Life and health insurance product development can be extremely rewarding for both insurer and consumer if done right.
Handling product development the right way, however, is very challenging. Too often, insurers face obstacles in meeting customer needs over other considerations such as launching a product to outperform the competition or incentivizing distribution via commissions. Coupled with the fact that the shelf life of an insurance product is often short, the typical approach to product development may lower consumer confidence in insurers and the industry.
How can insurers and reinsurers develop customer-centric life and health insurance products that can also help the industry? Design thinking1,2 could be the answer.
There are five basic phases of design thinking3 methodology that can be applied to developing life and health insurance products.
Since the process is iterative and non-linear, it is possible to return to a preceding principle before completing development.
The phases include:
- Empathize with the customer
- Define the problem
- Ideate
- Prototype
- Test
Phase 1: Empathize with the customer
Human beings’ capacity for empathy is one of our most admirable qualities. Product innovators and designers should ensure empathy is kept at the center of design and development. This means putting real customer needs above all.
The key to success for any new product — be it insurance or otherwise — is that it serves the real needs of its target consumers and that they realize the product’s value enough to purchase it.
If product design and benefits are so technical that most laypeople do not understand them, chances are the resulting insurance product will become another push product with a short shelf life.
Feedback from real target consumers through Voice of the Customer (VOC) programs is a great way to identify market needs. When planning VOCs and/or focus group discussions, all elements – from the questions asked to the information sought – need to be thought through. Most importantly, the objective of the exercise should be crystal clear.
Feedback on distribution is equally vital but should be validated from actual target consumers. Influential distribution partners (agents, affinity partners, etc.) often demand a “product” that serves a channel’s interests more than end consumers.
Phase 2: Define the problem
Empathy leads to understanding and the ability to articulate nuances of target consumers’ real needs in a problem statement. The best way to create this statement is to ask questions, such as:
- What are customers’ pain areas?
- What are their key drivers for purchasing insurance?
- What challenges do they have with existing insurance products?
- How likely are they to buy an insurance product should the benefits meet their expectations or needs?
- If they were to buy insurance cover for themselves and/or their family – what is the optimal premium price point?
Phase 3: Ideate
With the problem statement defined, it is time to start looking for possible solutions. There could be many solutions to the same problem.
Ideation can happen in various ways – brainstorming, focus group discussions, consultation with experts, etc. The primary objective in this phase should be to explore all possible solutions rather than narrowing down to one right away. Since the design thinking process is iterative/non-linear rather than linear, it is important to validate and reconfirm customer needs with proposed solutions before selecting the best option.
See also: Beat the Brainstorming Blues
Phase 4: Prototype
After identifying possible solutions, narrow them down to the one or two that best fit the objective. Develop a working product prototype(s) covering possible variants. The prototype(s) should help address all the gaps identified as well as meet end customer needs. Once complete, test within the team or across other teams and departments to gather feedback and fine tune.
Phase 5: Test
Finally, test the prototype with a sample of target consumers through individual feedback or focus group discussions. Every attempt should be made to extract comprehensive feedback on features, design, marketing, price point, and coverage, as well as whether consumers are able to relate to the product.
The keys to success are to experiment, understand the consumer needs clearly, develop appropriate solutions quickly, and be courageous enough to test, fail, adapt, and learn.
By placing the end customer at the center, the resulting paradigm shift in insurance product development could result in rapid business growth and greater insurance penetration.
Below are a few suggestions for consciously keeping the end customer as the central focus – a win-win formula for insurance product development:
- Ease of onboarding
- End-to-end digital process and infrastructure for seamless sales-to-issuance experience
- Leveraging data/customer information to pre-populate forms and application materials (subject to applicable data privacy and protection laws)
- Simpler underwriting questions
- Using behavioral science strategies to design underwriting questions from a layperson’s perspective and factoring in cultural influences to improve customer understanding and facilitate disclosure
- Asking relevant and reflexive questions by tapping into consumer data across the value chain and using technology to aid in risk segregation
- Marketing/sales pitch
- Simpler brochures and interactive/gamification on digital applications
- Guidance for distributors on how to handle objections
- Claims handling
- Using machine learning techniques for identifying “red flags” or supporting a robust automatic claims approval process
Closing the insurance coverage gap will require abandoning the status quo for new processes and new ways of thinking. In the area of product development, applying design thinking could be a vital step in making that happen.
At RGA, we have tailored a design thinking framework specific to life and health insurance innovation called Life Design Sprints. Through this step-by-step process, we collaborate with our clients globally to hypothesize, validate, and test innovative ideas and bring new industry-specific products and solutions to market. Life Design Sprints deliver concrete, market-tested output shaped by a well-defined customer problem – all in a matter of days versus the weeks or months typical of product testing.
