Not a surprise. This is something that insurance companies, retail institutions and commercial banking need to think about deeply. The problem that we have with these industry sectors is that the rate of new product development overall sucks. Seriously sucketh majorly. Why? because historically, the demand hasn't simply been there. What do you mean demand? Well, ask yourself, when was the last time you went into a bank and asked for a new type of financial product that will get your mortgage few bits better than before or try to link your savings account with your brokerage account? retail customers are generally not that forthcoming or even welcoming towards new products. But if you build a better mouse trap, they will come! think about the single bank account structures, think about critical illness cover, etc. etc. their takeup is great.
But that doesn't mean that you sit back and think of England or USA or Mongolia. It is a tough life out there and many smaller boutiques are doing very well with rapid new development. And they are doing very well because their costs of distribution over the web and new channels means that their infrastructure is designed around multi product strategies (no hulking huge mainframe based single product single location process systems), their distribution is load independent, they can white label products very easily and their incremental cost for each additional sale is near zero. Hence, new product development is key and more importantly it has to be very fast. Take a clue from how the investment banking world works, the curve from new idea to development to sale to early adopters to main stream and commoditification can be as little as 3 weeks and generally not more than 1 year. Compare that to a life insurance policy. 100 years? I rest my case.
Analysts: Insurers Need to Accelerate Product Development
August 8, 2007 - El Segundo, Calif. - To remain competitive in the life and annuity industry, insurers should exploit technology to create more innovative products and introduce them faster, according to insurance industry analysts speaking at Computer Sciences Corp.’s Life and Annuity Users’ Forum.
More than 350 insurance industry executives attended the users’ forum in Naples, Fla. The event featured more than 150 sessions on topics ranging from industry trends to how product configuration software can reduce time to market for insurance products.
“Insurers that are unable to assess their customers’ needs, build products to support them, and deliver them to the sales channels quickly will find it difficult to compete,” says Kimberly Harris-Ferrante, research vice president at Stamford, Conn.-based Gartner Inc. “Product configuration technologies let insurers craft and test new products with less IT involvement, improve integration between the product engine and policy administration systems, and improve product management through the use of a central product library.”
“Improving time to market for life and annuity products with their rapidly proliferating features, minimums and guarantees is a widely acknowledged competitive necessity,” says Matthew Josefowicz, managing director of Celent LLC’s insurance practice. “The ability to innovate products is worthless without the ability to get those products to market rapidly.”
The need for more finely tuned products was identified in the November 2006 report “Insurance CIO/CTO Pressures, Priorities, Projects and Plans for 2007: Survey Results” from Boston-based Celent. Celent presented the results of the survey at the conference.
The report also showed that top areas of significant new project spending vary by size and sector, but include initiatives focused on underwriting, claims, product development and data mastery. Document handling, policy administration system replacement, ACORD XML adoption, and agent portals, and BPM all show up among the most common areas of significant new project spending. The report lists the top areas of "significant" and "some" new project spending by four size-and-sector groups of insurer respondents.
Web services/SOA is real, according to the report. Adoption of enterprise service buses and UDDI infrastructures may not yet be widespread, but the average insurer had approximately 15 services live within its enterprise, and about half of the sample is using Web services/SOA for internal and external integration to enable new business and underwriting. ACORD XML continues to play a role in more than half of these initiatives.
The incremental mainframe migration is continuing, and Linux is becoming an important element of platform modernization along with Windows. While most large insurers rely on at least partially on mainframes for their core policy systems, the overall role of mainframes continues to wane gradually.
Sources: CSC and INN archives
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