Product Development 產品的開發

Purpose and Drivers of Product Development 產品開發的目的及推動因素

Product development is the work of conceiving, designing, pricing and launching insurance products, and of keeping existing products under review. The product links the insurer to its customers: without products that meet real needs, the other functions such as sales, underwriting and claims have nothing to work on.

An insurer develops or changes products for several reasons: changing customer needs (an ageing population, for example, increases demand for medical cover and retirement annuities), new risks such as cyber risk, competitors launching new products, changes in law or regulation, and technology that opens up new ways to sell and service policies, such as buying cover online.

Insurance products also have a life cycle, usually passing through launch, growth, maturity and decline. The insurer must review its products regularly, modify those that no longer suit the market and withdraw those that are unprofitable.

The Development Process 開發流程

The process usually starts with market research: finding out what the target customers need, what competitors offer and which distribution channels are available. A feasibility study then tests whether the product is workable technically, financially and from a regulatory point of view, and whether it fits the company's risk appetite.

Next come design and pricing: setting the scope of cover, exclusions, policy conditions, limits, the way premiums are paid and the wording of the policy. Actuaries then set the premium rates using relevant statistics.

Before launch, the product must pass legal and compliance review, reinsurance must be arranged, computer systems must be set up, sales documents prepared and intermediaries trained, so that product information is clear and not misleading.

After launch, the insurer monitors sales, lapses and claims experience and compares them with the pricing assumptions. If actual experience departs significantly from those assumptions, it should consider changing premiums or terms for new and renewal business, or withdrawing the product.

Departments Involved and Their Roles 參與的部門及各自角色

Product development is a cross-departmental task. Marketing supplies information on customer needs, competition and distribution channels. The actuarial department handles pricing, reserving and profit testing. Underwriting sets acceptance criteria and the way risks are selected. Claims uses past claims experience to point out wording that is unclear or likely to cause disputes. Legal and compliance make sure the policy wording and sales documents meet legal and regulatory requirements. The reinsurance department negotiates capacity with reinsurers, while IT and finance support systems and cost budgets.

The Insurance Authority regulates insurers, but it does not design products or draft policy wording for them. Each insurer is itself responsible for making sure its products comply with the Insurance Ordinance (Cap. 41) and the guidelines the Authority issues.

Pricing Principles and Other Key Considerations 定價原則及其他主要考慮因素

Premiums should generally meet three principles. They should be adequate, meaning enough to pay expected claims, expenses and commission and to contribute to reserves and profit. They should be equitable, meaning each policyholder pays according to the risk they bring to the common pool. And they should be competitive, meaning not so high that customers go to another insurer.

Pricing relies on statistics. Life insurance takes account of mortality or morbidity, investment returns, expenses and lapse rates. General insurance relies mainly on the frequency and severity of past claims. The law of large numbers allows an insurer covering many similar risks to predict its overall losses more accurately.

Other considerations include the target customers and whether the product suits them, whether the risk is insurable, the company's capital and reinsurance capacity, and the distribution channels. Hong Kong also has specific regulatory requirements. For example, an investment-linked assurance scheme offered to the public must also be authorised by the Securities and Futures Commission. Voluntary Health Insurance Scheme certified plans must be certified by the Health Bureau, and qualifying deferred annuity policies must be certified by the Insurance Authority, before the related tax deductions apply.