“CCIR and CISRO expect that the design of a new insurance product or significant adaptations made to an existing product take into account the interests of the target Consumers’ group. With the development of complex products that are sometimes difficult to understand, any weakness in the design or the related disclosure documents can increase the likelihood of inappropriate choices from Consumers.” - ccir-ccrra.org
What steps can Insurers take to ensure that the customer remains at the forefront of decisions around creating new or updating current insurance products? Here are a few questions to start the conversation:
- Who is the target audience?
- What need does the business intend to address by creating a new product or making changes to existing products?
- How will this new product fulfill the unmet needs of the target audience?
These questions will help you establish a customer-centric foundation to base your product design off. As you move through each stage of product development, build in time to validate that the focus remains on the customer. For example, during the design stage, these questions will be important to consider:
- How will the product be differentiated in the market?
- Will the product(s) be customizable so that they can suit several niche audiences?
- Instead of creating a fresh product, is there a possibility of reviewing existing products with the customer at the center of the process from end to end?
- What will distribution for the new product entail?
- Has the business taken into consideration the evolving needs of customers who now seek not only simplified insurance information, but also control over the products that they purchase?
Within the FTOC guidelines, Insurers are offered guidance on what must be considered with product design. There is great value in the conversations and feedback MGAs and Advisors (Intermediaries) share with their wholesalers and insurance partners. They understand the Customer’s needs and can provide that type of data to the companies that they work with.
The expectations laid out by the Fair Treatment of Customers guidelines for designing new insurance products provide more in-depth direction on how to proceed:
“Expectations to achieve this outcome (Insurers)
- Development of products includes the use of adequate information to assess the needs of different Consumer groups.
- Product development process (including a product originating from a third-party administrator) provides for a thorough assessment of the main characteristics of a new product and of the related disclosure documents by every appropriate department of the Insurer.
- Policies, procedures and controls put in place enable the Insurer to:
- offer a product that delivers the reasonably expected benefits;
- target the Consumers for whom the product is likely to be appropriate, while preventing or limiting inappropriate sales;
- assess the risks resulting from the product by considering, among other things, changes associated with the environment or stemming from the Insurer’s policies that could harm Customers; and
- monitor a product after its launch to ensure it still meets the needs of target Customers and, as the case may be, take the necessary remedial action.
- Provide relevant information and training to Intermediaries to ensure they understand the target market, such as information related to the target market itself, as well as the characteristics of the product. Collaboration between all those involved, from Insurers to Intermediaries, is a key factor in achieving fair treatment of Customers.
- Retain oversight of, and remain accountable for, the development of its products whenever product development is undertaken by an Intermediary on its behalf.
Expectations to achieve this outcome (Intermediaries)
- Provide information to the Insurer on the types of Customers to whom the product is sold and whether the product meets the needs of the target market, enabling the Insurer to assess whether its target market is appropriate and to revise the product, when needed.
- When undertaking product development on behalf of an Insurer, take Customers’ interests into account in performing this work.” – ccir-ccrra.org
The expectations outlined above cover many aspects of the product design and delivery processes. They have a direct impact on the insurance business, with their focus on product suitability and the ability to equip distribution to support clients with all necessary information about a product.
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