1. Trends in Product development
Date 14th November 2011
Ralf Günther

2. Prolog: Product development process
Discovery
Scoping
Business Case
Develop-ment
Testing and Validation
Launch
Prolog: Product development process

3. Prolog: Product development process
Discovery
Scoping
Business Case
Develop-ment
Testing and Validation
Launch
Prolog: Product development process
Evaluating
ideas
Implementing Product
Gathering ideas

4. What is the most crucial part?

5. Let‘s have a look at a completely different product
Smartphone Sales figures 1.Q 2011
Nokia (24,3% market share)
Apple (18,7%)
Blackberry (14,0%)
Samsung (10,8%)
HTC (8,9%)
Source:
Titel der Präsentation und Name des Redners

6. Let‘s have a look at a completely different product
Smartphone Sales figures 1.Q 2011
Nokia (24,3% market share)
Apple (18,7%)
Blackberry (14,0%)
Samsung (10,8%)
HTC (8,9%)
Source:
Source:
Titel der Präsentation und Name des Redners

7. Success is not just a question of quality or price, but as well
Image
Target group
Product ideas
Product design
Sales Channel
Titel der Präsentation und Name des Redners

8. Gathering the right ideas is one of the most crucial success factor for a new product
Titel der Präsentation und Name des Redners

9. Agenda Classical Endowment
Target Group Analysis for products with savings
Examples
Summary of Trends

10. 1. Classical Endowment Technical Interest Rate Mortality table
Health Questionnaire with 10 – 20 questions
Strikt Underwriting Requirements in order to be on the save side
Costs according to commissions and internal costs
Combined with rides, mainly accidental death and accidental dismemberment

11. Some thoughts about this product
Male, 30 years, duration 20 years, sum insured € Extra mortality: 100% -> Loading ~15 € per year Does it make sense to have the full underwriting process for that?
Titel der Präsentation und Name des Redners

12. Some thoughts about this product
Male, 30 years, duration 20 years, sum insured € Extra mortality: 100% -> Loading ~15 € per year Does it make sense to have the full underwriting process for that? Assume that 10% of all policies get a loading of 100% in average. This means that the whole U/W process leads for this example to an extra income of years * 15 € / year * 10% = 30 € per policy How expensive is your U/W process?
Titel der Präsentation und Name des Redners

13. Some thoughts about this product
Person age 55 wants to save some money for retirement or grandchildren. What do you expect from the underwriting process?
Titel der Präsentation und Name des Redners

14. Some thoughts about this product
Person age 55 wants to save some money for retirement or grandchildren. What do you expect from the underwriting process? Probably there will be some findings that lead to a more intensive underwriting. But the applicant will probably not accept a time consuming U/W process or to go to the doctor – especially as the death benefit is not his main interest.
Titel der Präsentation und Name des Redners

15. Some thoughts about this product
Is Endowment a good product?
Titel der Präsentation und Name des Redners

16. Is this a good product? Titel der Präsentation und Name des Redners

17. Is this a good product? It depends on where you want to go!
Titel der Präsentation und Name des Redners

18. 2. Target Group Analysis for products with savings
Classical Endowment + Riders
Income
Age
Titel der Präsentation und Name des Redners

19. 2. Target Group Analysis for products with savings
Endowment with annuity option + disability rider
Endowment + LTC rider
Unit Linked with low SI + AccDis
Endowment w/o U/W
Classical Endowment + Riders
Income
Funeral Expenses
Endowment with simplified U/W + acc. Riders
Age
Titel der Präsentation und Name des Redners

20. 2. Target Group Analysis for products with savings
Complexity of U/W
Distribution Channel
IFA
Own Agents
Endowment + LTC rider
Endowment with annuity option + disability rider
MLM
Classical Endowment + Riders
Bank
Funeral Expenses
Endowment w/o U/W
Endowment with simplified U/W + acc. Riders
Product
Unit Linked with low SI + AccDis
Titel der Präsentation und Name des Redners

21. 3. Examples: Endowment with simplified U/W
Target Group: Lower income people with the intention to save money
Distribution: Banks, MLM, own agents
Mass product with low premium income -> keep the administration and U/W simple
Just a few different packages available
Perhaps sum insured for death lower than at maturity
Perhaps automatic inclusion of an accidental death benefit
U/W: e.g. health declaration until € Sum at Risk -> no acceptance and administration of substandard risks
Minimum possibilities of changes in the policy after conclusion
Titel der Präsentation und Name des Redners

22. 3. Examples: Endowment with simplified U/W
Target Group: Lower income people with the intention to save money
Distribution: Banks, MLM, own agents
Mass product with low premium income -> keep the administration and U/W simple
Just a few different packages available
Perhaps sum insured for death lower than at maturity
Perhaps atomatic inclusion of an accidental death benefit
U/W: e.g. health declaration until € Sum at Risk -> no acceptance and administration of substandard risks
Minimum possibilities of changes in the policy after conclusion
This has nothing in common with a classical Endowment except the mathematics
Titel der Präsentation und Name des Redners

23. 3. Examples: Gender Directive / Unisex TariffsDD
We understand that contracts concluded before are not affected, and that not every amendment in existing policies after (e.g., mechanisms for review, renewal or adjustments) constitutes a new contract (with the obligation of unisex pricing).
We feel that it should still be possible to differentiate between men and women with regard to individual underwriting. Otherwise it would jeopardize the principles of private insurance and MR’s ability to meet long-term commitments to clients, as also reflected by the supervisory requirements at European level (Solvency II: requirements for insurance companies' risk management and the calculation rules for u/w reserves).
We feel that it should be possible to provide products which are only attractive for one gender (e.g. products with gender-specific components or target group products ).
Münchener Rück

24. 3. Examples: Premium – gender relevant?
Annual premium for females in % of male premium*
Disability and endowment: minor effect of risk factor „gender“ on premium, with disability occupational class dominates
Deferred Pensions and Critical Illness: medium effect but can be significant because of premium volume
Long-term care and term life: significant effect of risk factor „gender“ on premiums
premium male
LTC
Annuity
Disability
Endowment CI
Term life
*) Only calculated for a specific age and term combination. May differ with other combinations.
Gender-Directive

25. 3. Examples: Possibilities for Term Life
Use Male Table
Low Sum Insured /
Easy Product
High Sum Insured /
Complex Product
Titel der Präsentation und Name des Redners

26. 3. Examples: Possibilities for Term Life
Use Male Table
Use mixed Table
Low Sum Insured /
Easy Product
High Sum Insured /
Complex Product
Titel der Präsentation und Name des Redners

27. 3. Examples: Influence of Smoking
Titel der Präsentation und Name des Redners

28. 3. Examples: Possibilities for Term Life
Use Male Table
Use mixed Table
Smoker / Non Smoker Tariff
Low Sum Insured /
Easy Product
High Sum Insured /
Complex Product
Titel der Präsentation und Name des Redners

29. 3. Examples: Influence of occupation
Mortality: Preferred- and Non-Preferred Occupation

30. 3. Examples: Possibilities for Term Life
Use Male Table
Use mixed Table
Smoker / Non Smoker Tariff
Full Preferred Lifes
Low Sum Insured /
Easy Product
High Sum Insured /
Complex Product
Titel der Präsentation und Name des Redners

31. 3. Examples: Possibilities for Term Life
The best possibilty depends on your Target Group, the Sales Channel and the expected sums insured!
Use Male Table
Use mixed Table
Smoker / Non Smoker Tariff
Full Preferred Lifes
Low Sum Insured /
Easy Product
High Sum Insured /
Complex Product
Titel der Präsentation und Name des Redners

32. 4. Summary of trends
Focus in product development turns from the covered risk to the target group and the sales channel.
Depending on the target group and the sales channel the complexity of the product is determined.
The same risk will be covered within one company by completely different U/W and at a different price.
Products will be developed in a much closer cooperation with the sales forces
Titel der Präsentation und Name des Redners

33. Thank you very much for your attention!
© 2009 Münchener Rückversicherungs-Gesellschaft © Munich Reinsurance Company
Thank you very much for your attention!
Ralf Günther