Southeastern Actuaries Conference. Product Strategy Debate

Transcription

1 Southeastern Actuaries Conference Product Strategy Debate Brad Barks, FSA, CPA, MAAA, EA CFO, Global Preferred Holdings Tom Bobowski, CLU VP Marketing, Global Preferred Holdings

2 Purpose HAVESOME FUN Tell Some War Stories Learn Something New About Product Development from Your Peers 2

3 Participation Sense of Humor Participation Good Stories but Keep Them Short Keep it Clean Secession Will Only Be As Good As You Make It Ground Rules 3

4 Format Actuaries vs. Marketing Participation Tom & Brad Provide the Issues You Provide the Answers 4

5 Issue Where Do We Start the Product Process? 5

6 Race Car Driver Go As Fast As Possible Don t Crash 6

7 Strategic Planning Process Assessment Customer, Competition, US Goals - Direction Strategy Value Proposition. Product Type, Distribution Channel Tactics Product Features, Approach to Distributors 7

8 Issue What Are the Competing Interests? 8

9 Interactions between Competing Interests Marketing Looking outside company to competitors and customers. Finance Looking inside company at stockholder returns, capital, anti-selection, catastrophe scenarios. 9

10 Competing Interests Marketing Development Process Easy Sales Process Competitive Rates Benefit Package Sizzle Product Differentiation 10

11 Competing Interests Pricing Development Process Profitability Risk Management Worst Case Scenario Ways Agent can Break Break the Product Adverse Selection Disintermediation Minimum Volume to Cover Expenses Administering the Product 11

12 Competing Interests Example: Universal Life Insurance Product Jet Issue Marketing Goals 130% top Commission w/ 5% renewals Combination for benefits from the top 3 competing products Flexible Underwriting Illustrated Cash Value in 90 th percentile High Credit Rates Financial Goals 15% after Tax ROE Limited Possibility of Anti-selection Maintain Margin for Adverse Deviation Low Surplus Strain Low Admin. Expenses Limit Cash Flow Mismatch Maintain Company Reputation Breakeven by year 7 12

13 Issue What is Win Win? 13

14 Win - Lose Financial Price > Cost 14

15 Lose - Win Marketing Perceived > Price Value 15

16 Win - Win Company Perceived > Price > Cost Value The Customer Rules! 16

17 Issue What to Measure? 17

18 What to Measure? Cost: Distribution, Risk, Administration, Capital Perceived Value Risk (next Slide) 18

19 Risks in Assumptions What to Measure? Third Party Behavior Agent (replacement), Policyholder (surrender, loan, partial Withdrawal, fraud, lifestyle choices), Competitors (new products, risk classification) Chance Mortality, Economic Performance (equity markets, interest rates, defaults), disasters Company Action Underwriting, Crediting and Charges, Price Point, Distribution Channel, Selling Process 19

20 Issue How to Measure? 20

21 How to Measure? Cost / Benefit Feature 10% more 1 st Yr. Commission 10b.p. Higher Credit Rate Living Benefit 10% Higher Surrender Charge Lower Max. Comm. Premium by $1 Cost in ROE 0.8% 0.9% 2.0% (0.4%) (0.6%) Etc. Many Others 21

22 How to Measure? Avoid The Risk Parallel Interests: Share Risk Thru Reinsurance Adjustable Charges and Credits Limits on Utilization 22

23 Issue The Problem With Measurement... 23

24 The Problem With Measurement... Complexities Risk is hard to measure in Dollars Returns may not Equate to Intangible Benefits Value of Sales Growth Hard to Define Difficulty Agreeing on Perceived Value of Product Features in the Marketplace So, don t wait for perfect information to start discussion. 24

25 The Problem With Measurement... The Marketing Credo See The People Tell The Story Help Them Buy The Numbers Rarely Tell The Story You Have to Be a Marketer Inside the Company 25

26 The Problem With Measurement... Actuarial Training Discrete Digital Best Solutions Advanced Stochastic Modeling These All Have A Tendency To Take Focus Off of the Key Issues 26

27 Issue How To Address Conflict? 27

28 Techniques Attack the Marketing Guy s Character Attack the Actuaries Personality Mud Wrestle Be Careful Flip a Coin Make It Up In Volume 28

29 How to Address Conflict Establish Ground Rules When Should It Happen? Who is Involved? What Tools to Use? 29

30 How to Address Conflict Minimize Areas of Conflict Common Goals & Strategy Look at It From Their Point of View Explain How Your Solution Benefits Them 30

31 How to Address Conflict Techniques Tell The Story Behind the Numbers Maintain Balance Think Outside the Box Learn About How to Influence People Practice 31