What are the most effective ways to manage risks in insurance product development?

1 Define the risk appetite

Before you start developing a new insurance product, you need to define the risk appetite of your organization, which is the amount and type of risk that you are willing and able to take on. The risk appetite should align with your strategic objectives, financial capabilities, and stakeholder expectations. It should also consider the external factors that may affect your product, such as market conditions, customer preferences, and regulatory changes. By defining the risk appetite, you can set the boundaries and criteria for your product development decisions, and avoid taking on excessive or inappropriate risks.

2 Conduct a feasibility analysis

Once you have an idea for a new insurance product, you need to conduct a feasibility analysis to evaluate its potential viability, profitability, and sustainability. The feasibility analysis should cover the technical, operational, financial, legal, and ethical aspects of your product, and identify the key assumptions, uncertainties, and dependencies that may affect its performance. You should also conduct a market research to understand the customer needs, preferences, and behaviors, as well as the competitive landscape and the regulatory environment. By conducting a feasibility analysis, you can validate your product idea, test your hypotheses, and identify the gaps and risks that need to be addressed.

3 Implement a risk management framework

In order to effectively manage the risks in insurance product development, it is essential to implement a risk management framework that encompasses the entire product lifecycle. This framework should include a risk identification process to systemically recognize potential sources, causes, and impacts of risks in each stage of the product development process. Additionally, a risk assessment process should be used to assess the likelihood and severity of each risk, and prioritize them based on their significance and urgency. Furthermore, a risk mitigation process should be implemented to develop and execute strategies and actions to reduce, transfer, avoid, or accept the risks while monitoring their effectiveness and outcomes. Additionally, a risk reporting and communication process is necessary to inform and consult relevant stakeholders about the risks, their status, and their actions. Finally, a risk review and evaluation process should be used to review and update the risk management framework periodically, as well as evaluate its performance and results.

4 Involve the stakeholders

Successful insurance product development requires involving the stakeholders throughout the process. This includes customers, employees, managers, partners, suppliers, regulators, and competitors. Doing so can provide insights and feedback on product idea, design, features, pricing, distribution, and promotion. It can also help align the product with stakeholder expectations and needs. Additionally, involving stakeholders enhances collaboration and coordination with stakeholder groups and roles. Moreover, it increases transparency and accountability for product decisions and actions. Finally, it helps manage stakeholder risks like resistance, conflict, dissatisfaction, or non-compliance.

6 Monitor and evaluate

After launching your new insurance product, it is important to monitor and evaluate it to measure its outcomes, impacts, and benefits. Utilize indicators and metrics such as sales, revenue, profitability, retention, loyalty, satisfaction, referrals, and complaints. Additionally, use various methods and tools such as audits, reviews, surveys, interviews, focus groups, and analytics to evaluate your product. Furthermore, compare your product results with your product objectives, expectations, and benchmarks. By monitoring and evaluating your product you can assess performance and value proposition; identify and address gaps, challenges, and opportunities; learn from successes and failures; adapt the product to changing market conditions; manage risks associated with market shifts or customer churn; and address legal disputes.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?