Tag Archives: group insurance

Group Insurance: No Longer Overlooked

Group insurance is an approximately $65 billion market. While growth has been consistent but moderate at 3.5% to 4% per year over the last six years, changes in the employee-employer dynamic are reshaping group benefit needs and making investments and growth prospects in the sector more attractive.

Carriers’ initial response has been to drive profitable growth by streamlining their operating models and making incremental investments in technology to upgrade their capabilities. However, employer and employee needs and expectations continue to rise.

Employers are using innovative benefit solutions to differentiate themselves when recruiting and retaining top talent. Employers recognize that employees no longer have the patience or time for benefit plans that are cumbersome to enroll in and manage. They’re looking for holistic solutions that employees themselves can direct. In addition, employees have different needs based on income diversity and – more so than in recent memory – generational circumstances. Consequently, they’re looking to employers to offer customizable solutions that help them meet their unique needs in a user-friendly fashion, 24/7.

Moving forward, five trends will continue to shape the group insurance market and influence carriers to move beyond incremental investment to fundamentally reposition their business and operating models. These trends will motivate group insurers to provide more measurable value for employers, employees and intermediaries by delivering more integrated products and services and better customer experiences. We also expect to see a) More and more players in adjacent markets such as health, workforce management and wealth to expand into market niches that overlap with group insurance; and b) More venture capital to flow to insurtech solutions that meet the group space’s evolving needs.

Group insurer solutions will take advantage of the convergence of
health-wealth-career management

Consumers are increasingly managing their health, wealth and career decisions in a coordinated way because they all affect the same wallet.

Decisions about health range from ways to maintain fitness to ensure their quality of life (and thus ability earn an income) to selecting the right combination of benefit products to reduce the key risks that could knock them and their families off track for an extended period of time. As people at the higher end of the socioeconomic scale live longer and healthier lives, they’re looking to manage their personal wealth to support their and their families’ financial positions for longer periods of time.

Moreover, as employers compete for top talent, they are increasingly providing benefits and programs that address the concerns their employees have about their and their families’ physical, mental and financial health. Employers are focusing on a) health and return to work programs that contribute to worker productivity and performance, and b) employee development programs.

See also: How to Unlock Group Insurance Market  

The confluence of these factors is creating opportunities for group insurers to provide employers with solutions that help them improve their employees’ health, wealth and professional satisfaction. Some carriers are responding by offering more holistic solutions, either by expanding their own product offerings or through partnerships with others in which they can white label products. Other carriers have decided not to expand their own product offerings, but instead focus more on the wealth/ retirement or health. In either case, they’re trying to make their products and services fit with the other benefits employers’ chosen platforms offer.

Group insurers will look to serve more market segments

Many group insurers have long focused on certain market segments. For example, some have been dominant in the national account or large case segments and others in the small or mid-case account segments.

Each market segment requires different operating model strengths. But, as employer and employee needs increasingly change, the traditional lines between small, mid, and large account segments are starting to blur.

Group carriers are now rebuilding core capabilities and introducing new ones in order to more profitably serve a broader range of employer segments. Recent M&A activity has resulted in significant new capabilities. For example, the Hartford, which acquired Aetna’s group life and disability business, and Lincoln Financial Group, which acquired Liberty Life, are examples of the priority group players are placing on adding or enhancing capabilities (such as integrated absence management) to serve broader segments of the market.

These moves indicate that the carriers which traditionally have been stronger in the small and mid-markets are building new capabilities and transforming their target operating models in order to serve the unique needs of larger account segments. Moreover, large account carriers are building new capabilities and changing their target operating models in order to standardize and automate their solutions to more profitably serve smaller market segments.

Group insurers will increasingly respond to increased absence management needs, even for down market clients

Absence and leave management services are a core service in the disability market and demand is growing.

There has been a spike in requests by employers for absence and leave services as a result of:

a. The January 1, 2018 New York Paid Family Leave Law, which is the most significant paid leave program in the US;

b. Recent localized laws, such as the Paid Sick Leave Ordinance (PSLO) and Paid Parental Leave Ordinance, have increased the local complexity of employer leave and absence tracking; and

c. Increased cross-selling of disability, FMLA, and voluntary products makes the need for claims/absence integrated services more relevant.

In response to these changes, carriers are increasingly adding absence services and platforms to their repertoire. For those familiar with disability, FMLA, and other products, absence is not new. For those who aren’t, tracking the high number of federal, state, and local laws is a tremendous value-add to their client base. In order to improve customer service, carriers are integrating claims and absence into an “event” experience to radically reduce the burden of correspondence that explains payments and absence rights.

M&A activity and insurtech investment will continue to shape in the group market

Moving upstream and downstream among employer segments requires new capabilities.

The traditional way of doing business will not meet changing employer and employee expectations. As a result, M&A, insurtech investment, and maturing group technology solutions will continue to influence the group market in three ways:

a. In addition to the M&A activity we previously noted, there have been other transactions in the group space, including Meiji’s acquisition of Stancorp and Sumitomo Life’s acquisition of Symetra. Acquisitions like these potentially provide much needed capital investment for group players looking to take advantage of the convergence in the space and the opportunity to profitably expand across traditional market segments. This in turn could raise the bar for existing players, especially in areas where they need i) broker or consultant customers to recommend their products, and ii) to address employer needs to respond the changing employer- employee dynamic.

b. There also have been deals adjacent to group benefits, such as CVS’s acquisition of Aetna and the Amazon, Berkshire and JP Morgan joint venture. These developments may impact more than product solutions, pricing and omni-channel distribution and service; they also could significantly reshape the employer and employee customer experience.

c. Group carriers traditionally have often been reluctant to make significant investments in technology and when they have, they’ve attempted to build new technology solutions in-house. However, with the exponential growth of insurtech and the maturation of group-focused core technology, some carriers are finding it both necessary and easier to acquire new solutions rather than build them. Consequently, group insurers are accelerating their investment in core areas, including enrollment, policy administration, and claims, thereby allowing them to improve in a number of areas from quote to close ratios, and from employee program participation to claims management.

Group insurers will continue to build digital & data architecture and expand analytic capabilities

Artificial intelligence, predictive analytics, behavioral economics,
machine learning, robotic process automation, among other technological developments, represent opportunities for group insurers to better understand, acquire, serve and retain customers in new and more cost effective ways.

Carriers are choosing to invest in new digital capabilities to improve customer and channel segmentation and experience, as well as enhance their ability to acquire and retain the right customers. This helps carriers anticipate employer needs and enables solutions to change as employers do. It also promotes better carrier understand of employees’ broader needs beyond the employer relationship.

Also of note, group insurers have long had a significant amount of data and in recent years have taken advantage of advances in big data, reduced cost of computing power, and commoditized analytic techniques to increase their use of data for decision-making and insight generation. However, many of the advances in data have still not translated to improvements in employee level data across the value chain.

See also: Group Insurance: On the Path to Maturity  

New investments in data will help group carriers 1) Improve the data architecture that is critical to improving workflow and customer experiences, 2) Focus on employee level data to better meet the needs of employees – especially in the areas of portability, and 3) Incorporate third-party and unstructured data with employee level data, which will help them be more consultative with employers about the design of responses to employee needs.

Implications

  • Group insurance will be increasingly important as a business platform for addressing employee health, wealth and career needs, as well as employer needs to offer their employees differentiated solutions.
  • Existing players cannot stand still because they face converging forces that are fundamentally transforming group business and operating models. Carriers that are business units of larger insurers which have underinvested in group capabilities (even if the group business unit has been consistently profitable) need to be particularly attuned to these developments.
  • New group players, including those resulting from M&A, should do more than just make the mergers “look good on paper” but sincerely focus on designing new customer-centric operating models that leverage new business and technology architectures to create excellent B2B2C experiences.

This report was written by Jamie Yoder, Marie Carr, Jim Quick, Mike Mariani, and Josh Schwartz.

What SMBs Want in Group Insurance

In my last blog, we established the rationale for group and voluntary benefits providers to consider new business and technology strategies. The market is changing. Market drivers should be pushing carriers to recreate themselves to meet the needs of employers and employees.

As a part of that blog, we touched on group and voluntary benefits for the small-to-medium business market. Nearly every group insurer recognizes that there is opportunity within the SMB market segment, but they need confirmation that: a) They understand what SMBs really want from group and voluntary benefit providers, and b) they grasp how they can employ technology to meet those needs.

So, in today’s blog, we will look at the answers to those issues in greater detail.

What do SMBs really want from their group insurance providers?

SMBs want insurance without huge costs. They care about premiums, and they pay attention to how much it costs to simply administer benefits. It takes time to educate employees, enroll them and handle their day-to-day benefit issues. SMBs recognize when an insurer is taking steps to remove administration hurdles and headaches, and they appreciate a streamlined, automated process that will reduce internal administration.

SMBs see innovative voluntary benefits as a differentiating employee acquisition and retention strategy. The unemployment rate is at a record low 4.1% in the U.S., plus we are seeing an increasing move of millennials starting new businesses and a shift of many into the gig economy.  This means that job seekers have options and choices. So, employers must have competitive and compelling voluntary benefits packages that meet the needs and expectations of a changing workforce.

Wearable technologies make a great addition to SMB employer offerings. Employers want health-focused, wellness incentives for healthy habits and exercise to keep costs low but also to align to changing expectations. In our new consumer research, The New Insurance Customer – Digging Deeper, we found that all generations use fitness trackers like Fitbit and that using a fitness tracker is one of the top three digitally performed activities that will have an impact on insurance. So, group and voluntary benefits providers that can integrate products with wearables or mobile tracking may get a second look.

SMBs want to have a wider selection of voluntary choices from their benefit providers. With the emergence of a new set of employee expectations and a competitive marketplace for talent, particularly for millennials and Gen Z, many companies are recognizing the value of voluntary benefits and the potential to offer options that appeal to the unique needs of different employee segments. Each segment has different needs and expectations, and a one-size-fits-all offering does not necessarily work.

See also: SMBs Need to Bulk Up Cyber Security  

Millennials and Gen Z are carrying large student debt loads, and many Baby Boomers are delaying retirement and are facing rising healthcare costs and low wage growth. In line with these issues, there are several voluntary benefit options that are expected to grow in popularity for these different generational groups among mid- to large-sized employers, according to Willis Towers Watson:

  • Long-term care – 30% now, 52% by 2018
  • Student loan repayment – 4% now, 26% by 2018
  • Pet insurance – 36% now, 60% by 2018
  • ID theft – 35% now, 70% by 2018

Self-funding is an area of interest for SMBs. SMBs that have carefully weighed the risk of self-funding, and that have a reasonably healthy employee base, stand to save a tremendous amount of money. Self-funding, however, still requires a carrier of some kind for administration purposes. Insurers that design self-funding plans into their overall offering stand to gain, because they can offer it as a “future” option for employers that may want to change or as an instant option for those that are ready today.

Group insurers can also look to the consumer market for preference and demand trends. In Majesco’s report, The Rise of the Small-Medium Business Insurance Customer, we found that, “insurers should reevaluate their digital and business strategies for small business owners and align them more closely to personal lines.” We also found that:

  • SMBs are thirsting for products that will lower their risk. SMBs are highly risk-conscious, and very in-touch with their employees, making them an excellent market for group products. The desire for lower risk also makes them likely to be open to technologies that will assist.
  • They are not unwilling to share relevant data if it gives them discounts or added protection. This will allow insurers to better control risk over smaller employee populations.
  • They are ready for easy-to-understand and easy-to-purchase solutions. The smallest businesses, those with one to nine employees, represents the largest share of the SMB market, yet they find it much harder to research, buy and service insurance. New insurers or MGA startups are capitalizing on this gap in service.
  • They are willing to break from tradition. SMBs have extremely low loyalty rates across all lines of insurance, and they are highly receptive to insurers with non-traditional offerings or value-added products.
  • They long for personalized service. This doesn’t mean that they need face-to-face service. It means that they need an organization that can customize products to fit the business need and have easy-to-use touchpoints for administration and communication.

What should group insurers seek from technology to meet the needs of the SMB market?

Here are some high priorities that group insurers should consider when they are looking at technology options:

Digital front end

In all of Majesco’s research, we have found that the most important driver for SMB buyers is ease of research, purchase and servicing. A digital front end will provide engaging, easy enrollment. It should come with claims technology and tracking that makes the process simple. It should somehow manage a process of continual engagement. It should provide service options that make it simple for SMB HR departments to administer the products, plus it should offer self-service administration options for employees to remove simple tasks from HR.

Speed to market with new products

Open enrollment happens every year, and it is on a fixed schedule. New products can’t simply be rolled out at any time. Insurers need quick methods for defining and testing new products, so they can offer and be ready when employers are putting together their benefits packages. Technology can help. Today’s cloud-based group product alternatives include pre-built rates, rules and products that can be up and running in a very short time. Group insurers can use these outside of core systems to add new products, services or whole new lines of business.

This is especially effective when considering the development of new personal property and casualty insurance as voluntary insurance. Many group insurers can’t consider these new types of offerings without first acquiring the technology to make it happen. Speed-to-market solutions are now far easier to implement and use than with traditional group systems.

Actionable data and consumer insights down to the individual consumer

Group products, and even SMBs, aren’t all governed by HIPAA-level data constraints that amalgamate individual data into company or community pools. Many types of voluntary products will yield individual data that can help employers and insurers manage risk.

Actionable data, such as social data, wearable data and behavioral data, should be gathered and analyzed. Insurers need a data framework in place that will add value to employers and employees.

An ecosystem for benefits administration

Group insurers should avoid burning their IT budgets with over-customization, or intensive integration or the maintenance costs of trying to keep obsolete technologies alive. An ideal technology solution leverages the best solutions in the market by building an ecosystem of best-of-breed solutions coupled together with a framework that will allow the ecosystem to accept plug-ins for today’s and tomorrow’s services and technologies.

The digital era shift is realigning fundamental elements of business that require major adjustments from insurers for them to survive and thrive. There are a multitude of potential futures for group, employee and voluntary benefits insurers in an increasingly volatile world. The rapid and unprecedented pace of change will drive out old business models and allow new ones to flourish with the introduction of products and the offering of new services, and much more, from both new insurtech startups and established insurers.

See also: Cyber Insurance Needs Automated Security  

At the heart of the disruption is a shift from Insurance 1.0 of the past to Digital Insurance 2.0 of the future. The gap is where innovative insurers are taking advantage of a new generation of buyers, capturing the opportunity to be the next market leaders in the digital age. The next wave of growth is expected to come from their ability to provide superior customer experience – not just in comparisons with other insurers but also in comparisons to all companies with which their customers interact.

There will be constant pressure from startups backed by venture capital, the M&A between traditionally different businesses like CVS and Aetna, the entry by big tech such as Apple, Amazon and Google into insurance and the digital transformation of existing insurers in the digital race to meet those needs and capture more share of the enormous opportunity in the market.

The time for understanding, planning and execution is now to capture these new opportunities for group, employee benefit and voluntary insurance. Those who recognize and rapidly respond to this shift will thrive in an increasingly competitive industry.

This article was written by Prateek Kumar.

Group Insurance: On the Path to Maturity

The group insurance market shows real promise, but most carriers are still trying to determine the best path forward. Moving from being in a quiet sector to the front lines of new ways of doing business has shaken the industry and confronted it with challenges – and opportunities – that many could not have foreseen even a decade ago.

For starters, let’s take a look at where the market is right now. Three recent trends, in particular, are having a profound impact:

  • The Affordable Care Act, which has led health carriers to increase their focus on non-major medical aspects of the parts of their business that the legislation has not affected. In turn, this has led to intensifying competition.
  • Consumerism, which has resulted largely from workers’ increasing responsibility for choosing their own benefits. This has created disruption as employees/consumers have become increasingly dissatisfied with the gap between group insurance service, information and advice and what they have come to expect from other industries.
  • The aging distribution force, which means that experienced brokers/agents are leaving the work force and are being replaced by inexperienced producers at decreasing rates or are not being replaced at all.

Group players – which historically have been conservative in their market strategies – focus on aggressively driving profitable growth. To do this, they are concentrating on four key areas: 1) growing their voluntary business, 2) streamlining their operating models, 3) re-shaping their distribution strategies and 4) making significant investments in technology.

See Also: Long-Term Care Insurance: Group Plans vs. Individual

Group insurance is no longer a quiet sector of the industry but instead is in the front lines of developments in customer-centricity and technological innovation.

Growing the voluntary business – The voluntary market has been of interest to traditional group insurance carriers for more than two decades, but the success of the core employer paid group insurance business has resulted in a lack of robust voluntary capabilities. However, with employers shifting more costs to employees, voluntary products have become a key way to manage group benefit costs while expanding the portfolio of employee products.

Some carriers are expanding their voluntary businesses by offering a modified employer paid group product in which the employee “checks the box” to pay an incremental premium and receive additional group coverage (e.g., long term disability (LTD), life and dental). Other carriers are exploring models where employees can sign up for an individual policy at a special premium rate. The former example is a traditional voluntary product, while the latter example is a traditional worksite product. For most carriers, adding the traditional voluntary product is fairly straightforward because it is still a product that the group underwrites. However, more carriers are looking into the worksite product (which AFLAC and Colonial Life & Accident have executed particularly well) because, with the passage of the Affordable Care Act, some see a potential opportunity to reach small businesses that previously may not have been interested in group benefits.

Streamlining operating models – Group carriers also are trying to develop streamlined, cost-effective, customer-centric operating models. The traditional group insurance operating model has been built around product groups such as group LTD, short-term LTD, dental, etc. However, the product-based model is inefficient because it increases service costs, slows speed to market and fails to support the holistic views of the customer that enables carriers to serve customers in the ways they prefer.

Group insurers are now investing both time and capital to understand how to remove inefficient product-focused layers of their operations and streamline their processes to profitably grow. Many have focused on enrollment, which cuts across products and is a frequent source of frustration for everyone. Carriers are frustrated because they can spend days and weeks trying to ensure that everyone is properly enrolled in the right plan. Moreover, what should be a fairly straightforward, automated process often can require considerable manual intervention to ensure that employees are properly enrolled. In the meantime, employees are frustrated with recurring requests for information and the slowness of the enrollment process. Employers are frustrated by the additional time and effort that they have to expend and the poor enrollee experience. Producers become frustrated because the employer often holds them accountable for the recommended carriers’ performance.

Reshaping distribution strategies – In terms of distribution, private exchanges initially promised to connect group carriers with the right customers using extremely efficient exchange platforms. As a result, many group carriers joined multiple exchanges expecting that this model would put them on the cusp of the next wave of growth. However, success has proven more elusive than they expected, largely because they’ve spread themselves too thin across too many, often unproven exchanges. And, while private exchanges still offer great potential, many carriers have now begun to rethink their private exchange strategies with the realization that the channel is not yet a fully mature group insurance platform.

Investing in technology – Whether group carriers are focusing most on entering the voluntary market, streamlining operations or refining their private exchange strategies, successful in all these areas depends on technology. Group technology investments have lagged behind the rest of the industry. The reasons for this range from a lack of proven technology solutions that truly focus on the group market to downright stinginess and the resulting reliance on “heroic acts” and dedication of committed employees to drive growth, profits and customer satisfaction. However, viable technological solutions now exist – and they are probably the most critical element in the march toward effective data integration, efficient customer service and ultimately profitable growth. Every facet of the business –underwriting, marketing, claims, billing, policy administration, enrollment, renewal and more – is critically dependent upon technological solutions that have been designed to meet the unique needs of the group business and its customers. Prescient group carriers understand this and have been investing in developing their own solutions and partnering with on-shore and offshore solutions providers to fill gaps in non-core areas.

Whatever their primary focus – growth, operations or distribution – a necessary element for success is up-to-date and effective technology.

A market in flux

In conclusion, group insurance is in a time of transition. Major mergers and acquisitions have already started to reshape the market landscape, and existing players are likely to use acquisitions and divestitures as a way to refine their market focus. Moreover, new entrants are looking to exploit openings in the group space by providing the kind of focus, cutting-edge product offerings and service capabilities that many incumbents have not. These developments show group’s promise. The winners will be the companies that wisely refine their business models and effectively employ technology to meet the unique needs of new, consumer-driven markets.

Implications

  • We will continue to see group carriers focus on the voluntary market, especially traditional group-underwritten products. They will look to not only round out their product bundle by providing solutions that meet consumer needs, but also integrate their offerings with other employee solutions like wealth and retirement products.
  • Group insurers will continue to aggressively streamline processes to promote productive and profitable customer interactions.
  • Private exchange participation strategy needs to align with target markets goals, including matching products with appropriate exchanges. Focusing on participation means that group carriers avoid spreading themselves too thin trying to support the various exchanges (often with manual back-end processes).
  • Group carriers can no longer compete with antiquated and inadequate technology. Fortunately, there are now group-specific solutions that can make modernization a reality, not just an aspiration.