Spurred on by rapid technological advancements, the insurance industry is facing a pivotal moment where traditional products can no longer meet consumers' rapidly evolving needs. During a PIMA 2024 Summer Insights Conference session titled "Balancing Risk and Opportunity in Launching New Products," moderated by Christin Kuretich, VP of Supplemental Products at Voya Financial, speakers Glenn Tobleman of Lewis & Ellis, and Stacy Koron of First Consulting & Administration emphasized the crucial role of innovation for insurance providers.
They highlighted that to stay competitive, insurers must develop products that go beyond the conventional, addressing regulatory standards and providing real value to customers. The rapidly changing market demands innovative insurance products and solutions that can adapt to new risks and consumer expectations, ensuring that insurance offerings remain relevant and effective.
The Need for New Insurance Products
For years, the insurance industry has relied on tried-and-true products, often resulting in stagnation. In the wake of the digital age, traditional products are proving inadequate as consumer needs evolve and new risks emerge. There is a growing recognition of gaps in the market that need to be addressed through innovative solutions.
New technologies, changing demographics, and shifting consumer expectations have created a demand for insurance product development that addresses contemporary issues. To effectively develop these new products, it is essential to integrate compliance, actuarial, and product teams from the outset.
This collaborative approach, referred to as the "product development triangle," ensures that new products are innovative, compliant with regulatory standards, and financially viable. During the panel, industry leaders discussed several real-world case studies to illustrate the practical applications of the product development triangle. The following are a few of their examples:
Case Study 1: Comprehensive Supplemental Health Coverage
Problem: High Claim Denial Rates
The panelists highlighted the issue of high claim denial rates that have historically occurred in critical illness and other supplemental lines of coverage. Consumers often found that their specific health conditions were not covered, leading to dissatisfaction and financial strain.
Solution: Development of a Comprehensive Supplemental Health Product
To address this issue, a company developed a comprehensive supplemental health product that covers 13,000 ICD-10 codes. This extensive coverage significantly reduces the likelihood of claim denials and provides consumers with broader protection.
Challenges: High Costs and Regulatory Hurdles
While the product offered extensive coverage, it also came with high costs, making it less affordable for many consumers. Additionally, navigating the regulatory landscape to get approval for such a comprehensive product was complex and time-consuming.
Outcome: Initial Market Response and Lessons Learned
The initial market response was cautiously optimistic. Although the product addressed a critical need, its high cost limited widespread adoption. This experience underscored the importance of balancing comprehensive coverage with affordability. The company continues to refine the product based on market feedback and aims to find a better balance between coverage and cost.
Case Study 2: Landlord Insurance
Problem: High Insurance Costs
During the session, panelists shared insights from another significant case study on landlord insurance. They explained how many landlords, especially those with smaller properties, faced prohibitively high insurance costs. These obstacles made it difficult for them to maintain affordable rental rates, creating a barrier to entry for many potential landlords.
Solution: Grouping Landlords as an Affinity Group
To address this issue, the solution involved grouping landlords into an affinity group. By pooling their risks and resources, these landlords could benefit from economies of scale and reduced insurance costs. This approach also provided more consistent and affordable coverage options for landlords.
Challenges: Compliance and Actuarial Considerations
Ensuring compliance with regulatory standards and accurately pricing the risk within this affinity group presented significant challenges. Panelists emphasized the importance of early involvement of compliance and actuarial teams in navigating these complexities and avoiding market conflicts.
Outcome: Successful Implementation and Market Uptake
The affinity group model was successfully implemented, resulting in more affordable insurance options for landlords. This model helped landlords manage their properties more effectively and led to positive market uptake. The success of this model demonstrated the value of collaboration between compliance, actuarial, and product development teams in creating innovative insurance products and solutions.
Case Study 3: Financial Support for IVF and Adoption
Problem: High Costs of IVF and Adoption
During the panel, panelists discussed a unique case study involving the high costs and financial risks associated with in-vitro fertilization (IVF) and adoption. They highlighted how these financial burdens often deter individuals and couples from pursuing these family-building options.
Solution: Development of a P&C Product
While on the surface, coverage related to IVF seems to be a health issue, the product design team understood that, in many cases, the need for IVF was not triggered by a health event, and the risk was more of a financial variety. To address this risk, a new property and casualty (P&C) product was developed to provide financial support for individuals undergoing IVF. This product offered refunds for failed IVF attempts, thereby reducing the financial risk for those seeking to build a family through this method.
Challenges: Pricing and Regulatory Compliance in Insurance
Pricing this innovative product accurately and ensuring it met regulatory standards were major challenges. Panelists emphasized the importance of gathering comprehensive datasets and involving actuarial teams to develop a viable pricing model. Additionally, navigating the regulatory landscape to ensure compliance was crucial for the product's success.
Outcome: Market Introduction and Evaluation
The product is being introduced to the market and is currently being evaluated. Initial feedback indicates that the product meets a critical need, although ongoing assessments are necessary to refine its effectiveness and affordability. This case study underscored the importance of integrating compliance and actuarial insights early in the product development process to create innovative and compliant insurance solutions.
Case Study 4: Mental Health Coverage Integration
Problem: Lack of Mental Health Coverage
The final case study discussed during the panel focused on the lack of mental health coverage in traditional supplemental health products. Panelists highlighted the growing need for comprehensive mental health coverage, given the increasing prevalence of mental health issues and the significant gaps in existing insurance products.
Solution: Comprehensive DSM Coverage
To address this problem, a product was developed to provide comprehensive coverage for all conditions listed in the Diagnostic and Statistical Manual of Mental Disorders (DSM). This approach aimed to offer broad coverage and support for individuals with a wide range of mental health conditions.
Challenges: High Product Cost and Low Market Adoption
While the product addressed a critical need, it also resulted in excessive costs and lower payouts, making it less affordable and less impactful for many consumers. Additionally, educating the market and achieving widespread adoption was a formidable challenge. The panelists discussed the difficulties in balancing comprehensive coverage with affordability and market acceptance.
Outcome: Ongoing Refinement and Lessons Learned
The product's initial rollout revealed the need for further refinement. The high cost limited its market adoption, underscoring the importance of finding a balance between comprehensive coverage and affordability. The company is continuing to refine the product based on feedback and market response, aiming to improve its adoption and effectiveness. This case study illustrated the ongoing efforts to integrate mental health coverage effectively within insurance products and the lessons learned from initial attempts.
Innovation is Necessary for the Future of the Insurance Industry
The PIMA 2024 Summer Insights Conference provided a compelling look into the critical role of innovation in the insurance industry. Through the engaging session, it became clear that integrating compliance, actuarial, and product teams early in the development process is essential for creating effective and compliant insurance solutions.
Ultimately, the product development triangle will play a pivotal role in navigating the future of the insurance industry. By continuing to embrace collaboration and integration, insurers can create products that address emerging risks and meet the evolving needs of their customers. The future of insurance innovation is bright, and with the right strategies in place, the industry can look forward to a new era of growth and success.
PIMA® (Professional Insurance Marketing Association®) is a member-driven trade association focused exclusively on the affinity market.
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