Group 46 Product Development

Question 1

The product development cycle
Part 2 of 4
Innovation

Answer 1

1. Understand a company’s strategic perspective
   
   1. 1 reduce unnecessary work; narrow the potential scope of ideas
2. Drivers of product ideas (aka genesis of ideas)
   
   2. 1 innovator or follower
   3. 2 changing laws and regulations
   4. 3 consumer demands
   5. 4 marketing and sales demand
   6. 5 social need
   7. 6 changing demographics
   8. 7 changing economy and financial markets
   9. 8 competitive advantage
3. Idea screening
4. Market assessment
   
   4. 1 what exist in the market today?
   5. 2 what is the regulatory environment
   6. 3 Financial value and other benefits for the consumer
   7. 4 Price targets
   8. 5 Competitor’s likely reaction
   9. 6 Sales reaction

Question 2

The product development cycle
Part 3 of 4
Design the product

Answer 2

1. Product structure
   
   1. 1 features to include
   2. 2 the product type
   3. 3 risk mitigation features
2. Variables in design
   
   2. 1 coverage duration
   3. 2 member cost share
   4. 3 defining the scope of coverage
3. Contribution requirements
   
   • create marketing and underwriting around these to manage the risk
4. Regulatory compliance

Question 3

The product development cycle
Part 4 of 4
Building the product

Answer 3

1. Project enrollment
   
   1. 1 helps decide whether the product is worth pursuing
   2. 2 Estimate the volume of claims
2. Price the product
   
   2. 1 Finding appropriate data
   3. 2 determine assumptions
   4. 3 this is an iterative process
3. Financial assessment: ROI and ROE
4. Implement necessary infrastructure
5. Senior management approval

Question 4

Teams involved in product development

Answer 4

1. Senior management
   
   1. 1 set tone and general direction of the new product
   2. 2 set minimum requirements to be worth pursuing
   3. 3 make the decision to pursue a proposed idea
2. Marketing
   
   2. 1 attract customers; build name recognition and branding
3. Sales
   
   3. 1 work directly with customers and brokers to sell products
   4. 2 have insights into the price sensitivity and products customers have been requesting
4. Underwriters: help quantify the risk of plan features
5. Information technology (IT)
   
   5. 1 understand the feasibility of the infrastructure needed
   6. 2 Estimate costs of infrastructure
6. Operations: claims, billing, and policyholder admin
7. Compliance
8. Actuarial
   
   8. 1 projections; feasibility studies, pricing; reserves
9. Finance: do projection meet corporate targets?

Question 5

Product Development considerations for various instance lines

Answer 5

1. Group medical, prescription, dental, vision
   
   1. 1 Are marketed both to the plan sponsor and the consumer
   2. 2 Health care reform is dramatically impacting these
2. Group DI: must be integrated with the plan sponsor’s sick day policy
3. Group Life: can generate taxable income for some individuals in the group
4. Group LTC: Educational materials are essential
5. Retiree healthcare benefits
   
   5. 1 comply with reporting standards for post-employment benefit obligations

Question 6

The product development cycle

Card 1 of 4

Answer 6

1. Innovate
2. Design the product
3. Build the product
4. Sell the product
   
   4. 1 Test marketing
   5. 2 Mass marketed
5. Assess
   
   5. 1 Track financials
   6. 2 Actual to expected studies
   7. 3 Consumer and market feedback
6. Revise