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Digital Insurance 2.0: Benefits

The disruption and changes that are reshaping economies, industries and the businesses within them are providing unprecedented growth opportunities for employee and voluntary benefit insurers in terms of new markets, new customers and the demand for new products and services … creating Digital Insurance 2.0. The gig economy, evolving healthcare markets, shifting industry boundaries due to mergers and acquisitions (M&A), cost shifting from employer to employee, new behaviors driven by digital companies as well as new technologies and the growth of small and medium-sized businesses (SMBs) are at the forefront of these changes and opportunities.

Familiar Market, Brand New Look

While the outlook for employee and voluntary benefits is promising, the market no longer looks like it once did. In our new thought leadership report developed jointly between Majesco and Milliman, A New Age of Insurance:  Growth Opportunity for Employee and Voluntary Benefits Insurance in a Time of Market Disruptionseveral factors are converging to create change and opportunities in the employee and voluntary benefits landscape, as illustrated in Figure 1.

Figure 1: Forces creating opportunities in the employee and voluntary benefits market

The two largest generations, Baby Boomers and millennials, are in the midst of rapid transition. Their shifting positions within the general population, the workforce and business leadership are rapidly reshaping the market landscape. The behaviors and attitudes of both generations are substantially influenced by economic conditions, and digital technology is rapidly becoming an integral part in their lives. Gen Z is further intensifying this shift. These factors have helped fuel the rise of the gig and sharing economy, which is estimated to encompass 35% of the U.S. workforce today and is continuing to grow and expand.[i]

Together, these and other forces are creating employee and voluntary benefit needs and expectations that present unprecedented opportunities for growth. The growth in new affinity groups; increased demand for benefit portability; and the growing demand for new, non-traditional benefits and services that offer a simplified, satisfying customer experience are just a few of the dramatic shifts in needs and expectations.

See also: 4 Good Ways to Welcome Employees  

The market landscape will continue to rapidly transform as workers’ and employers’ needs and expectations shift, healthcare reform continues to change, industry boundaries shift with M&A, marketplaces evolve, new products are introduced and new competitors emerge from within and outside the industry. The surge in employee demand for innovative voluntary benefits are an increasingly critical element to attract and retain top talent for companies, particularly as we continue to see unemployment rates decline, as boomers retire and as the fight for technology talent intensifies.

Adding fuel to the market shift is the rapid emergence of new technologies like wearables and advanced medical devices and exploding data (among others) that are redefining the insurance market into one focused on well-being, lifestyle and longevity, rather than illness and death. Innovative benefits are increasingly focused on digital health and well-being, elderly care, pet insurance, college loan repayment and the demand for digitally enabled customer engagement.

Making the Marketplace and Workforce Changes Work for You

Greenfields and startups saw these opportunities early, but existing insurers are now quickly developing strategies and plans to capture this once-in-a-generation opportunity.  Insurtech has fueled significant investment by venture capitalists, spawning companies like Zenefits, Maxwell Health, ZhongAn, Discovery, Allan, Bright Health and Clover Health.  We now see existing insurers begin to focus on the opportunities, such as MetLife focusing on the SMB market. At the same time, the increased demand for portability of voluntary benefits due to the generational acceptance of frequent job change offers insurers a unique opportunity to cost-effectively capture employees as individual customers and to keep and grow individual relationships (and premiums), rather than losing relationships through attrition.

The robust, once-in-a-generation opportunity is seeing insurers of all types developing strategies and plans to capture business, including:

–Traditional worksite carriers specializing in supplemental products such as accident, cancer, critical illness, hospital indemnity, voluntary STD, term life, universal life and heart/stroke insurance are expanding their portfolios to include voluntary LTD, gap, dental, whole life or vision products.

–True group carriers that historically specialized in group products, including term life, basic AD&D, group STD and LTD, dental and vision are expanding their product portfolios to include accident, critical illness, hospital indemnity and gap insurance.

–Medical carriers specializing in major medical coverage have been acquiring supplemental benefit carriers or administrators to expand their portfolio with supplemental products. They may have a competitive advantage because of their ability to harness and analyze extensive medical data.

–Finally, we are seeing a range of other carriers including multi-nationals, P&C carriers, retiree market specialists, and others that are entering the market with unique voluntary benefits like pet insurance and legal insurance as well as expanded affinity market programs to capture the opportunity.

Underlying each of these is the need to respond with innovative products, plan designs, underwriting and pricing as well as new services, distribution channels and customer engagement approaches enabled by modern digital platforms. Thinking about the best strategic approaches to pursue to maximize the potential of these new products, services and processes will be critical for success.  Several approaches that are gaining traction include:

–Product differentiation: Insurers can differentiate themselves in a crowded market by offering a complementary portfolio of unique products, services and benefits. Differentiation may be achieved through value-added services (if exclusivity is achieved), creating an integration model across products, aligning products and benefits with a carrier’s identity, etc.

–Adjacent markets: Traditional group carriers are developing individual products to compete in digital, direct-to-consumer markets, and traditional individual carriers are developing group products to compete in the gig economy or growing affinity markets. Carriers operating in the consumer market are expanding into retiree markets, and carriers in the retiree market are moving into consumer markets.

–Product bundling: The demand for product bundling, or “combo” products, has recently increased. Sample combo products may include a group hospital indemnity product with accident, critical illness and term life riders or a universal life product with a long-term care rider. While these are just two examples, a large number of product combinations may be considered. In all market segments, and in particular the SMB market, combo products can broaden coverage, increase affordability and reduce or eliminate the need for underwriting by limiting anti-selection.

–Rapid product development: We are seeing an increasingly quick pace of product development, which is in stark contrast to the long shelf life of products before the ACA. In addition, carriers in the large market are frequently required to customize benefits and rates for distribution partners as well as employers. Keeping up with this pace requires a nimble technology solution for administration, billing, claims and operations. Carriers that are using newer technologies will have a distinct competitive advantage, especially in the large account and broker markets, as these technologies provide increased flexibility and speed to market. This competitive advantage also applies to the bottom line, as more efficient technologies can eliminate manual processes and reduce expense margins.

See also: Value in Informal Employee Networks  

–Partnering with emerging technology/insurtech: Insurance markets are being flooded with new insurtech startups. Some of these startups provide products or services that complement employee and voluntary benefit carriers’ value propositions. Existing carriers would be wise to identify the key startup companies in their markets and establish strategic, beneficial partnerships.

Reap the Benefits of This Unique Market Opportunity

There are a multitude of exciting opportunities for employee and voluntary benefits insurers in this rapidly evolving market. The 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, plus interesting mergers and acquisitions such as Aetna and CVS, and the emergence of new business models via insurtech and established insurers.

There is no longer a doubt or debate regarding the need to digitalize insurance, but this still continues to be an unpaved path for insurers. Not many understand the best way to achieve it. Insurers are still in the midst of legacy modernization of their core systems for strengthening their back-end processing capabilities, but most realize that these initiatives will fall short without digital transformations that will bring meaningful benefits to customers and ultimately to win them. In this new market, insurers will need a single platform to support individual, group, voluntary benefits and worksite across all lines of business and with a design flexible to adapt to new products, workflows, distribution channels and even devices. The platform will need to enable portability of voluntary benefits to individual policies as well as innovation of products where the same product can be offered as an employer-paid, voluntary or worksite product. Platforms must increasingly make it easy to customize plan options for groups.

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.

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.

It is a once-in-a-lifetime opportunity for insurers to redefine the market and competitive landscape in employee and voluntary benefits. Be one of them!

Rethinking Group and Voluntary Benefits

Traditional group and voluntary benefit markets are growing, especially in those areas such as critical illness and vision and any benefits that enhance the quality of life. Lifestyle products, such as pet insurance, health club memberships, legal coverage and identity protection are also on the rise. Carriers, however, may not have fully capitalized on the growth due to the need for innovations that necessitate digital technology advancements. Insurers need to rethink their strategies to capture new opportunities for growth.

With low unemployment rates and demand for knowledgeable employees across all industries, potential employees have more choices.  With those choices, group and voluntary benefits, while still widely used in many companies, are an intensifying pressure point for insurers to provide value and compelling tools for marketing, enrollment and service. And, given that many small to medium-sized businesses are some of the fastest-growing but still underserved due to the lack of cost-effectively reaching them, all this adds up to an increasing gap between what the market wants and needs and what group and voluntary benefits insurers are able to deliver.

Everyone is dissatisfied on some level.

Employees choices are expanding in a low employment rate market.  Add to this the shift from people staying with a company for their entire career, to changing jobs regularly to gain different experiences.  Further complicating this is the increasing shift to the gig economy that demands the ability to port insurance to an individual level.

Employers of every size are faced with providing more choices to attract talent and remain competitive, but they need more diversity of offerings and they need to be sold and serviced with more digital methods than they are now.

See also: Group Benefits: the Winds of Change  

Insurers, representing different segments, from traditional Group to Worksite, P&C, healthcare and new market entrants, see the trends and opportunities. They see what employees are demanding and what employers are wanting. They need to reach a broader market, especially small-to-medium businesses that can supply growth. Their systems, however, are legacy-based, with little digital engagement, minimal ability to innovate with new products, ability to integrate new value-added services or easily allow portability of benefits to an individual policy level, allowing insurers to retain and grow their client base.

Everyone agrees there is opportunity.

A growing number of insurers, MGAs, brokers and new entrants see the group and voluntary market as ripe for innovations that will drive growth.

Healthcare insurers, for example, have been saddled with exchange issues and mandatory coverages. Service expansion within employers could mean more “wallet-share.”

Traditional voluntary insurers see opportunity in digital and automated service for bridging the gap to reach small-to-medium businesses at scale. Where agent service is less feasible, digital service meets SMB criteria for ease of service.

Traditional worksite insurers may be in a stronger position to deal with individual policies, but they are now eyeing new marketing methods, channels and affinity partnerships to gain access to SMBs and niche groups. They see direct sales and robust portals as additional pathways to growth.

Property and Casualty insurers are also in the mix. Many of them have relationships with SMBs, and they are looking for ways to expand service within existing clients.

For any of these insurers, technology solutions can help open up opportunities, but they must first understand what the market wants and pair those needs with the right solutions.

What do SMBs really want?

Though many of these trends and drivers apply across all size businesses, SMB trends are like gold in the mine — there are opportunities that remain untapped. In many ways, SMBs look and act like the consumer market. For example, in Majesco’s SMB research, we found that SMBs were open to purchasing business-related insurance through an online retailer like Amazon or an exchange similar to Health Care Exchanges.[i] That’s a signal that group distribution to SMBs could take a new approach.

In what other ways are SMBs similar to consumer markets?

  • They are thirsting for products that will lower their risk
  • They are not unwilling to share relevant data if it gives them discounts or added protection.
  • They are ready for easy-to-understand, and easy-to-purchase solutions.
  • They are willing to break from tradition.
  • They long for personalized service.

What do employers of all types really want?

Human Resource departments are overburdened with complex benefit administration. One thing that would help, would be for insurers to simplify both HR administration and employee administration of their own plans.

Employers spend more time each year, attempting to educate employees on their benefit options. Anything that an insurer can do to either simplify their packages or improve their communications is valuable.

Employers also appreciate it when one insurer can put together packages of multiple products, so that they don’t have to operate a la carte for a dozen different insurance providers. And, they appreciate non-traditional benefits that will make their benefits package look valuable to both current employees and new hire prospects.

This all ties into what end consumers really want: clear choices, clear communication, broad selection, reduced complexity and the value gleaned from group buying power.

Knowing all of this, what do Group and Voluntary benefit providers really need?

What has been holding many insurers back is an emotional tie to an economic reality. They may see opportunity in small to mid-size companies, but they know their legacy systems and channels do not easily engage or support these companies.  Insurers are wondering, “How can I make this business work digitally, so that we can grow this market effectively? If we can’t build a business case, we can’t make an investment.”

See also: Integrating Group Life and Voluntary Benefits  

First, of course, group insurers need flexibility so that they can think and operate innovatively with new product, marketing and distribution possibilities. The business case has to account for harvesting business in new ways. Insurers need systems that can handle any size business … but especially small to medium businesses as efficiently as they can handle groups. The answers lie in technology improvements such as:

  • Modern risk management solutions with updated data and analytics that will feed relevant information to underwriting.
  • Top-tier rating capabilities with templates, rules and calculations for group products.
  • Better CMS capabilities and better digital capabilities for communication and personalization, with portals that will assist employers, brokers and employees with enrollment and self-service.
  • Technologies that support agile moves, with easier product modeling and testing and pre-built frameworks.
  • Cloud environments that won’t require massive capital investment.

Group insurers need end user engagement for better underwriting and to shift focus to preventive care. Wearables and other technology advancements have certainly helped, but there is room for more.

So, how will all of these needs and all of the changes in the group market drive technology investments? Is it possible for traditional group and worksite providers to keep an edge on incumbent players in the group market?

With the proper planning and implementation, a cloud-based group system can be a unification point for many of an insurer’s systems and processes. In our next blog, we will take an in depth look at technologies that will bring group capabilities to life. It is an exciting time and I hope that you will see group and voluntary market drivers as signposts for change.

This article was written by Prateek Kumar.

Integrating Group Life and Voluntary Benefits

Group and voluntary benefits providers vary in a hundred different ways. If you are a supplementary benefits provider that only provides one product to the group market, your data integration issues with multiple brokers and employers may still be complex. The more products you sell into the group and voluntary space, the more difficult your data integration will be.

Let’s say that your organization carries group life, voluntary supplemental life, dependent life, LTC and AD&D products. Without modernization, it is likely that your organization will have several hurdles to surmount. The first is to develop one consolidated repository from all of the data that is likely held on multiple systems. The second is to make that set of data available to the many different people and institutions that have a vested interest in access. On the flip side, insurers need to be able to receive data efficiently, as well. Carriers must be able to import data received from various benefit partners into their source systems through a single point of entry. Without this, entry or import issues could lead to benefit integrity issues, where data is are correct on one platform but incorrect on another. These types of basic data errors will quickly erode relationships with employees and benefit partners.

One way to help alleviate potential data issues is for insurers to focus on providing simple products with simple rate structures. Focus on guaranteed issue limits. Anything that has to be approved or underwritten after payroll deductions begin will cause deduction and billing issues. An exception could be made if an insurer is able to provide automated underwriting decisions at the point of sale.

The data requirements for employers and enrollment partners vary widely (in part because no standards exist), which places more of the data integration responsibility on individual carriers to interact with individual employers or benefits companies. So, the easier it is for your IT teams or vendor partners to make those connections, the better off you are likely to be when it comes time for an employer to renew their contracts. It makes sense to pursue a course that keeps your systems agile.

What about a fresh start?

When it makes sense, we regularly recommend that, instead of attempting to migrate current and past business to a new platform, insurers start fresh with a new system dedicated solely to the one program. If an insurer is moving into a new market or launching new products, why not learn from past system issues and product issues and embrace a clean slate, eliminating the need to translate and carry cumbersome legacy programming into a new environment? Start with a brand new set of products and filings, a brand new marketing plan…perhaps even a brand new name to signify the difference.

Within group and voluntary benefits, this approach makes its case when looking at just a few of the benefits, including simplified testing, fewer resources required to launch, less expense, less risk to the old system and old data and dramatically increased flexibility in data usage, capability development and integration points. Managers who touch the system are far more likely to trust the data they see, reducing a “checks and balances” approach to billing, reconciling, correspondence and a dozen other areas where the need for clean data and quick visualization are essential.

We’ll discuss more about data strategies in the coming months, including ways you can build effective technology bridges and keep a high level of data integrity.