The Pursuit of Insurtech – Product Management »

Imagine a world without insurance products, life as we know it would be a lot scarier because many things that we take for granted every day would be exposed to financial dangers such as:

  • Driving a Car – would be a huge financial risk for most people. A minor crash could result in thousands of dollars in damages and even more if someone gets injured or dies.
  • Building a Skyscraper – would be impossible as no worker would want to risk their life and the livelihood of their family.
  • Travelling Abroad – would not be as enjoyable because of the constant thought to play it safe. How much money would you need to set aside in case you go to hospital?

Luckily for all of us, insurance companies have been busily building new insurance products every day to meet our changing lifestyle.

Where did it all begin?

The idea of protecting ourselves against unforeseen events is not something new. If we slide through history, we will see that the Insurance has been around since 3000 BC and insurance products has been adapting to the changing world. For example, after the Great Fire of London, Fire Insurance was developed. Fast forward to today, Fire Insurance is more commonly known as Home Insurance and covers much more than just fire.

  • 3000 BC

    Chinese merchants who had to travel treacherous waters would divide their items among several ships to limit the loss of goods.

  • 1750 BC

    The Babylonians developed a system which was recorded in the famous Code of Hammurabi and practised by early Mediterranean merchants. For more, see our article History of the risk free world – Part One

  • 550 BC

    The Persians developed the idea of personal insurance. For more, see our article History of the risk free world – Part One

  • 200 BC

    Greeks and Romans introduced the origins of health and life insurance. For more, see our article History of the risk free world – Part One

  • 1347

    The first insurance contract was written in Genoa. For more, see our article History of the risk free world – Part Two

  • 1667

    The first insurance company was set up because of the Great Fire of London. For more, see our article History of the risk free world – Part Two

  • 1897

    The first car was invented in 1886 and not long after the first car insurance policy was written in 1897.

  • 21st Century

    There are thousands of insurance products covering all sorts of things such as: life, income, mortgage, pet, cyber, gadgets etc.

  • The Future

    Changing Technology and consumer behaviour will reshape the types of risks we will be insuring in the future. We will be insuring our personal robot? Let us know what you think!

    What is an Insurance Product made of?

    An Insurance product can be broken down into the following five key components:

    refers to the underlying item that we want to protect.
    Sum Insured
    refers to the coverage amount.
    Risk Event
    refers to the risks or claimable event that we want to protect against.
    Cover Period
    refers to the period of time that an item is protected.
    Customer Service
    refers to the additional services on top of the insurance product to improve customer engagement and experience.

    How can Insurtech reshape Insurance Products?

    Insurtech can reshape the future of insurance products by accelerating the rate of product development, opening new markets and taking products to the next level. Now let us look at some of the trends for each product component and understand how insurtech can help.

    The Insured Component
    The insured item is evolving
    As technology evolves, so are the items we are insuring. For example, the invention and adoption of drones have seen an increase in customer demand for drone insurance. As a result, this has opened a new market for insurers to grow their business and expand their customer base. Some examples where Insurtech can help include:

    • The usage of data stored in IoT to build better risk models.
    • Improving the speed to market and reducing the cost to deploy products by using new configuration-based product editors that require minimal coding.
    IoT as a Rating Factor and/or Premium Variable
    With electronic devices becoming cheaper and connected to the internet, insurance companies are increasingly looking into how IoT can be used as a rating factors to better assess risk and to provide more competitive premiums to their customers. Some opportunities where Insurtech can help include:

    • Using new Big Data and Data Analytic techniques to churn through large data sets recorded on IoT devices. Will we see a rise in the adoption of real-time rating factors such as current weather conditions?
    • Adoption of microservices architecture to ensure maximum reusability of functionality such as pricing which is used at various stages of the insurance process. For example, quotes provided by agent and/or aggregators, premium billing, policy renewal, policy cancellation etc.
    Simplification & Personalisation
    As tech giants such as Google raise the digital capability bar, so are customers from a digital expectation perspective. Customers today, are demanding a simpler insurance experience with a touch of personalisation.

    This is somewhat of a juxtaposition as simplification is associated with reducing the number of options, whereas personalisation is associated with providing more options so that the customer has more choice and control. Finding the right balance is a fine art and this is how insurtech can help:

    • Simplifying the insurance application process by using web-enabled underwriting systems which can provide a response to customers immediately. If done the service-oriented way, this same functionality should be reusable by other sale channels and/or insurance processes such as mid-term adjustments.
    • Converting paper applications into digital online forms: to enable pre-population of fields based on social media accounts, to optimise the number of fields that the customer needs to review, to reduce business response times etc.
    • Provide personalised offers and/or recommending product options based on social media accounts and customer web analytics.
    • Through their digital experience learnings from Fintech and Retail tech, technology companies can bring the right balance of simplification and personalisation experience to the same customers but for the insurance industry.
    The Sum Insured Component
    Lower Value Insured Items
    In a society where we are living from pay check to pay check, insurance for low-value items has become popular. Today you can buy Price Protection insurance for airfare costs with premiums as little as $19 and Extended Warranty insurance for small electronics starting from $10. These insurance products allow customers to protect their “Live For Today” lifestyle without needing to worry about saving money for a rainy day. Some example where Insurtech can help include:

    • The usage of robotic process automation to reduce the costs of administering such product and to make it a more viable business proposition. Imagine telling your shareholders that the business was paying a claim agent $40/hour to process a $1 claim which takes 1 hour to process.
    • The adoption of service-oriented systems to create competitive advantage by achieving lower IT costs, increase business agility, improve automation opportunities etc.
    Variable Sum Insured
    The sum insured for insurance products is getting more sophisticated. Sum Insureds are no longer just fixed dollar amounts but is increasingly being linked to other things such as a loan balance, an overarching policy limit, Life Stages event (i.e. automatically increase your sum insured when you have a baby or turn a certain age) etc. As the world becomes increasingly connected, will sum insured amounts in the future be linked to real-time markets such as the Bitcoin or the stock market? Some opportunities where Insurtech can help include:

    • The adoption of service-oriented systems to expose and reuse internal functions such as calculating the remaining policy limit.
    • The adoption of service-oriented systems to automate information flow of high-value fields between systems.
    • New ways of working to optimally track sum insured without performing the traditional policy mid-term adjustments which may trigger downstream processes such recalculation of premiums, accounting transactions, customer communications etc.
    The Risk Event Component
    New Event Types
    The type of risk events we are insuring against is vastly different to that of 25 years ago. The invention of the internet which went live to the world on 6th August 1991, created an opportunity for businesses to connect with their customers in a new way but also exposed them to new risks such as cyber attacks. Today, Cyber Insurance is a growing insurance market. Some opportunities where Insurtech can help include:

    • The usage of new data analytics tool to build improve risk models.
    • The usage of Big Data to extract unstructured data from the internet and transform it into a structured format that can be used by internal teams to understand risk trends.

    Did you know – Cyber Insurance is on the up!

    The market for cyber insurance product is increasing daily. Here are just a few reasons why:

    • In 2016, 1 billion Yahoo accounts were hacked, requiring users to change their passwords. (Oath)
    • In 2016, 600,000 driver’s licence details and 57 million Uber user personal information was compromised. (Uber)
    • In 2017, 2.4 million customer details such as names and partial driver’s licence information were stolen. (Equifax)
    • In 2017, 5.4 billion WannaCry attacks were blocked. (Symantec)
    • In 2018, 1 million computers were infected with the ransomware Nyetya. (Cisco)
    The Cover Period Component
    Shorter Cover Periods
    The policy cover period is getting shorter and more flexible. Traditionally insurance has been about providing coverage for a pre-agreed fixed period (generally years or months). More recently, companies such as Trov have changed the dynamics by giving customers more choice and control over how they can insure single items. Trov customers can insure a single item whenever they want and for however long they need. Insurtech can make such concept possible by:

    • Providing a platform to enable new ways of working which cannot be done optimally in legacy systems. For example, with on-demand insurance you may want to calculate premiums based on events or variables that can only be determined after the policy has been issued whereas some legacy systems require premium to be calculated at the time of issuing a policy. Obviously one can attempt to modify the core system but it may eventually cause other downstream bottlenecks as the original system was not designed to work this way. Interestingly, the shorter cover period may have synergies with real-time rating factors as both require premiums to be calculated more frequently.
    The Customer Service Component
    Increasing Customer Engagement
    Historically, insurance has had low customer engagement and the most common engagement, premium collection, is often perceived to be a negative one. To change the customer’s perception of insurance from “a product that takes and never gives back” to one of understanding the value of insurance, insurers are increasingly looking into providing additional services such as:

    • Lifestyle Apps i.e. to provide discounts at retailers, health well-being tips etc.
    • Building Customer Portals & Chat Bots to provide a 24/7 service.
    • Using social networks as an alternative customer service channel and to share useful information with their customers.

    By providing these positive digital engagements, insurers can also build their brand loyalty and increase the likelihood of the customer re-doing business in the future. Insurtech can make such digital engagement possible by:

    • Becoming a technology partner. This allows insurers to tap into these digital capabilities without needing to invest large upfront amounts to build it.
    • Providing Cloud-Based IT services with these capabilities to lower costs, provide scalability and flexibility etc.

    How to Pursue Insurtech?

    In general, an insurtech solution should not be viewed in silo but instead viewed as a building block in conjunction with other insurtech solutions to unlock further synergies and competitive advantages. It is definitely not easy to predict which insurtech trend will be the next “Big Thing” but diligent customer research, business strategy and enterprise architecture can provide stakeholders with valuable guidance!

    The best we can do is size up the chances, calculate the risks involved, estimate our ability to deal with them, and then make our plans with confidence.

    Henry Ford

    Before you start pursuing your insurtech journey it would be a good idea to review your architectural landscape to determine whether your IT ecosystem is suitable and/or if it’s better just to start from scratch. Think of it as good town planning, you don’t want your town (IT ecosystem) to be created with ugly systems and traffic congestions.

    If time and money was not a factor, then the most obvious place to start is with a product management tool. You may be asking why? Well, while working on various insurance sites, 3CA would commonly see insurers using a different system for different insurance processes. For example, Online Website, Customer Portal, Sales System, Marketing System, Pricing Engine, Premium Billing System, Policy Administration System, Claims System, Reinsurance System, Accounting System, Document Management System etc.

    What became obvious was that insurance products were becoming more sophisticated as insurers wanted to differentiate their products from their competitors. Slowly over time more and more product specific attributes were being embedded into different subsystems each with its own way of storing product information. After several years of product revisions, new products and key staff coming and going, the remaining staff found it difficult to reconcile these products. Common problems included but not limited to:

    • Matching the product version from one subsystem to another subsystem.
    • Matching the product version from one subsystem to the PDS revision issued to the customer.
    • The same insurance product had different names in each of the subsystems
    • Over time as more and more product enhancements were made, staff found it difficult to identify all the product customisation touchpoints. As a result, product parameters became out of sync and people lost sight of what is correct!

    In the future where insurance products will be evolving at a faster rate to meet changing customer demand, it may be ideal to set up a central product management system first. Conceptually, the product management system will house all the product parameters such as rating factors, benefits, PDS etc. and become the source of truth. It can then be referenced by all other subsystems via a global product ID. Think of it as a library catalogue where the catalogue is the product management tool and the books are the products. Without the catalogue, finding a specific book would be difficult, time-consuming and a waste of resources.


    Peter Tugby

    Managing Director 3CA

    Robert Lee

    Principal Consultant 3CA

    What’s Next?

    Traditionally the manufacturing of insurance products has been primarily performed by insurers with some help from reinsurers. However, as insurtech reshapes the insurance distribution model, will the role of product manufacturing shift to a new player? Stay tuned for our next article “The Pursuit of Insurtech – Product Distribution”

    Over the coming weeks, 3CA will be releasing the additional articles as part of our “The Pursuit of Insurtech” series:

    • The Pursuit of Insurtech – Product Distribution
    • The Pursuit of Insurtech – Customer Service

    If you like this article or would like to know what product management tools are out there, please contact:

    Peter Tugby

    Managing Director 3CA
    0404 521 018


    © Copyright 2019 3CA PTY LTD

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