Composite insurance: changes in time-to-market requirements

Product life cycles are getting shorter! Not just for electronics or clothing, but also for insurances. Customer requirements with regard to the coverage of risks are also constantly changing and follow the changing living conditions. For example, there was little need for battery and charging cable coverage for electric or hybrid vehicles in motor insurance just a few years ago. However, this has changed. Today, customers of electric or hybrid vehicles expect benefits in motor vehicle insurance that did not exist before.

In addition to the increasing speed of changes in risk coverage requirements, insurance customers are increasingly operating in a transparent market due to online comparison portals.

These two aspects make a shorter time to market imperative for insurance companies and may even provide competitive advantages. But how can this be achieved and why is it important for composite insurance companies to accelerate technical product development in particular?

The product development of the past

In consultation with the sales department, actuarial department and management, the employees responsible for product development in the respective line of business have defined the essential benefit components of a new tariff or even a new and innovative product.

The following three steps were then initiated:

• Development / revision of the texts in the insurance conditions for the future tariff
• Calculation of actuarially required prices in consultation with the sales department
• Evaluation of the necessary resources for the technical mapping of the tariff and any necessary adjustments in the inventory management and claims system and, if necessary, the technical mapping of the tariff in the print system.

The latter point regularly presents insurance companies with challenges in terms of speed and flexibility.

In insurance landscapes based on the Cobol programming language, for example, new tariffs / new products are programmed directly into the systems in order to be able to map them there. This ties up extensive developer resources, which are increasingly scarce and are actually needed for topics that generate direct customer benefits. The development usually takes several months and is complex due to various dependencies in the systems that have grown over the years.

In addition, the systems have restrictions due to their basic architecture. These restrictions are often due to the fact that new products no longer fit into the previous "classic" divisional landscape and separate solutions have to be found for them.

Furthermore, a new product including the tariffing features must be mapped in all online calculators. Especially in the case of aggregators, the restrictions, complexity and long return times (performance) mean that they may have to be used or must be duplicated.

Product development with modern systems

So what is the solution to the above challenges?

• Insurance companies need systems with which products can be modelled by means of a graphical interface rather than being programmed (low code / no code). A defined attribute budget is determined for this purpose, which can be extended at any time. In addition, tariffs can be applied to each attribute to generate a price. By moving away from programming to modeling tariffs, individual service components can be copied and reused. The product modeling is done by the product development specialists, which saves developer resources.
• The restrictions in the basic architecture can be lifted with an inventory management system that dynamically follows the selected product completely in the mapping and query of the necessary pricing characteristics. Thus, during the application and bidding process, the inventory management system adopts the pricing characteristics modeled in the selected product/tariff and the attributes available for selection. With the introduction of new products/tariffs, it is therefore no longer necessary to make adjustments to the inventory management system.
• The flexible connection to aggregators can be done by the modern product modeling system, which has a single computational core. Here the tariffs defined by the insurance company are "delivered" by means of a distributable calculating engine and thus even short-term changes in the tariff can be mapped immediately in the online calculator. A Java artifact is generated from the modeled product/tariff, which can be integrated into any system. By using the distributable calculating engine, this can be used as a product server. In this way a "single point of truth" is achieved.

Why product development and a shorter time to market are so important, especially for composite insurance companies.

In a European comparison, Germany is one of the markets with the most competition in the insurance environment. This is increasingly putting insurance companies under not only price and efficiency pressure, but also pressure to innovate in terms of offering new and innovative products. Insurance companies that can not only quickly identify a customer need, but also cover it with their offering, have a competitive advantage.

Composite insurance companies serve the needs of private customers most strongly and at the same time have the highest diversification in classes, products, tariffs and individual tariff components. In concrete terms, this means product development that is under constant time pressure simply because of the mass of products. For example, various homeowners, householders, liability, accident and legal protection products are being developed at the same time. A fast time to market can therefore only be made possible with modern systems through which the ideas can be implemented quickly.

The circumstances described therefore lead to only one conclusion: in order to maintain the competitiveness of composite insurance companies, it is necessary to switch from product programming to product modelling by means of systems with a distributable calculating engine.

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Do you want to proactively shape digital transformation and achieve shorter time to market cycles? Then feel free to contact our expert Karsten Schmitt.