Why Qualitative Research is Key to Better Insurance Product Design
By Amanda Turcotte
NewsDirect, October 2021
As actuaries, we’re trained to see patterns in numbers and to design solutions that mitigate risk. But I can tell you from experience that while quantitative analysis and modeling are critical actuarial tools, looking at the numbers alone can lead to insurance products that don’t succeed in the real world the way the math says they “should.”
With new digital technologies, we have more data at our fingertips than ever before, but I believe it’s equally as important to bring qualitative research methodologies into your product development process if you want to design solutions that meet real needs in the market.
What Happens When You Neglect or Ignore Qualitative Inputs?
I’ll share an example from earlier in my career. I was working on a term life product and because my company had strong banking partnerships, we naturally thought our banker partners would be the perfect distribution channel.
We did interviews with several heads of insurance at some of our banking partners, and they said there would be an issue because bankers aren’t compensated like insurance brokers. Bankers are rewarded for assets under management, not premiums dollars written, and our product was never made a scorecard metric for the bankers. Since we didn’t fall into a commission structure or bonus target, the product sat on the shelf and had pitiful sales results.
Those heads of insurance were right, but we disregarded their input as anecdotal. We were confident in our models. They showed a healthy return on investment, and all the appropriate sensitivity analysis had great results. What we couldn’t get from digging into the numbers, however, was “will this product sell in our target market?” It was a hard way to learn that your product has to be a solution to your intermediary’s problem as much as your end user. To ignore qualitative inputs is to put your product at risk.
Qualitative Research Surfaces Important Information Early in the Design Process
Years later, I joined a startup that was passionate about human-centered design, which is a qualitative research methodology. When I arrived, they were already 18 months into a research project focused on microinsurance for low- and moderate-income populations in the United States. Our pilot program was creating a benefit program for taxi-drivers in New York City. I jumped right in and found myself at a taxi-dispatch center in Long Island City interviewing 15-20 drivers over a couple of days.
There were two things that surprised us from these conversations. First, we learned that drivers are motivated by a range of factors that drive loyalty (or not) to any particular taxi company. Many drivers gravitate toward whoever is easiest to work with and has an available car for them to drive that day. Driving a comfortable, well-maintained car is also a top priority. Our client taxi company owner was hoping that a really great benefit program could attract a loyal base of drivers.
Our assumption going into the project was that these drivers would really want health benefits. After all, isn’t the most valuable benefit in the employer-sponsored portfolio the health plan? We were wrong. Most of these drivers were eligible for public health benefits and were satisfied with the coverage and value these programs deliver. In their neighborhoods, the physician networks were strong and they had few barriers to access care they or their families needed. Of course, responses across the group were not consistent, but qualitative data analysis techniques give us the tools to recognize patterns and draw insights from long-form interviews with unique individuals.
A key insight was that a significant area of stress was the responsibility these drivers felt towards their families, where they were often the sole breadwinner for an extended-family household. Once we understood the areas of stress, we could better tailor a specific package of benefits to meet those needs, at a price point the sponsor could afford. The program was primed for success because the solutions met the end user’s real needs and it met our employer-client’s goal of achieving driver loyalty.
How to Implement Qualitative Research Practices
- Make qualitative research your first step. At Brella, we started interviewing potential customers before we designed our supplemental health product. We learned that it wasn’t necessarily the big health issues that were the problem, it was the financial shock of more common issues that created financial hardships for people with health insurance when they were sick or injured. Also, the deductible alone is not a problem—families often learn to cope with the cost of medical expenses related to routine care for mild issues. The problem is when more serious health issues create sudden, unexpected financial shocks that upend a household’s financial plan. This insight led us to design a plan that covers 13,000+ conditions from pneumonia to cancer with smaller benefits designed to ease the burden of the out-of-pocket costs people have when they get their health insurance at work.
We have a range of quantitative analysis tools to address quantitative problems—this is a skill set the actuary specializes in and is trained to use. Similarly, there is a range of tools in the qualitative analysis workbench. When addressing a question that can’t be answered with statistics or quantitative analysis—often the questions that start with “why” or “how”—the first step is to determine which tool is appropriate to apply toward finding a solution. - Stay engaged. It’s important for senior management to stay engaged in conversations with customers as the company and product scales. People’s problems are complex, and it’s important to speak to both customers and non-customers to learn why people are engaging with your solution and why others may be avoiding it.
We invest time ensuring senior management understands the assumptions, methodologies, and implications of our quantitative models. It’s critical to managing the business well, and one reason we see actuaries in senior leadership roles at so many insurance companies! We should take just as much time in qualitative analysis, and connecting management to the research and insights this brings to our business. - Share insights cross-functionally. At Brella, we share customer feedback cross functionally so that what we’re hearing in our Concierge support team and marketing user testing can be applied by sales and product development. Each opportunity to gain customer feedback is important. By considering cross-functional priorities, we can be sure we’re getting feedback in a way that helps not only the immediate team, but also benefits the entire organization.
We all take on significant expenses and risks when we develop new insurance products and take them to market. We finely tune our models to predict the claims per member and to anticipate things like changing interest rates, but I have found that we often don’t spend as much time scrutinizing our product adoption models, which are highly dependent on the people who will sell, buy, and use the product to meet real world needs. If we want our efforts to be profitable, we need to spend time talking to them. Sometimes our hypotheses are wrong—that’s great learning, and valuable information that allows the company to pivot early or re-deploy investment from a project that has fatal flaws.
Qualitative research can surface issues early and help you answer questions like: Can we really sell this product in the market? Why would someone buy this? Understand how widespread the need is, and importantly, understand how your product could be a solution you didn’t intend. Unexpected product adoption can drive unexpected utilization patterns, which can be even more problematic than if the product didn’t sell at all.
In my experience, the energy and expense of a qualitative research project has been small compared to the valuable insights I’ve gained. Don’t risk developing a product that doesn’t meet real market needs, and don’t put a product out if you’re not aware of all the ways it can be used.
If you’re new to qualitative research, check out the human-centered design kit from IDEO to get started. Want to read more? Check out books by Johnny Saldaña, one of the world’s leading scholars on qualitative research methods and processes.
Statements of fact and opinions expressed herein are those of the individual author and are not necessarily those of the Society of Actuaries, the newsletter editors, or the respective author’s employer.
Amanda Turcotte, FSA, is chief insurance officer at Brella Insurance. She can be contacted at amanda@joinbrella.com.