How are INSURANCE PRODUCTS designed?

Product designing in insurance is the process of identifying a market opportunity, developing a proper solution for it, and validating that solution with the market. Insurance products a generally solutions for insurance needs that society needs at the time. The ideation process with regards to product designing can start by first identifying a visible problem in the market or by identifying a gap in the market for the unserved customers or by just merely identifying the weaknesses of the existing products.

The second step of the insurance product designing is establishing the population category that will be interested in the product. Knowing the target population will help him identify the insurance benefits to include in the cover and the exclusions that will prove to be unprofitable to the insurer. For example, the public liability insurance pays for damage or injury, or death to other persons that is caused directly by one’s business operations and excludes injury to employees as that will be covered by another insurance product (the employer’s liability insurance).

The third step is conducting a marketing research campaign for data collection from the target population. This process involves directly interviewing different individuals with regards to the solution you are suggesting or through other methods such as the use of questionnaires, online surveys, and focus group discussions. The collection of such data will in turn help the product designer develop a customer-centered solution that takes the customers’ needs, wants, and demands into account.

The fourth step is developing the actual cover for the insurance solution that you came up with. This step involves developing the policy wording document, the proposal form, and the claim form. This step also involves checking for legal compliance by seeking consultancy from a legal consultant who will check if the provisions and exclusions of the policy wording are legally viable and meet the compliance requirements of TIRA and other authorities.

The fifth step involves seeking actuarial evaluation for the insurance pricing or rate-making process. The actuary has the job of fixing the premium rates that the insurers will charge for the newly designed insurance product. The premium rates suggested by the actuary will include the risk premium, a charge for covering losses and expenses (administration costs), and a small profit margin. Actuaries have to take into consideration that insurers are subjected to regulations that guide them on how much they can charge their customers. Based on the assessment the actuary will issue an actuarial assessment report that will be submitted to the regulatory authority alongside other documents.

The sixth step involves developing a business case that contains the product write-up to explain thoroughly the newly designed products, the marketing plan, and the market performance estimations. The final step is submitting all the important to the regulatory authority (TIRA) for approval. The documents that shall be submitted to TIRA are the cover (policy wording, proposal form, claim form), actuarial report, the market research report, the business case, and the product write-up. Where convenient the proposer can be asked to present the product before TIRA’s officials.

After TIRA’s approval, the insurance company will have to prepare for launching the product into the market. This will involve coming up with the marketing approach and figuring out the distribution channels that will be used such as engaging intermediaries such as brokers, agents, and bancassurance agents. Sometimes, companies employ marketing agencies for their marketing efforts with regard to the product.

After Launching the insurance product, periodic reviews have to be conducted so as to check the products’ performance against the investments injected. Ultimately, with the insurance products designed the insurer should aim to reduce the problem or solve the problem indefinitely. Some of the insurance products currently being sold fall under three categories: General insurance products, Life insurance products, and Marine insurance products.

The law requires insurance professionals who manage insurance businesses to have professional training from higher institutions so that they can better design their insurance products that will satisfy their customers’ needs. An insurance product designer who is unattached to an insurance company can partner with any insurance company to launch the product with, after approval from TIRA. When designing an insurance product, insurers must pay attention to the risks that affect a large number of people, unintentional and accidental losses, economically feasible premium losses, non-catastrophic losses, determinable and measurable losses and the calculable chance of loss.