The Product Development Challenge Session COM-42 A Personal Lines Perspective.
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Transcript of The Product Development Challenge Session COM-42 A Personal Lines Perspective.
![Page 1: The Product Development Challenge Session COM-42 A Personal Lines Perspective.](https://reader033.fdocuments.net/reader033/viewer/2022042608/56649dd55503460f94acd528/html5/thumbnails/1.jpg)
The Product DevelopmentChallenge
Session COM-42
A Personal Lines Perspective
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Product Development
Personal Lines• Brand new program
– New Direct Auto
– New Home Warranty
• Improvement current program– New Auto/Home discount
– Expanded Rental Car coverage
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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
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Product Development
Years of change in:
• Technology
• Customer requirements
• Channels of distribution
• Competitors
• Structure of the industry
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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
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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
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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
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Product Development
• Chief element of success is top management commitment– Give control to those responsible– Good working relationship– Careful, constant attention to the
marketplace
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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
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Product Development
First-To-Market-Myth: Pioneers can target the
largest,lucrative segments and get ahead start on developing
customerloyalty, thus ensuring success
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Product DevelopmentYears 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
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Product DevelopmentAnother 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
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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
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Product Development• Some basic principles
– Loyal customers are profitable customers•Tracking retention rates
– How do you get and keep customer loyalty?
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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?
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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?
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Sport Utes Of The Future• Ford, GM bet on SUV hybrids-
Intersection of a Pickup Truck and SUV
Lincoln Blackwood Hybrid
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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
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Elements for Success
• Need top management support
• Need vision, think out of the box
• Need good communication
• Need organization and
leadership
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Elements for Success
• Need knowledge of the customer
• Need knowledge of industry
• Need knowledge of own company
• Need field testing of product
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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
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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
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Product Development• What is role of the Actuary?
– Evaluate underwriting
– Develop rates/rules/forms
– Filing preparation
– Develop pro-forma
– Monitor/Track results
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Product Development
• For company to serve customers, and distinguish itself from its competitors, it needs an efficient product development team
• Actuary plays vital role on the product development team
• Create loyal customers