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The Product Development Challenge

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

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  1. The Product DevelopmentChallenge A Personal Lines Perspective Session COM-42

  2. Product Development Personal Lines • Brand new program • New Direct Auto • New Home Warranty • Improvement current program • New Auto/Home discount • Expanded Rental Car coverage

  3. 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

  4. Product Development Years of change in: • Technology • Customer requirements • Channels of distribution • Competitors • Structure of the industry

  5. 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

  6. 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

  7. 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

  8. Product Development • Chief element of success is top management commitment • Give control to those responsible • Good working relationship • Careful, constant attention to the marketplace

  9. 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

  10. Product Development First-To-Market-Myth: Pioneers can target the largest, lucrative segments and get a head start on developing customer loyalty, thus ensuring success

  11. 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

  12. 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

  13. 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

  14. Product Development • Some basic principles • Loyal customers are profitable customers • Tracking retention rates • How do you get and keep customer loyalty?

  15. 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?

  16. 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?

  17. Sport Utes Of The Future • Ford, GM bet on SUV hybrids-Intersection of a Pickup Truck and SUV Lincoln Blackwood Hybrid

  18. 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

  19. Elements for Success • Need top management support • Need vision, think out of the box • Need good communication • Need organization and leadership

  20. Elements for Success • Need knowledge of the customer • Need knowledge of industry • Need knowledge of own company • Need field testing of product

  21. 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

  22. 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

  23. Product Development • What is role of the Actuary? • Evaluate underwriting • Develop rates/rules/forms • Filing preparation • Develop pro-forma • Monitor/Track results

  24. 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

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