Insurance Products and Underlying Coverages

Product is a lifeline of any company and there should be no ambiguity about a product definition, unfortunately, this is generally not a case especially where there are too many products in a company or when a product itself is too complicated to understand which is usually the casewith financial products. In the insurance industry, there is often no clear or consistent definition of products. Insurance companies rely heavily on data to find out their ideal customer and in deciding product or coverages they should sell to that ideal customer. Coverages roll up to define a particular insurance product, and various kinds of data are generated based on coverages that are analyzed at product level. Data on products can well lead to incorrect conclusions if the underlying coverages rolls up to the wrong product. Things can go extremely wrong if the fundamentals or the product definition is faulty or inconsistent, and will lead to the insurance company aligning the wrong set of coverages or product to its ideal customer. This often results in low customer satisfaction and a higher attrition rate. Customer analytics, management reporting, reserves vs product premiums, and even external financial reporting all can suffer due to such inconsistencies. On the other hand, when a customer does not understand coverages properly, and simply buys standard coverages, this can result in the customer remaining under covered or over covered. A clear definition of products can help insurance companies reach their most profitable customer, provide them with right coverages, and have right reserves for risks a company is exposed to. At the same time, better understanding of coverages will help the customer make right selections to cover his/her risks. Such a scenario would create a win-win situation for both the insured and the insurance company.