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The Product Development Challenge. A Personal Lines Perspective. Session COM-42. Product Development. Personal Lines Brand new program New Direct Auto New Home Warranty Improvement current program New Auto/Home discount Expanded Rental Car coverage. Product Development.

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The product development challenge

The Product DevelopmentChallenge

A Personal Lines Perspective

Session COM-42

Product development
Product Development

Personal Lines

  • Brand new program

    • New Direct Auto

    • New Home Warranty

  • Improvement current program

    • New Auto/Home discount

    • Expanded Rental Car coverage

Product development1
Product Development

  • Product Development is one of the most powerful but difficult activities in business

  • A dynamic time when new technical concepts create new opportunities and new threats

Product development2
Product Development

Years of change in:

  • Technology

  • Customer requirements

  • Channels of distribution

  • Competitors

  • Structure of the industry

Changing times
Changing Times

  • Time when new demands are emerging from customers

  • Time when competitors are making new unexpected moves

  • Time when new ways of competing are emerging

The new economy
The New Economy

  • We are in the age of the new economy

  • Give customers what they want or someone else will.

  • Quality at a competitive price

Product development3
Product Development

  • No one “best” approach

  • Some fundamental principles involved for success

  • Company management needs to foster environment that:

    • encourages creativity

    • promotes communications

      • within company

      • between company and customers

Product development4
Product Development

  • Chief element of success is top management commitment

    • Give control to those responsible

    • Good working relationship

    • Careful, constant attention to the marketplace

Product development5
Product Development

  • Risk and rewards of well-conceived and executed new products can be great

  • Risk of inadequate programs, or no program at all, can be high

  • You innovate or you disintegrate

Product development6
Product Development


Pioneers can target the largest,

lucrative segments and get a

head start on developing customer

loyalty, thus ensuring success

Product development7
Product Development

Years back, a stock broker touted:

  • World’s biggest chain of highway restaurants

  • Pioneer in restaurant franchising and strongly entrenched

  • Highest quality investment

  • What Company was he talking about?

    Howard Johnson’s Restaurants, not McDonald’s

  • Product development8
    Product Development

    Another Example:

    • RC Cola was first with diet cola

    • Coca-Cola came out later with Diet Coke, was able to take leadership away from RC Cola

    • Late entrants can leverage brand name and distribution for successful market entry

    Product development9
    Product Development

    • Some basic principles

      • Customer data is key to customer relationships

        • Who is buying that stinky cheese?

        • Identify/Target niche groups

        • Data warehousing

        • Data mining

      • Outside market research

    Product development10
    Product Development

    • Some basic principles

      • Loyal customers are profitable customers

        • Tracking retention rates

      • How do you get and keep customer loyalty?

    Product development11
    Product Development

    • What is customer loyalty worth?

      • Acquisition cost: How much will it cost to get the customer?

      • Revenue stream: How much revenue will customer generate over time?

      • Cost stream: How much does it cost to serve the customer continuously?

      • Duration: How long is the customer expected to generate profit?

    Product development12
    Product Development

    • Insurance product is intangible, harder to sell than many other consumer products

    • Insurance product design faces many of the same problems of other new commercial products

      • Will it sell?

      • Will it make money?

    Sport utes of the future
    Sport Utes Of The Future

    • Ford, GM bet on SUV hybrids-Intersection of a Pickup Truck and SUV

    Lincoln Blackwood Hybrid

    Elements for success
    Elements for Success

    • Need Strong Product Development Team

      • Actuary, Agency, Claims, Forms/Filing Unit, Legal, Marketing, Statistical, Systems, Underwriting

    • Most important member of team is the customer

    Elements for success1
    Elements for Success

    • Need top management support

    • Need vision, think out of the box

    • Need good communication

    • Need organization and leadership

    Elements for success2
    Elements for Success

    • Need knowledge of the customer

    • Need knowledge of industry

    • Need knowledge of own company

    • Need field testing of product

    Product development13
    Product Development

    • How is Personal Lines different from Commercial Lines?

      • B2C vs B2B

      • Price-sensitive

      • Coverages/Forms more similar

        • Not as individualized

    • More highly regulated

    Product development14
    Product Development

    • What is role of the Actuary?

      • Help focus market research

      • Analyze market/customer data

      • Help with product design

      • Evaluate the cost of customer loyalty

      • Provide estimate of costs

    Product development15
    Product Development

    • What is role of the Actuary?

      • Evaluate underwriting

      • Develop rates/rules/forms

      • Filing preparation

      • Develop pro-forma

      • Monitor/Track results

    Product development16
    Product Development

    • For company to serve customers, and distinguish itself from its competitors, itneeds an efficient product development team

    • Actuary plays vital role on the product development team

    • Create loyal customers