Section 2 - Product Development Flashcards
What actions would the product development team pursue from EMT strategic plan of developing and pricing a product in the southwest region?
- Regular regulatory environment… gain approval from regulators for rules, rates and forms
- Judicial environment… help the team build forms that can withstand coverage challenges.
- Risk appetite… working with actuaries and the product development team are critical to develop essential underwriting rules, guidelines, forms and endorsements
- Lines of business… product development teams need to make sure rules rates and forms are in line with the companies strategic plan
- Geographical footprint.. product development team verifies personnel is executing, proper skill sets to meet the market challenges in this footprint.
Name five steps, the insurance company, contemplates, using or modifying standard forms or developing proprietary forms
- Develop a concept or idea.
- Conduct a feasibility study.
- Design and develop.
- Implement and launch.
- Monitor and modify
When a new product has acquired a claims history, what info does the product development team need from actuaries and how do they get it?
Actually must come up with the pure cost of risk of rate making. They must trend or index losses. Once converted to today’s dollars, actuaries divide the losses by the exposure to develop your cost risk.. the actuarial department works closely with the product development department to develop a loss cost multiplier LCM which contemplates underwriting expenses and desired profit. Last cost is multiplied by the LCM to determine the final base rate.
What is indexing losses?
Accomplished by factoring in inflation, taking Yesterdays dollars and basing on value of today’s dollar
How do you develop a loss cost multiplier LCM?
Developed by the actuarial department and product development department. The LCM contemplates underwriting expenses and desired profit.
What is the last step of determining the final base rate when a product acquires claim history?
The last cost is multiplied by the LCM to determine the final base rate
Pros of proprietary forms
- Marketing, to attract potential clients
- Opportunity for innovation, stand out from others.
- Greater flexibility.
- Ease of modification, standard forms takes years to approve.
- Specify coverage and endorsements.
- Require skills set.
What is market conduct?
The behavioral characteristics of a company operating in a certain market or industry, governed by guidelines and perimeter set by the regulators.
What are the three steps of product management you take once product is established?
- Maintains
- Monitors.
- Manages.
To ensure profitability
Can the product development team be responsible for a single development?
Yes
How do you develop a tactical plan?
Break down into departments to develop plan, which is influenced by the strategic plan
Can the product development team outsource the products and why?
Yes. Small or sort of agencies because skill set not yet available
What are the three steps to develop proprietary forms?
- Underwriting
- Claims
- Product distribution.
What are the cons of proprietary forms?
- Time consuming.
- Regulatory issues, review time can be lengthy.
- Distribution force training.
- No historical performance data to compare.
- No judicial interpretation history.
What are the five steps for the act of product development?
- Develop idea.
- Conduct study.
- Design and develop product.
- Launch new product.
- Monitor and modify the product.
What are the three categories of new products?
- New line of insurance.
- New product within line of business LOB.
- Expansion into new state.
What is the methodology that’s actuaries use to determine the estimates of ultimate net less?
Triangulation
Aggregating all of the premiums for a specific line of business is called what?
Pooling
What statistical principle is used to calculate the risk of loss and set premiums?
La of large numbers, the more policyholder is the more likely the actual loss will be close to the predicted loss
