Drew Birtwistle, Product Marketing Manager, Camilion Solutions, Inc.
Many insurers have steadily expanded their product portfolios with the goal of increasing sources of revenue and fulfilling customer needs. While mergers and acquisitions have enabled insurers to rapidly increase the breadth of their product offerings and accelerate entry into new markets, they have also led to complicated product portfolios.
The recent economic downturn has led many insurers to rethink their product strategies. Faced with investment losses, increased claims due to catastrophes, and an overall volatile market, insurers are now focused on controlling expenses and increasing efficiencies. In an effort to streamline product development and reduce operating costs, many insurance CFOs, CIOs and CUOs have begun to push for product rationalization.
More Isn’t Always Better
Just as automakers can no longer afford to build almost identical models to be sold as separate brands, insurers must reduce product duplication and simplify product offerings to remain competitive. The goal of product rationalization is to reach a maximum number of customers with a minimum number of marketable products in order to lower operating costs, increase efficiencies, and maximize revenue potential for each product.
Rationalization requires insurers to take an objective look at their products in order to remove duplicate or unprofitable offerings from the portfolio. It also involves looking at the relationships and commonalities between products – which may exist not only within product lines but across lines of business – in order to establish core product baselines. The core product baseline provides a common product foundation or chassis from which other products can be quickly and easily built through the reuse of product components which are externalized and stored in a central product repository.
When the product portfolio is viewed in terms of its core product baseline, it is possible for insurers to reorganize, integrate and simplify product lines. This simplification brings new efficiencies to underwriting and selling processes, while at the same time providing clearer, simpler choices for producers and customers.
Get a Head Start on Core System Replacement
For insurers that are considering a core system replacement or renovation, or are in the midst of such an initiative, product portfolio rationalization can provide a head start. Logically, the new core system they choose has a central product repository, or they have acquired a standalone product development solution which provides this capability that will integrate with their core system. While going through the selection process, insurers should extract all product logic from existing systems into a central product repository where they can identify commonalities and streamline the product portfolio, which will ease the transition from the old to new system.
During the transition, the product repository provides a place to house product components for easy inheritance and re-use, reducing implementation risk. Once the system replacement or renovation is completed, the new system can call on the authoritative insurance product information stored in the repository.
Insurers that have invested in product rationalization have seen improvements in product delivery times and a reduction in IT maintenance, product development and management costs. Underwriting, selling and marketing efficiency is also improved, making the insurer easier to do business with and helping to eliminate brand confusion in the market. When the product portfolio is simplified, virtually every task becomes faster and more streamlined from product development to underwriting to state filing.
A Web seminar: Get A Head Start in Core System Replacement: Insurance Product Rationalization will be offered on Thursday, Feb. 18, at 2 p.m. EST. Click here to register.
About the Author
Drew Birtwistle is Product Marketing Manager, Camilion Solutions, Inc. (www.camilion.com). Camilion delivers innovative product development and management solutions for P&C and L&A insurance, as well as the insurance industry’s most product-agile P&C policy administration system.
