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4 Key strategies to gain product agility and to respond faster to new market opportunities
Commoditization is a major trend in the insurance industry. It is largely driven by the digital revolution – technological innovations and the wide-spread availability of these innovations to consumers at large. A concrete example of this commoditization trend is the increased number of aggregator sites appearing in in all types of consumer-facing markets, including insurance. These sites are targeting consumers who are looking for the “best buy” and they deliver exactly the transparency that consumers are demanding.
Commoditization means that insurers are now often forced to compete on features and price as opposed to value. Margins become lower, resulting in increased cost pressure and eroding profits – not an attractive business scenario. In order to overcome the threat of commoditization insurers need to revise product strategies to gain product agility. Here are four key strategies you can apply to address the commoditization challenge.
Strategy 1: Simplify and differentiate
Consumers often complain that insurance products are hard to understand. Yet internally, insurers are struggling with product proliferation, complexity and hard-coded legacy products. This makes it difficult for insurers to have an overview of their product portfolio across product lines and silo’ed systems. A way around this conflict of interest is to move towards fewer internal “source” products and versions. These can then be combined and configured into a range of customized solutions that meet the needs of a diverse customer base.
How to simplify and differentiate:
Instead of having to create new products from scratch for different channels, segments or brands, you can create re-usable “building blocks” at various levels of the product definition. This enables you to efficiently define new products that fit their purpose based on common components. No more cloning a base product to make a variant when you can instead apply context-relevant rules or attributes that tailor how the product appears, for example by channel, by price or by customer segment.
Strategy 2: Develop pricing control
It is important to sell your product at the optimal price. Both over-pricing and under-pricing needs to be minimized to avoid lost premiums or lost profits. The core challenge for an insurer is to accurately match rates with risk. The more easy and routine it is to analyze customer data, while at the same time conducting competitive market analysis, the more you will be able to establish surgical precision in your pricing across product lines.
How to develop pricing control:
Differentiate your pricing by using as many tariff parameters and internal and external data points as needed to price as correctly as possible. Make this less of a burden for your customers by simplifying the customer experience and defaulting most tariff parameters. Use intelligent scripting in the dialog with the customer and design object screens that are user friendly based on the customer segment and the interaction channel used.
Strategy 3: Respond faster to market demands
In a commoditized market environment, insurers must be able to respond to new business opportunities or react to competitive advances fast, often by inventing new products or changing existing product offerings and pricing. Insurers are being held back by legacy IT, lack of up-to-date product performance data and process inefficiencies.
How to respond faster:
Simplify the product maintenance process by applying re-usable concepts with increased process and deployment support. Let business users take over most of the product maintenance process and simplify the IT landscape. This enables users to make fact-based decisions through improved capabilities for business intelligence and simulation, as well as discount management.
Strategy 4: Conduct needs-based selling
Another frustration point insurance customers often have is the lack of reliable advice when they are selecting a policy. This is often caused by inflexible systems and user interfaces that are not designed to guide customers. There can be no doubt that by being able to conduct needs-based selling and configure a product to match an individual’s requirements during the sales process, allows you to drive more new sales and stimulate up-sell and cross-sell.
How to conduct needs-based selling:
Being able to tailor products based on customer needs is an efficient way to differentiate. Often tailoring has been done in a time-consuming manual way, eventually resulting in product proliferation and an increasingly complex and rigid IT platform. To get around this you must simplify the IT platform by integrating needs-analysis tools with the core system and leverage re-usable product concepts. Guiding customers in an intelligent way with the help of a pre-defined script, increases sales productivity. Identifying needs and leveraging rules and data to propose “best-fit” product suggestions, that allow the customer a relevant choice, will improve the customer experience dramatically.
Product agility is key to success
In summary, there are several key initiatives that you can undertake to address the commoditization challenge and they all revolve around your product strategies. Achieving product agility within your organization translates into a better business performance, allowing you to gain new business, sell more to current customers, improve profitability, simplify product management and reduce reliance on IT resources. So if you want to succeed in today’s insurance market, make sure you take steps to get started on building the right product strategies.