have noticed, there were notable shifts in pricing and coverages. For example, certain carriers introduced clauses that required clients to replace their roofs if damaged before the storm hit, which drove up costs. Some modern carriers now place a higher burden on the consumer in terms of roof replacement costs and have increased deductibles. These changes aim to reduce costs for the insurance companies but might not be immediately apparent to consumers.
Auto Insurance
In auto insurance, carriers have introduced benefits like accident forgiveness and new car replacement, but at a cost. Previously, increased premiums due to accidents were a significant concern for customers. Additionally, consumers despised paying high prices for after-market parts or used vehicles when their vehicles were new. To address these issues, most carriers now offer these benefits as add-ons that require additional premiums. This shift in strategy aims to address consumer concerns but can be seen as a form of upfront cost shifting.
The Role of Technology in Insurance
Telematics, in particular, has played a crucial role in modernizing auto insurance. By using technology to track and understand driving habits, insurers can offer more personalized rates and benefits. Telematics products like Snapshot and DriveRight provide insights into driving behavior, allowing insurers to adjust premiums based on actual usage and risk profiles.
Conclusion
The evolution of insurance product development is a testament to the industry’s commitment to meeting consumer demands while ensuring the solvency and adaptability of insurance companies. As new risks and technologies emerge, insurers must continue to innovate and adapt to remain competitive and provide value to their customers.