Do You Know Your Products? Why it may be time to rationalize your insurance product portfolio.

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.

While mergers and acquisitions have enabled many insurers to rapidly increase the breadth of their product offerings and accelerate entry into new markets, they have also led to complicated product portfolios and rising management costs.

What are the costs of complexity?

Here are a few signs that your insurance product portfolio may be too large to efficiently manage:

• Your various business units operate autonomously with little integration or standardization of systems or processes
• Corporate decision-makers struggle to understand exactly what products are being sold
• Product duplication means duplication of effort on the part of underwriters, product developers, product managers and IT
• Underwriters compete against each other, selling virtually the same product
• Multiple brands increase the cost of marketing and selling

What is insurance product rationalization?

Traditionally, the goal of the insurers was to sell as many insurance products as possible, but today many insurers are rethinking this strategy. The goal of insurance product rationalization is to reach a maximum number of customers with a minimum number of marketable products. By simplifying their insurance product portfolios, insurers can lower operating costs, increase efficiencies and maximize revenue potential for each product.

Insurance product rationalization is a strategic initiative that requires insurers to take an objective look at their products and establish a methodology to remove duplicate or unprofitable offerings from the portfolio. It also involves looking at the relationships and commonalities between products in order to establish core product baselines.

When you break them down, all products are composed of a series of components, questionnaires and coverage objects which, when assembled together, represent the rules, rating and risk assumptions of a given insurance product. The core product baseline provides a common foundation from which other products can be quickly and easily built through the re-use of product components.

To optimize this process, the insurer will need a product development solution that provides a central product repository where individual product’s components can be easily re-used and configured through inheritance capabilities.

Simplification brings cost savings and other benefits

When the insurance product portfolio is viewed in terms of its core product baseline, it is possible for insurers to reorganize, integrate and simplify product lines. The number of marketable products can be reduced by a ratio of up to 10 to 1. This simplification enables insurers to achieve new efficiencies in underwriting and selling processes, while at the same time providing clearer, simpler choices for their producers and customers.

Read the Paper

To learn more about how product rationalization can benefit your business, download the white paper “Making the Case for Product Rationalization”.

"By simplifying their insurance product portfolios, insurers can lower operating costs, increase efficiencies and maximize revenue potential for each product."