Trends in Product development Date 14th November 2011 Ralf Günther

Prolog: Product development process Discovery Scoping Business Case Develop-ment Testing and Validation Launch Prolog: Product development process

Prolog: Product development process Discovery Scoping Business Case Develop-ment Testing and Validation Launch Prolog: Product development process Evaluating ideas Implementing Product Gathering ideas

What is the most crucial part?

Let‘s have a look at a completely different product Smartphone Sales figures 1.Q 2011 Nokia (24,3% market share) Apple (18,7%) Blackberry (14,0%) Samsung (10,8%) HTC (8,9%) Source: www.handys-im-vergleich.com Titel der Präsentation und Name des Redners 20.04.2019

Let‘s have a look at a completely different product Smartphone Sales figures 1.Q 2011 Nokia (24,3% market share) Apple (18,7%) Blackberry (14,0%) Samsung (10,8%) HTC (8,9%) Source: www.handys-im-vergleich.com Source: www.computerbild.de Titel der Präsentation und Name des Redners 20.04.2019

Success is not just a question of quality or price, but as well Image Target group Product ideas Product design Sales Channel Titel der Präsentation und Name des Redners 20.04.2019

Gathering the right ideas is one of the most crucial success factor for a new product Titel der Präsentation und Name des Redners 20.04.2019

Agenda Classical Endowment Target Group Analysis for products with savings Examples Summary of Trends

1. Classical Endowment Technical Interest Rate Mortality table Health Questionnaire with 10 – 20 questions Strikt Underwriting Requirements in order to be on the save side Costs according to commissions and internal costs Combined with rides, mainly accidental death and accidental dismemberment

Some thoughts about this product Male, 30 years, duration 20 years, sum insured 10.000€ Extra mortality: 100% -> Loading ~15 € per year Does it make sense to have the full underwriting process for that? Titel der Präsentation und Name des Redners 20.04.2019

Some thoughts about this product Male, 30 years, duration 20 years, sum insured 10.000€ Extra mortality: 100% -> Loading ~15 € per year Does it make sense to have the full underwriting process for that? Assume that 10% of all policies get a loading of 100% in average. This means that the whole U/W process leads for this example to an extra income of 20 years * 15 € / year * 10% = 30 € per policy How expensive is your U/W process? Titel der Präsentation und Name des Redners 20.04.2019

Some thoughts about this product Person age 55 wants to save some money for retirement or grandchildren. What do you expect from the underwriting process? Titel der Präsentation und Name des Redners 20.04.2019

Some thoughts about this product Person age 55 wants to save some money for retirement or grandchildren. What do you expect from the underwriting process? Probably there will be some findings that lead to a more intensive underwriting. But the applicant will probably not accept a time consuming U/W process or to go to the doctor – especially as the death benefit is not his main interest. Titel der Präsentation und Name des Redners 20.04.2019

Some thoughts about this product Is Endowment a good product? Titel der Präsentation und Name des Redners 20.04.2019

Is this a good product? Titel der Präsentation und Name des Redners 20.04.2019

Is this a good product? It depends on where you want to go! Titel der Präsentation und Name des Redners 20.04.2019

2. Target Group Analysis for products with savings Classical Endowment + Riders Income Age Titel der Präsentation und Name des Redners 20.04.2019

2. Target Group Analysis for products with savings Endowment with annuity option + disability rider Endowment + LTC rider Unit Linked with low SI + AccDis Endowment w/o U/W Classical Endowment + Riders Income Funeral Expenses Endowment with simplified U/W + acc. Riders Age Titel der Präsentation und Name des Redners 20.04.2019

2. Target Group Analysis for products with savings Complexity of U/W Distribution Channel IFA Own Agents Endowment + LTC rider Endowment with annuity option + disability rider MLM Classical Endowment + Riders Bank Funeral Expenses Endowment w/o U/W Endowment with simplified U/W + acc. Riders Product Unit Linked with low SI + AccDis Titel der Präsentation und Name des Redners 20.04.2019

3. Examples: Endowment with simplified U/W Target Group: Lower income people with the intention to save money Distribution: Banks, MLM, own agents Mass product with low premium income -> keep the administration and U/W simple Just a few different packages available Perhaps sum insured for death lower than at maturity Perhaps automatic inclusion of an accidental death benefit U/W: e.g. health declaration until 10.000 € Sum at Risk -> no acceptance and administration of substandard risks Minimum possibilities of changes in the policy after conclusion Titel der Präsentation und Name des Redners 20.04.2019

3. Examples: Endowment with simplified U/W Target Group: Lower income people with the intention to save money Distribution: Banks, MLM, own agents Mass product with low premium income -> keep the administration and U/W simple Just a few different packages available Perhaps sum insured for death lower than at maturity Perhaps atomatic inclusion of an accidental death benefit U/W: e.g. health declaration until 10.000 € Sum at Risk -> no acceptance and administration of substandard risks Minimum possibilities of changes in the policy after conclusion This has nothing in common with a classical Endowment except the mathematics Titel der Präsentation und Name des Redners 20.04.2019

3. Examples: Gender Directive / Unisex Tariffs DD We understand that contracts concluded before 21.12 2012 are not affected, and that not every amendment in existing policies after 21.12. 2012 (e.g., mechanisms for review, renewal or adjustments) constitutes a new contract (with the obligation of unisex pricing). We feel that it should still be possible to differentiate between men and women with regard to individual underwriting. Otherwise it would jeopardize the principles of private insurance and MR’s ability to meet long-term commitments to clients, as also reflected by the supervisory requirements at European level (Solvency II: requirements for insurance companies' risk management and the calculation rules for u/w reserves). We feel that it should be possible to provide products which are only attractive for one gender (e.g. products with gender-specific components or target group products ). Münchener Rück

3. Examples: Premium – gender relevant? Annual premium for females in % of male premium* Disability and endowment: minor effect of risk factor „gender“ on premium, with disability occupational class dominates Deferred Pensions and Critical Illness: medium effect but can be significant because of premium volume Long-term care and term life: significant effect of risk factor „gender“ on premiums premium male LTC Annuity Disability Endowment CI Term life *) Only calculated for a specific age and term combination. May differ with other combinations. Gender-Directive

3. Examples: Possibilities for Term Life Use Male Table Low Sum Insured / Easy Product High Sum Insured / Complex Product Titel der Präsentation und Name des Redners 20.04.2019

3. Examples: Possibilities for Term Life Use Male Table Use mixed Table Low Sum Insured / Easy Product High Sum Insured / Complex Product Titel der Präsentation und Name des Redners 20.04.2019

3. Examples: Influence of Smoking Titel der Präsentation und Name des Redners 20.04.2019

3. Examples: Possibilities for Term Life Use Male Table Use mixed Table Smoker / Non Smoker Tariff Low Sum Insured / Easy Product High Sum Insured / Complex Product Titel der Präsentation und Name des Redners 20.04.2019

3. Examples: Influence of occupation Mortality: Preferred- and Non-Preferred Occupation

3. Examples: Possibilities for Term Life Use Male Table Use mixed Table Smoker / Non Smoker Tariff Full Preferred Lifes Low Sum Insured / Easy Product High Sum Insured / Complex Product Titel der Präsentation und Name des Redners 20.04.2019

3. Examples: Possibilities for Term Life The best possibilty depends on your Target Group, the Sales Channel and the expected sums insured! Use Male Table Use mixed Table Smoker / Non Smoker Tariff Full Preferred Lifes Low Sum Insured / Easy Product High Sum Insured / Complex Product Titel der Präsentation und Name des Redners 20.04.2019

4. Summary of trends Focus in product development turns from the covered risk to the target group and the sales channel. Depending on the target group and the sales channel the complexity of the product is determined. The same risk will be covered within one company by completely different U/W and at a different price. Products will be developed in a much closer cooperation with the sales forces Titel der Präsentation und Name des Redners 20.04.2019

Thank you very much for your attention! © 2009 Münchener Rückversicherungs-Gesellschaft © 2009 Munich Reinsurance Company Thank you very much for your attention! Ralf Günther