Insurers: Avoid “Black Swans” in Product Launches

We've all seen it happen: An IT project plagued with delays, changes and complications goes so far off the rails that it becomes a liability. Seventeen percent of these so-called "black swans" end up threatening a company's survival, according to McKinsey & Company and the BT Centre for Major Programme Management at the University of Oxford.

Black swans are projects that exceed budget by more than 200%--sometimes as much as 400%. If one such project is tied to a product or service launch, it's easy to see how it could threaten the future of an entire organization.

In the insurance industry, where new concepts and products must be developed quickly and away from the competition's prying eyes, a black swan can be devastating to the company. Insurers want to avoid a debacle like the launch of the federal government's healthcare website, which was plagued by glitches and malfunctions from its October 2013 rollout to March's enrollment deadline.

Unlike most insurance product launches, however, the federal government's healthcare website is tied to a law mandating that people sign up, which virtually assured its viability once the kinks were fixed. In contrast, when insurers launch a product, it must be compelling on its own by providing an attractive new service or an unbeatable value.

Colin Armitage, Original Software

Today, in a marketplace heavily influenced by e-commerce capabilities, many insurance customers seem more influenced by price than they are by brand loyalty, so a new insurance product launch must be trouble-free. That isn't easy, considering the complexity of the distribution network for insurance products. To reach customers, insurers use their own websites, call centers and online comparison services. The practice of creating white-label products for other companies and brokers also can complicate the process. Adding further convolutions are the myriad regulatory requirements, which vary by state and distribution channel, making development and deployment a major challenge.

To avoid a black swan, when insurers launch a new product, there should be no glitches or malfunctions in all the technical aspects of the launch, including the corresponding website. If the website does not function properly right off the bat, or displays incorrect pricing for a new product, the results can be fatal. Such errors can cause financial hits, the loss of customers and possible regulatory fines.

[Alfa to enhance rating, product development]

Disasters are avoidable, though. Implementing a quality management solution will help insurers introduce new products and get them to market in a timely fashion while still allowing for the rigorous testing that prevents glitches and compliance issues. Testing prior to a product launch is essential, and insurers should pay heed to the following when testing:

1. Validate all IT and business data and technology. To ensure the quality of the product and the systems supporting it, insurers must validate all relevant data and technology--on the IT and business sides.

2. Cover every aspect of a product launch. This includes relevant systems, data sets and processes, the people handling the product and all applicable regulations.

3. Test everything that could go wrong. Anything that could fail should be tested and retested to prevent malfunctions.

4. Test the live environment. Testing in a staging environment is common, but it's also less reliable. The only thing that matters is what is live, so test your production environment.

5. Use technology to ensure your software and website quality processes are fast and efficient. Functionality should include instant access to live information, real-time control of tasks and resources, workflow, and audit capabilities, as well as rapid system testing, regression testing, and user acceptance testing.

With insurance environments becoming increasingly intricate, insurers must protect themselves and their customers through thorough and transparent quality assurance. A quality management solution can ensure that the project and product launch stay on track--and help insurers avoid a black swan--which could be the difference between a product's success and its failure.

About the author: Colin Armitage is CEO of Original Software, a software testing solutions company serving more than 400 organizations, from multinational corporations to small development shops, operating in more than 30 countries.