Product development is a much more sophisticated art than in the past, so we have asked two insurers how they approach the challenges and the opportunities. We put various questions to each and first up, Martin Sincup of Holloway Friendly answers our questions about the product review process at the UK’s oldest IP provider:
What's the process for deciding what product to update/design?
Our strategy includes a proposition roadmap that looks a number of years ahead.
We tend to score ideas against a wide range of things that help us understand how viable they are, or what we would need to change for them to be viable. An example might be how accessible distribution would be for the idea. Or it could be whether we have existing internal expertise in that area. We might look at the cost to build and run it, or what unmet customer needs it addresses.
There are many other things that ‘need to be true’ for a proposition to work. Taking this approach provides us with a nice structure to make informed decisions. And if something isn’t viable right now, it can highlight something that’s not product related that’s equally important to get on the roadmap.
Strategic planning is important but as the saying goes … ‘the best laid plans of mice and men …’, and no matter how carefully we plan, there are lots of moving parts in the world of insurance.
Competitors are active with their propositions and reprices. Regulation is always evolving, as is technology and distribution. And ‘black swan’ events can happen, as we saw with Covid.
So a lot of change needs to be more tactical or agile as we respond to opportunities and threats.
Decision making sits within our product development and governance framework, to make sure the right people are involved, all options are looked at, and that changes are delivered safely with the right customer outcomes.
Who has responsibility for a product's design and pricing and who is involved in the process?
Our Proposition Team is responsible for designing new products, as well as managing our existing ones.
Ultimately though our wider proposition – by that I mean our overall offering - involves everyone, whether that’s Sales, Underwriting, IT, Marketing or Claims. So everybody has an important part to play.
We work with our actuarial colleagues on pricing new products and reprices. We’ve developed a fairly sophisticated understanding of our competitive position over the last couple of years, which helps us give our actuaries useful insights.
What's your typical lead time to i) develop a new product and ii) update an existing one?
Our latest product, My Sick Pay, took about six months. It depends what’s involved, but three to six months would be what we’d aim for.
Getting the terms and conditions and product specification nailed down early on really helps baseline things.
There’s often a dependency on third parties, for example adviser portals, panel processes with networks or reinsurance for example, so that can limit speed a little.
Workstreams like pricing can take time, and the newer or more different a product is, the longer it’s likely to take. And testing is another area that typically takes a fair chunk of time.
But if things happen concurrently it’s possible to get it done pretty fast.
How much formal research do you do with i) intermediaries and ii) end customers?
There are a few things that influence this. For example, how’s it going to be sold? Is it through an intermediary, or direct to customers?
You could do research with end customers who (naturally) say if they were buying something they’d like something simple, with no health questions. But if the distribution for that product is intermediaries who choose products based on factors like price and comprehensiveness of the product, then that research may be of limited value.
Broadly speaking if it’s a product that’s to be sold through intermediaries, we’d do research mainly with intermediaries who know their customers well and have a deep understanding of the problem that they’re trying to solve for them. If it was a direct to customer product, the focus would be more on the customer’s needs, the buying journey, their understanding and making sure they get the right outcome.
How new or established a product and market is would also be a something we’d take into account.
We shouldn’t forget testing literature on customers too, particularly with the incoming Consumer Duty requirements. With My Sick Pay we tested our Terms and Conditions on everyday people to check they could understand everything – including a child!
How important are reinsurers in i) product design and ii) pricing?
We don’t currently use reinsurance for our products.
My past experience is that reinsurers add a lot of value to our industry. They have access to vast amounts of data, often global, which helps with decision making. They’re often happy to be part of the creative process. In a previous job, I remember a reinsurer lent us one of their actuaries who sat in our offices to help build a pricing model for a new product, when the pricing team was at capacity. What a help.
It’s true that not using reinsurance can mean you can do some things differently. But their access to big data and often an appetite to test and learn in new areas also helps the industry to move forwards and try new things.
Do you regularly use outside consultants in the product design/update process? If so, for what?
No, product design is done in-house. As is our marketing and literature.
We’re income protection specialists, not generalists, so there’s really no excuse not to have a deep knowledge of our market and what we do. The only exception would probably be something technical. For example maybe something new around technology or pricing.
What do you see as the top three product design trends in your markets?
Firstly, there’s been a big focus on making underwriting IP easier, partly driven by technology providers. Underwriting engines have become more optimised, straightthrough rates increased, journeys shortened, indicative outcomes provided etc. Basically ways to squeeze out more efficiencies from the current model and help intermediaries work in a more optimal way.
Secondly, there is an increasing recognition that traditional income protection was built on the idea of people working with a regular steady income. But the gig economy and others ‘earn as they work’ in a more flexible and diverse way. We’ve seen a few new approaches around this.
There’s also a lot of insurtech and fintech companies emerging, targeting certain groups of customers and demographics through digital distribution. Traditional products and journeys don’t really meet their needs. So I expect to see more flexible products, tailored for specific distributors and their markets, start to emerge in time.
What are the three biggest constraints when it comes to developing new or updated products?
Change capacity vs. ambitions, competing priorities and budgets are just a fact of life in financial services, so I’d be lying if I said they weren’t a consideration!
Secondly, I’m going to say the industry can be uncompromising. For example, we keep saying we want things to be simpler, quicker and more accessible to more people. But to achieve that there is usually going to have to be a compromise on price or level of cover.
But distributors’ compliance and advice processes are often uncompromising and rigid. Often geared towards how comprehensive a product is or the price.
And if something is new and different, can it fit in? I remember once doing a product where a distributor couldn’t sell it because advisers had to compare it against two other products, and it was too different to compare.
As well, the industry tends to reward ‘bells and whistles’ over simplicity. Perhaps without questioning how often they are rung or blown.
The alternative of ‘ploughing your own furrow’ and taking something new direct to customers would be a tough ask. Nobody really wakes up in the morning thinking ‘I could really do with some IP’. Most people don’t know what it is, or where to get it, it’s generally sold not bought.
So we’re stuck in a bit of a vicious circle. To really grow IP to hundreds of thousands of sales a year, as an industry we’re going to need to find different ways to sell it, integrated into people’s daily interactions. Maybe insurtech will achieve that in time.
Thirdly, I’ll go for ‘data’. The big challenge in doing something new – really new – is lack of data. What will happen if we do XYZ which has never been done before? To do something really new requires a certain level of risk appetite, which (especially with a long term contract) is not always possible.
Are third party/value added services becoming more important or has this about reached its peak?
It depends on what it is. We’re doing some research with advisers on this soon and we’ve talked to our members in the past.
We use a number of companies at claim that help where the NHS is either slow to act, or can’t help. Plus things like three way translation services at claim.
There are some great services out there, but also some which sound good on paper, then you find out they’re only used by a handful of customers, even when working with large insurers.
The regulator is increasingly focused around delivering value for money, so if we add something at a cost to everyone we have to be confident it’s going to deliver value and be used.
As an industry, we’re probably at a very early stage in terms of the technology and services available. New, innovative services will emerge in future that will help close the loop between general health, wearables, personal data and insurance in a more meaningful, integrated way without feeling like a bolt-on.
Martin Sincup, Head of Marketing and Propositions, Holloway Friendly