Group Insurers’ Need for Speed

Introduction

The most famous quote from the movie Top Gun couldn’t be more appropriate for today’s group insurance industry. For much of its history, it has been fortunate to have a successful and resilient business model. Lower distribution costs and better risk pooling (from employee groups of varying ages), have provided a strong foundation for profitable growth. But today’s group insurance industry remains highly competitive and increasingly commoditized, and the “need for speed” is more urgent than ever. Delivering new products to market in nine months or less, and modifications to existing products of two months or less, has become a requirement, with two-thirds of group insurance companies now able to meet these timeframes.¹ Companies that cannot respond efficiently to employer and broker feedback to improve their product offerings may face the danger of commoditization and decreased profitability.

Speed to Market Benefits, Turbulence, and Clear Skies

One of the primary benefits of speed to market is increased product shelf space with brokers that serve the markets where group insurance companies want to transition and expand. With so many fast followers and imitators in the market, it is critical for group insurance companies to either enjoy the initial pricing, feature, branding, and other advantages of being first to market or to quickly respond to other companies’ product innovations. Slow-responding companies experience such turbulence as product commoditization that results in thinner profit margins and subsequent pressure to write higher volumes of low-margin business to cover operating fixed costs. While it has always been an imperative for insurers, speed to market is often elusive due to talent shortages, operational silos, outdated technology, and data limitations.² Delays often result between a product’s conceptualization and its eventual market launch but achieving speed to market mainly comes down to optimizing processes,³ to streamline and expedite production and market entrance. The following solutions can facilitate these objectives for clear skies:

• A Modular Product Architecture Foundation. With group insurers’ willingness to modernize core systems, modular product architecture can support the new system, where functions or individual operations necessary for the overall product purpose are identified. Standard assemblies are then created to undertake these individual operations. As a result, product developers can deliver new marketing products in a shorter period, via module re-use and rebundling.⁴ This means that new market products can be created quickly by reusing or modifying any of the components, resulting in increased development speed and a streamlined product portfolio that can be brought to market quickly.
• A Streamlined Product Portfolio. Once insurers establish a modular product architecture foundation, they can more easily recognize opportunities to streamline their product portfolio and eliminate redundancies, resulting in increased operational efficiency.⁵ Once they start to view products through a modular product architecture framework, it will become easier for them to detect product development logjams and become more adept in terms of trouble-shooting and resolution.⁶
• Earlier IT Involvement. Like Top Gun’s Maverick and Goose, achieving speed to market remains a team effort. Insurers who involve their wingmen (a/k/a their IT teams) earlier in the design process deliver products faster than those that wait until later stages. Including IT earlier in the development stages also helps bring perspective on how to best design a product that fits in the current or even future ecosystem and processes. Involving IT from design to actual product deployment is especially key in group insurance, where many carriers still operate via antiquated legacy systems. However, other industry players have realized the necessity of core system upgrades and have committed significant resources toward technology transformations. Upgrades provide the opportunity to build a foundation for speed to market from the ground up, with modular product architecture that enables timely development of innovative and market-driven products.

Conclusion

In today’s fast-paced and hypercompetitive industry, Insurers that implement product development optimizations for faster speed to market and overall industry responsiveness will soar to new heights with more production insights and consistent profitability. Like Top Gun’s most illustrious aviator, grab your wingman and request permission to buzz the tower – it’s time to come in hot.

¹ “Speed to Market for Life/Annuity/Benefits Insurers,” Aite-Novarica, May 2021, pg. 5
² “Speed to Market – Part of the Insurance Series: Benefits of a New Policy Administration System: Why Going Live is Not Enough, Deloitte, 2015, pg. 1
³ “Questioning Speed to Market,” Aite-Novarica, May 2021
⁴ Op. Cit., Deloitte, pg. 3
⁵ Ibid.
⁶ Ibid.