There’s a new standard in property and casualty insurance in terms of the efficiency, execution, and innovation required to better protect people, property, and organizations. Insurers need to be agile and efficient when it comes to their product development and specialty offerings. That’s why many are turning to SaaS-based insurance platforms that support constant innovation via scalable solutions.
One key ingredient for achieving this new standard calls for insurers to build product factories. Product factories enable insurers to innovate new, market-relevant products, reusing common base product definitions across their portfolios, allowing them to offer tailored coverages without creating a massive library of products that are expensive and time-consuming to maintain. With speed to market being one of the biggest drivers of success in this industry, insurers are seeking out innovative digital solutions that support this functionality.
What Is a Product Factory?
A product factory is the result of a methodology for developing product hierarchies. Using low-code configuration tools, insurers can establish a set of base products which are used as the foundation for product variations in order to tailor coverage for specific market needs.
Why Are Product Factories Important?
In the highly regulated world of insurance, carriers are constantly seeking ways to differentiate themselves from the pack. Offering insurance products tailored to specific markets and addressing coverage needs that other insurers overlook is one way to create that separation. But the challenge insurers face in creating tailored products is the expense of constantly maintaining and refreshing their product definitions in order to keep their products relevant and competitive.
This is where the value of the product factory becomes evident. With the product factory approach, insurers gain the ability to define and maintain a robust inheritance model that supports reuse of common elements and definitions across products. Product inheritance is the ability to define an item, for example at a country level, that can then be used across lines of business and even coverages. By defining the item at that country level, any changes made to that item are automatically inherited by the line of business and coverage level unless the definition is overridden to break inheritance.
Product Factory Implementation Best Practices
To use product factories to sustain a tailored product business model, insurers need to design the right product inheritance structure, built on a low-code SaaS platform, which is continuously refreshed with enhancements that incrementally provide insurers with more capabilities.
The process for implementing a product factory will vary by insurer, based on their current applications and operational processes; however, there are general best practices that can be used in any organization. With these steps, insurers can ensure that product factory success is addressed from both business and technical perspectives.
On the business side, three areas of focus for success include:
- Staffing – using a capacity model and managing to business priority
- Change management – disciplined communication of product changes is critical to end user communities
- Innovation focus – attaining world-class efficiency and speed is a journey; a constant focus on innovation and improvement is key
On the technical side, three areas of focus for success include:
- Product hierarchy – design for reuse and commonality across products
- Product rationalization – achieving efficiency through product standardization, diverging only to align with an insurer’s true market differentiators
- Automation – leveraging automation in development, regression testing, and deployment/release management
Implementing these key factors while transitioning from the old standard to the new standard may take time; however, a disciplined product factory will pay off in the long run – start basic, then test, grow, and refine.
Duck Creek Product Factories — An AXIS Case Study
AXIS Insurance had undergone a technology and business transformation which resulted in the creation of their own product factory. AXIS realized that in order to remain competitive, it needed to rationalize products and eliminate manual processes and legacy systems.
The new AXIS product factory enabled the carrier to launch 20+ products in 2018, and their goal in 2019 was 40 new products. This growth potential was made possible by the partnership between AXIS’ agile product development and business teams, with iterative deliveries occurring in two-week segments.
By configuring products in Duck Creek Policy, the insurer simultaneously creates requirements for all coverages, matching coverages for claims-loss reasons. Each product then comes with specs for rate, quote, and issue, as well as claims, billing, and commissioning. Some highlights of AXIS’ product development approach include:
- 12 systems eliminated
- +15% underwriter productivity
- DWP growth from $1.2 billion to $1.5 billion
- Decreased cost of enhancements by 5x
- Increased spend on innovation from 9% to 37%
- Cost reduction from going paperless
Since completing its digital transformation initiative, AXIS has retired roughly half of its existing products — taking 80 to 42, with an ultimate goal of 86 products. The carrier grouped products by commonality in order to market them more efficiently and cut cost and delivery time by 75%. Now, most products are on the Duck Creek Platform, available for analysis and underwriting insights so AXIS can create automated decisioning.
Developing a product factory is a journey, a process that evolves over time as insurers find the right balance that works for their organizations. Commitment to success requires involvement from both business and technical organizations. Assemble a team who can prioritize product rationalization, determine common elements used across products, architect a product hierarchy that supports single point of change, and iterate on a regular basis to evaluate, design, and implement product enhancements based on market demand.
The Duck Creek Platform is the premium solution for implementing a product factory and improving insurance product development. Our OnDemand platform is infinitely configurable, enabling insurers to innovate new ideas, new solutions, and new policies that are tailored to meet complex and ever-evolving needs. With endless options, insurers are empowered to grow their businesses, reinventing themselves along the way with new products that provide better coverage, smarter risk management, and happier customers.