HDFC Chubb General Insurance
Product Development
HDFC Chubb General Insurance Company Ltd.
Acknowledgements I am grateful to the following for their valuable assistance: Michael Kuhn - Swiss Re John A Reiner - Chubb Corporation, USA I have drawn liberally from : Publications of Insurance Advisory Board, USA
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Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND
HDFC Chubb General Insurance Company Ltd.
Product Development in non-life insurance Balancing expectations What really happens Drivers Principles Challenges Process The way forward Prospects
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Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND
HDFC Chubb General Insurance Company Ltd.
Balancing Expectations The insurer’s dilemma
Widest coverage for lowest cost
Measurable exposure and economic premium Insurer
Buyer
The peculiarity of insurance is that making a sale does not amount to making a profit -insurers’ problems sometime begin when the sale is made 4
Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND
HDFC Chubb General Insurance Company Ltd.
What really happens Deregulation of insurance markets invariably leads to demands for enlargement of products This can come in the form of Completely new products contingency insurances travel insurance Accident & Health Multi line covers combining lines of business in one cover removing well established and necessary insurance principles or exclusions from established covers Movement into areas of other business e.g banking - such innovations sometimes lead to costly lessons
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Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND
HDFC Chubb General Insurance Company Ltd.
Drivers Customer - primary driver Intermediary - channel of communication, defines practical parameters in terms of pricing and costs Regulator - act as a balancing force Competitive businesses - e.g. banking, other providers, financial or finite risk ‘insurers’ Insurers - Expertise Reinsures -Capacity, handholding during the learning curve Capital Markets - provide reality check
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Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND
HDFC Chubb General Insurance Company Ltd.
Principles The opportunities provided by opening of an insurance market present an equal amount of risk, hence it is necessary to stick to sound insurance principles and develop mutual cooperation between the parties The most important principles: Need Necessity Randomness Other determinants: Mutuality Economic efficiency Assessablity Identical/Similar exposures
A critical determinant is availability of data, drilled down to the greatest possible detail, to facilitate statistical analysis. Here, the regulator and insurance associations play the most important role 7
Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND
HDFC Chubb General Insurance Company Ltd.
Challenges Building a customer base Threat of insurer marginalisation Retaining customer loyalty Is there such a thing as lifetime customer? Making profits Retaining shareholder commitment Building up substantial reserves
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Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND
HDFC Chubb General Insurance Company Ltd.
Process And this has to be done within the existing process
Risk Financing
Underwriting/ Rating
Product Design
Product Assembly
Distribution
Insurers’ Traditional Competencies
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Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND
HDFC Chubb General Insurance Company Ltd.
Constraints Constraints of incumbent channels and products product development is strongly influenced by existing distribution what competitors are doing or have done existing stable of products Constraints posed by regulatory apparatus regulators have a natural inertia to approving ‘new to the world’ products Inadequate sensing mechanisms to detect changing customer needs no formalised sensing mechanism….mostly reliance on intermediaries Inflexible product assembly organisation structure business processes
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Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND
HDFC Chubb General Insurance Company Ltd.
The way forward Insurer defined product compromise
Stimulate principled product design
Segment driven product design Masterpiece
Opportunity oriented product development cybersecurity for commercial insureds
How to move form one end to the other
Meet changing needs
Core customer intelligence through employees distributors focused research annual surveys
Proactive protection upgrades
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Customer driven risk-management solutions
Assemble flexible product solutions
Menu aided package building Individual PA
Objective based products Personal K&R
Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND
HDFC Chubb General Insurance Company Ltd.
Prospects Introduction of global templates with minor modifications travel accident and health IT industry Financial Services industry Flexible pricing tariff removal or relaxation Evolution of intermediaries brokers Building database to facilitate statistical analysis
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Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND