Designing for Product Agility: Where Should Insurers’ Products Live?

by Craig Beattie, July 17, 2013
Industry Trends
Global

Abstract

Celent describes distinguishing factors in addressing product change and adopting product engines. We also discuss the benefits and concerns associated with these approaches.

Insurance product complexity is grounded in operating model complexity and system complexity. In other words, insurers have adopted lots of systems and models for change over time and have run them in parallel. These systems tend towards entropy—if they aren’t managed towards simplicity, they grow in complexity over time. It is in examining the systems (people and IT) that change products that we understand the complexity of those products: the sources of cost, and the inhibitors to change.

In the report Designing for Product Agility: Where Should Insurers’ Products Live?, Celent examines the nature of individual insurance products, libraries of products, and the drivers that lead to different schemes for managing insurer products. Celent further provides some tools to help insurers understand their unique requirements for product engines and how they should select one.

“Just as insurers differ in the definition of insurance products, so their structures differ to reflect their priorities. Assumptions about where product components sit and their relative priority in terms of frequency of change define the DNA of the insurer,” says Craig Beattie, Senior Analyst with Celent’s Insurance Group and author of the report, “It is strategically important to understand the current position of the insurer as well as where the insurer wants to be. Appropriate assumptions about product components allow insurers to respond effectively to changes in the market.”

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

Insurer Agility and the Insurance Product

2

The Components of an Insurance Product

4

 

Product Components—Fast and Slow

5

Product Change Across Many Products

7

 

Product Change and the Case for Reuse

7

 

Types of Product Relationships

7

 

Nature Vs. Nurture: Innate Structure Vs. Tooling

9

System Complexity and Product Complexity

10

 

Where Is the Product?

10

 

The Decentralised Product

10

 

Sample Insurer Case Study 1

12

 

Sample Insurer Case Study 2

14

Where Does the Product Engine Fit?

16

 

The Centralised Product Engine

16

 

Each Component in Its Place

16

 

Position for Ease of Management: Fast Components Require Fast Systems

17

 

Where Does It Fit?

18

Implications

19

 

The Insurer Perspective

19

 

The Vendor Perspective

20

Conclusions

22

 

Celent View

23

Leveraging Celent’s Expertise

24

 

Support for Financial Institutions

24

 

Support for Vendors

24

Related Celent Research

25

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