In the not-so-distant past, group and voluntary benefits were known for their stability and consistency. The players were known. The products were established. Benefits packages didn’t vary much from year to year. The employee was simply concerned with the cost of premiums, particularly for medical, versus their annual pay increase. Group and voluntary benefits insurers lived in a semi-blissful state as brokers working with HR teams acted as agents, bringing in cafeteria-sized groups of policyholders.
The market wasn’t easy to enter. There were far fewer voluntary products than there are today. The top insurers cornered the market. They knew how to please employers, how to make a profit and how to protect their turf.
Then, a dam broke. First the ACA changed healthcare. Then came insurtech. Now, the convergence of talent competition, tech advancements, wellness initiatives, wealth management and multi-generational employees with varying different needs and expectations has made group and voluntary business into a new land of prospecting and opportunity.
Boardrooms started buzzing with rumors of gold in the hills, only they weren’t rumors. Voluntary and group benefits were and are a real area of financial opportunity. The top players still exist, but a growing number of insurers are entering the market, expanding the products they are providing and creating options in how they are packaged to meet the unique needs of a highly diversified and competitive employee base.
What’s so wild about group and voluntary benefits markets?
Majesco recently commissioned a Celent report to assess the opportunity as a part of our thought leadership and strategic marketing to provide another point of view on the future of insurance. We wanted insight on the opportunities, the technology platforms and ecosystems required to capture the market opportunities now unfolding. What is shaping the new need? What is today’s employer looking for? What is different about life for today’s employee? How do any of these answers relate to core platform development for next-gen group and voluntary benefits?
See also: Benefits of Deploying a Hybrid Cloud
Next-gen core platforms as an answer to channel expansion (and everything else)
At Majesco, we talk a lot about convergence and its impact on insurance. Real innovation happens at the point of convergence. Right now, all of the factors we list below are real pressures and opportunities creating points of convergence. These points all touch on issues that can be solved with a next-gen platform approach.
- New generation of customers – Millennials and Gen Z can shift ownership. This new generation of customers has the potential to turn the downward tide of insurance ownership over the last few decades. From a high in the mid-1970s with 72% of adults and 90% of households with two parents owning life insurance, that figure has fallen to a 50-year low; LIMRA’s 2010 life insurance study found only 44% of U.S. households had individual life insurance. Our health, wealth and wellness customer research highlights the demands from this new generation of employees. But do insurers have the products, value-added services and customer experiences they demand and expect?
- Employees shifting jobs. A Forbes article highlighted that the recent Prudential Financial’s Pulse of the American Worker survey noted that one in four workers are looking for new employment post-COVID. Nearly 80% are looking to employers for solutions to alleviate financial stress with benefits such as retirement plans, health, disability and life insurance, paid family medical leave and emergency savings programs. 40% of workers were more likely than a year ago to consider a job that offered better benefits. Is there a disconnect where employers could provide a broader set of benefits that meet this new expectation?
- Employers' desire to broaden benefits packages without increasing the HR workload. Talent is in short supply. Unemployment is the lowest it has been in over 12 months. Employers are in recruiting mode. With only so much they can offer in wages, they are moving to benefits and perks to make their companies look attractive and family-friendly. This means channels are opening for new and existing products.
- Employers' desire to hold on to their most valuable asset – employees — while keeping them safe and healthy. Whether an employer is self-insured (using large health insurers for repricing) or relies on employee population health to keep corporate premiums down, all are looking for ways to use perks and benefits to keep their employees healthy and foster wellbeing. Telematics and digital engagement are necessary to measure and make improvements.
- Benefit platforms in expansion/transition mode. Digital open enrollment, online benefit experiences and umbrella apps that contain all of an employee’s benefit information are on the rise. Add to this the demand for different plans to meet the diversity of employees – sometimes across four generational groups. To get invited to the platform party, insurers must be ready to play in the digital ecosystems that have already been created by some of the large benefits consultancies. Platforms and partnerships are lead players in the future of group and voluntary benefits insurance.
- New types of insurance. The economy is changing. Supply and demand are inconsistent. COVID-19 is still affecting customer behavior. Global politics seem unstable. Cyberattacks are frequent and disruptive. Individuals are looking for some stability for their finances. According to Aon, in 2020-2021, voluntary insurance offerings among employers grew 27%. Accident insurance, legal, identity theft, hospital indemnity and auto/home insurance all grew over 30%. This is astronomical year-over-year growth — a true Wild West scenario! And don’t forget about the gig employee ---where benefits could be gig on and gig off. Insurers can now look at any area of financial risk and consider where they may be able to create a product that will sell — if they are prepared to plug their systems and processes into platforms and ecosystems.
- Insurance purchase through employers. Even traditional products, such as auto and home insurance, are seeing an uptick in the group and voluntary benefits channel. The draw isn’t just a better group rate, but that premiums can be taken from paychecks. Employees can enroll and “forget about it.” It helps them manage their overall financial and risk needs, rather than working with multiple insurers or agents. This, in turn, drives up loyalty to employers. The more attractive services that the employer can provide, the more difficult it will be for employees to job hop. Who is out there creating the next new insurance hub or employer aggregation tool for P&C and other traditional products?
- Advanced data analytics. An employee is already a “known” person. They are somewhat vetted by their employers to be stable, reliable and less prone to risk. Product design and mix are in constant flux as insurers add more attractive products and product features to their portfolios, driving the need for more advanced data and analytics to understand what employers, sponsors and participants find appealing and to drive greater participation, enhance customer experiences and enable new products and services.
- Digital engagement. The importance of digital capabilities is now core to insurers' offerings, regardless if they are group benefits or individual products, to drive simplicity, participation and growth. The promise of digital engagement is a two-way channel — better communication into the insured employee and more informative data coming in from the employee. Digital engagement and data analysis can create another loyalty bridge between insurers and employers as they both begin to see the positive effects of understanding the employee population.
There are dozens of additional reasons that next-gen core platforms are going to rewrite group and voluntary benefits insurance, but the most basic is this:
Technology has advanced to the point that it fits the gaps created by convergence issues.
Every customer, employer and insurer need can now be met with next-gen insurance systems that are designed to fit. Insurers needed systems to be adaptable enough to create products and flexible enough to stand alone or fit into partner platforms. They needed solutions that would provide the same high-level digital experiences that they may be giving to individual policyholders who purchase through agent, broker or online channels. They also needed systems that could effectively move from “group” underwriting and purchase to “individual” underwriting, purchase and administration. This would allow for policy portability and a greater degree of population understanding and control.
Is there a formula for group and voluntary benefits success?
The answer to the Wild West in group and voluntary benefits is to digitally prepare for rapid flux.
