66 PD, Product
                                           Development Process –
                                          ...
Process Overview
                                  From Product Ideas to Product Development Project

                    ...
Process Overview
                                  From Product Ideas to Product Development Project

                    ...
Process Overview
                                  From Product Ideas to Product Development Project

                    ...
Process Overview
                                  From Product Ideas to Product Development Project
                     ...
Process Overview
                                  From Product Ideas to Product Development Project

                    ...
Process Overview
                                  From Product Ideas to Product Development Project

                    ...
Process Overview
                                  From Product Ideas to Product Development Project

                    ...
Process Overview
                                  From Product Ideas to Product Development Project


                   ...
Process Overview
                                  From Product Ideas to Product Development Project

                    ...
Process Overview
                                  From Product Ideas to Product Development Project

                    ...
Potential – Road Hazards
                                ♦ Lack of Senior Management Commitment to Priorities
            ...
Reinsurance Assistance
                                                          Rate Development

                       ...
Reinsurance Assistance
                                                         Additional Support

                      ...
Reinsurance Assistance
                                                       Not so successful story


                  ...
Additional areas that may be considered
                                  to help speed product development

             ...
Annuities bring some additional
                                      considerations for rapid product
                   ...
Roles played by consultants can help
                                       speed product development
                    ...
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San Antonio - The Product Development Process - Getting Your ...

  1. 1. 66 PD, Product Development Process – Getting Your Product to Market Quickly June SOA – San Antonio, TX Overview ♦ General Overview of the Life Insurance Product Development Process ♦ Potential Road Hazards ♦ Who can help – Reinsurance Assistance – Consulting Assistance ♦ Insight into the Annuity Product Development Process ♦ Questions? SOA 2004 San Antonio Spring Meeting - 66 PD, The Product Development Process - Getting Your Product to Market Quickly 1
  2. 2. Process Overview From Product Ideas to Product Development Project 1. Idea Generation And Filtration 2. Idea Approval and Priorities Set 3. Marketing and Financial Objectives 4. Pricing Iterations 5. Contract Drafting Rate Development Risk Analysis 6. State Filing Rate Delivery Marketing Plan 7. Monitor State Approval 8. Marketing Launch Product Training 9. System Implementation Process Overview From Product Ideas to Product Development Project 1. Idea Generation And Filtration 2. Idea Approval and Priorities Set 3. Marketing and Financial Objectives 4. Pricing Iterations 5. Contract Drafting Rate Development Risk Analysis 6. State Filing Rate Delivery Marketing Plan 7. Monitor State Approval 8. Marketing Launch Product Training 9. System Implementation SOA 2004 San Antonio Spring Meeting - 66 PD, The Product Development Process - Getting Your Product to Market Quickly 2
  3. 3. Process Overview From Product Ideas to Product Development Project 1. Idea Generation And Filtration Strategic Fit Competencies Profit Potential Sales Potential Resources Consumed Timing Is there something better Process Overview From Product Ideas to Product Development Project 1. Idea Generation And Filtration 2. Idea Approval and Priorities Set 3. Marketing and Financial Objectives 4. Pricing Iterations 5. Contract Drafting Rate Development Risk Analysis 6. State Filing Rate Delivery Marketing Plan 7. Monitor State Approval 8. Marketing Launch Product Training 9. System Implementation SOA 2004 San Antonio Spring Meeting - 66 PD, The Product Development Process - Getting Your Product to Market Quickly 3
  4. 4. Process Overview From Product Ideas to Product Development Project 2. Idea Approval and Priorities Set Project Benefits Impact of Not Doing it Scope Product Filing Illustrations Marketing Admin Systems New Business Process Overview From Product Ideas to Product Development Project 1. Idea Generation And Filtration 2. Idea Approval and Priorities Set 3. Marketing and Financial Objectives 4. Pricing Iterations 5. Contract Drafting Rate Development Risk Analysis 6. State Filing Rate Delivery Marketing Plan 7. Monitor State Approval 8. Marketing Launch Product Training 9. System Implementation SOA 2004 San Antonio Spring Meeting - 66 PD, The Product Development Process - Getting Your Product to Market Quickly 4
  5. 5. Process Overview From Product Ideas to Product Development Project 3. Marketing and Financial Objectives Targeted Competitors Sales Concepts Who does it well How do they do it. Who will sell it What makes a good product Profit Potential Identify Risks Risk Management Process Overview From Product Ideas to Product Development Project 1. Idea Generation And Filtration 2. Idea Approval and Priorities Set 3. Marketing and Financial Objectives 4. Pricing Iterations 5. Contract Drafting Rate Development Risk Analysis 6. State Filing Rate Delivery Marketing Plan 7. Monitor State Approval 8. Marketing Launch Product Training 9. System Implementation SOA 2004 San Antonio Spring Meeting - 66 PD, The Product Development Process - Getting Your Product to Market Quickly 5
  6. 6. Process Overview From Product Ideas to Product Development Project 4. Pricing Iterations Product Outline Checkpoint #1 Initial System Specs System Scope/Impact Process Overview From Product Ideas to Product Development Project 1. Idea Generation And Filtration 2. Idea Approval and Priorities Set 3. Marketing and Financial Objectives 4. Pricing Iterations 5. Contract Drafting Rate Development Risk Analysis 6. State Filing Rate Delivery Marketing Plan 7. Monitor State Approval 8. Marketing Launch Product Training 9. System Implementation SOA 2004 San Antonio Spring Meeting - 66 PD, The Product Development Process - Getting Your Product to Market Quickly 6
  7. 7. Process Overview From Product Ideas to Product Development Project 5. Contract Drafting Rate Development Risk Analysis Checkpoint #2 Product Design Tests Competitive Review System Specs System Design Risk Analysis Work Checkpoint #3 Process Overview From Product Ideas to Product Development Project 1. Idea Generation And Filtration 2. Idea Approval and Priorities Set 3. Marketing and Financial Objectives 4. Pricing Iterations 5. Contract Drafting Rate Development Risk Analysis 6. State Filing Rate Delivery Marketing Plan 7. Monitor State Approval 8. Marketing Launch Product Training 9. System Implementation SOA 2004 San Antonio Spring Meeting - 66 PD, The Product Development Process - Getting Your Product to Market Quickly 7
  8. 8. Process Overview From Product Ideas to Product Development Project 6. State Filing Rate Delivery Marketing Plan Actuarial Material State Variations System Building/Testing Product positioning Marketing Plan Process Overview From Product Ideas to Product Development Project 1. Idea Generation And Filtration 2. Idea Approval and Priorities Set 3. Marketing and Financial Objectives 4. Pricing Iterations 5. Contract Drafting Rate Development Risk Analysis 6. State Filing Rate Delivery Marketing Plan 7. Monitor State Approval 8. Marketing Launch Product Training 9. System Implementation SOA 2004 San Antonio Spring Meeting - 66 PD, The Product Development Process - Getting Your Product to Market Quickly 8
  9. 9. Process Overview From Product Ideas to Product Development Project 7. Monitor State Approval Objection Responses Product Positioning Competitive Review Marketing Materials Admin Testing Process Overview From Product Ideas to Product Development Project 1. Idea Generation And Filtration 2. Idea Approval and Priorities Set 3. Marketing and Financial Objectives 4. Pricing Iterations 5. Contract Drafting Rate Development Risk Analysis 6. State Filing Rate Delivery Marketing Plan 7. Monitor State Approval 8. Marketing Launch Product Training 9. System Implementation SOA 2004 San Antonio Spring Meeting - 66 PD, The Product Development Process - Getting Your Product to Market Quickly 9
  10. 10. Process Overview From Product Ideas to Product Development Project 8. Marketing Launch Product Training Roll-out Sales Systems Mailed Applications Transition Rules Field Reaction Process Overview From Product Ideas to Product Development Project 1. Idea Generation And Filtration 2. Idea Approval and Priorities Set 3. Marketing and Financial Objectives 4. Pricing Iterations 5. Contract Drafting Rate Development Risk Analysis 6. State Filing Rate Delivery Marketing Plan 7. Monitor State Approval 8. Marketing Launch Product Training 9. System Implementation SOA 2004 San Antonio Spring Meeting - 66 PD, The Product Development Process - Getting Your Product to Market Quickly 10
  11. 11. Process Overview From Product Ideas to Product Development Project 9. System Implementation Implementation Monitoring begins Competitive Review Financial Review Typical Time Frames: LIMRA Individual Life Product Development Market Scan Average New Product Development Time Frames 50 45 7 40 6 35 11.6 39.9 Weeks 30 10.1 34.3 25 8 20 6.5 15 9.9 9 10 5.8 5 4.4 6.3 5 0 Var. Life VL overlap Term Term Overlap Idea Generation Product Concept & Feasibility Product Planning and Design Product Requirements Develop Products Launch Products Source: LIMRA, April 2004 SOA 2004 San Antonio Spring Meeting - 66 PD, The Product Development Process - Getting Your Product to Market Quickly 11
  12. 12. Potential – Road Hazards ♦ Lack of Senior Management Commitment to Priorities ♦ Unclear/Unrealistic Marketing and Financial Objectives ♦ Market intelligence is imperfect ♦ Inadequate expertise ♦ Insufficient resources ♦ Competition is a moving target ♦ Product Design doesn’t work ♦ Failure to identify material risks and management plan ♦ Regulatory Changes Reinsurance Assistance Potential to Primarily Address ♦ Inadequate expertise ♦ Insufficient resources ♦ Market knowledge Primarily in Product Development to Product Implementation ♦ Rate Development ♦ Pricing Iterations ♦ Risk Analysis SOA 2004 San Antonio Spring Meeting - 66 PD, The Product Development Process - Getting Your Product to Market Quickly 12
  13. 13. Reinsurance Assistance Rate Development ♦ Premium – reflect marketing goals/strategy ♦ Mortality consultation – Underwriting requirements and preferred criteria – Target market and distribution – Underwriting exception processing – Mortality experience ♦ XXX reserves on term ♦ Expense, interest rate, lapse, RBC and other assumptions including market intelligence feedback ♦ Reflect reinsurance rates Reinsurance Assistance Pricing Iterations ♦ Pricing profit analysis ♦ Mortality / underwriting expense trade-offs ♦ Premium trade-offs ♦ Impact of various reinsurance arrangements, if other reinsurers in pool SOA 2004 San Antonio Spring Meeting - 66 PD, The Product Development Process - Getting Your Product to Market Quickly 13
  14. 14. Reinsurance Assistance Additional Support ♦ Prospective X-factor development and retrospective X-factor testing on term products ♦ Periodic product review ♦ State filing assistance ♦ Analysis of impact of new regulations Reinsurance Assistance Success Story – Product to Market Quickly ♦ Clear, reasonable goals ♦ Eliminated variations before modeling, example risk class structure and focus on one pricing cell initially ♦ Little experience to analyze ♦ Clear communication with all interested parties ♦ Senior management committed and available for decision making ♦ Dedicated reinsurance resources available for on-sight model work ♦ Start to Finish (reinsurer involvement) – 3 weeks SOA 2004 San Antonio Spring Meeting - 66 PD, The Product Development Process - Getting Your Product to Market Quickly 14
  15. 15. Reinsurance Assistance Not so successful story ♦ Unclear plan, lack of consensus ♦ Multiple pricing scenarios ♦ Long delays for management review and approval ♦ Lack of communication with all interested parties ♦ Start to finish (reinsurer involvement) – 9 months Additional areas that may be considered to help speed product development ♦ Robust Experience Studies need to be on a regular cycle so that flow of assumptions is expedited: – Mortality (annually) in detail – Persistency (at least annually, but maybe semi-annually) by age, gender, size – Expenses (annually) with fresh look taken at allocations each year – Business mix (as needed) – gender, age, risk class – Experience study actuaries sometimes part of product development department SOA 2004 San Antonio Spring Meeting - 66 PD, The Product Development Process - Getting Your Product to Market Quickly 15
  16. 16. Additional areas that may be considered to help speed product development ♦ Investment strategy and portfolio mix should be discussed and agreed to prior to pricing products – Selection of assets, with duration elements, spreads over Treasury, and default risk charges – Reinvestment approaches – Active management practices – Tied in with stochastic modeling – Investment actuary to bridge gap between investments and product helpful Annuities bring some additional considerations for rapid product development ♦ Filing can generally be much more modular ♦ Use of riders can help simplify pricing, filing, and sales process. ♦ Stochastic models must be refined and efficient to speed pricing. ♦ Annuities can be managed on a micro, not macro basis. SOA 2004 San Antonio Spring Meeting - 66 PD, The Product Development Process - Getting Your Product to Market Quickly 16
  17. 17. Annuities bring some additional considerations for rapid product development ♦ For equity-indexed annuities, simplify designs and have (non)-securities issues covered. ♦ Significant sources of competitive information available (VARDS, Fisher, Web Sites, Jack Marrion, Beacon) ♦ Spreads are main pricing variable ♦ Clearly identifiable filing issues in certain states Roles played by consultants can help speed product development ♦ Baseline pricing (pricing system compatibility helpful) ♦ Difficult to obtain competitive information ♦ Insight based on prior experience that can avoid wheel spinning ♦ Participate in regulatory filing discussions ♦ Generate reserve factors and/or approaches ♦ Quick entry into new lines of business where in- house expertise lacking (start at second base) SOA 2004 San Antonio Spring Meeting - 66 PD, The Product Development Process - Getting Your Product to Market Quickly 17
  18. 18. Roles played by consultants can help speed product development ♦ Importance of legacy documentation ♦ Allows concurrent activities to take place with existing staff ♦ Potentially validate or draw into question prior conclusions ♦ When not to use consultants: – Lack of consensus about their value – Where not positive about their expertise – When the motives are political – When they will be placed in a box professionally SOA 2004 San Antonio Spring Meeting - 66 PD, The Product Development Process - Getting Your Product to Market Quickly 18

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