What a contrast in the L&A market! At the same time that individual life insurance sales and annuity sales are struggling, group and voluntary benefits are growing in popularity as the demand for new products and options emerges to meet new employee needs and expectations, particularly with Millennials and Gen Z. In particular, many of these innovative new products offer employees interesting value-added services at lower cost, and at low to no cost for the employer. Indeed, in a survey of employers by Willis Towers Watson, 92% of respondents said they expect that voluntary benefits and services “will be at the forefront of their strategic thinking and important to their employee value proposition over the next three to five years,” which was up from 59% in 2013.[i]
If this is the case, incumbent as well as new entrant Group and Voluntary Benefits insurers MAY be in a better position to capture the wave of growth and innovation opportunity better than any other market segment-focused carrier. The case for Group and Voluntary growth is bolstered by its ability to fit into the Digital Insurance 2.0 Product Framework outlined in Majesco’s recent thought-leadership report, Digital Insurance 2.0 Playbooks for L&A and Group Insurers. Looking at the market traits, we see some of the dimensions that are needed for successful new product endeavors.
- Marketability/Scale: Group and Voluntary products are carried into the marketplace in volume, offered by employers who have a vested interest in their uptake for employee satisfaction and to use as a tool to attract the best employees in a market of low unemployment and a fight for talent.
- Motivation: Employees are growing in their expectations, abilities and desire to make choices that will give them personalized options and protected futures. Employers want to broaden their voluntary benefit offerings with new and original ideas for associate coverage, meeting the shifting needs of a new generation of employees.
- Breadth: Technology will enable Group and Voluntary carriers to transform their previous Insurance 1.0 models and processes in ways that will allow them to more easily and effectively create broader and more desirable experiences, products and satisfaction in a Digital Insurance 2.0 world.
- Visibility/Journey/Ability: Many times, voluntary benefit coverage is accomplished online in a variety of different digital ways … meaning that employees are automatically presented with the option to purchase at least once per year during open enrollment. (We’ll talk about online capabilities later in this blog.)
- Permanency: Group and Voluntary carriers most commonly offer their products for at least one year…the contractual period of time. They won’t consider dropping during the year and in many cases, wouldn’t be able to drop mid-year without a life event change. Most employees will continue their coverage year-to-year and many will begin to take their coverage with them as they move into the Gig economy or other jobs, offering a unique opportunity to grow the customer relationship as they shift from a group / benefit coverage to individual coverage.
Understanding these shifting traits and how products may be customized to fit is the beginning of building a new digital playbook for a new market dynamic. In Majesco’s recent thought-leadership report, we examine how Group and Voluntary benefit insurers, incumbent and new entrants, are poised to capture the wave of growth and innovation with increased market share IF they are willing to transition their traditional Insurance 1.0 operational models to Digital Insurance 2.0 models. We outline what it means to make this shift and how these insurers can thoughtfully take advantage of all that digital enablement has to offer.
Challenges are tied to additional opportunities
The changing behaviors, expectations and lifestyles of the younger generations in the general population and the workforce, are having a significant impact on the types of benefits employers must offer to attract and retain the talent they need, which is intensifying with the record low unemployment rates. While the outlook for group and voluntary benefits is promising, the market no longer looks like it once did. Many factors are converging to create challenges and changes in the employee and voluntary benefits landscape, as illustrated in Figure A.
Figure A: Forces creating opportunities in the benefits market
For example, the rise of the Gig Economy means that many employees do not expect to remain in positions for extended periods like their parents did, yet MetLife’s employee benefit study found that 68% of employees agreed that their loyalty would increase for an employer that offered portable benefits, and 62% of employees were interested in portable benefits in 2016, up from just 50% just two years earlier.[i] Overall, 72% of employees said the ability to customize their benefits would increase loyalty, and 52% said they would be willing to bear more of the cost of their benefits in order to have the options that meet their needs.
Additionally, Millennials and GenZ are carrying large student debt loads while many Baby Boomers are delaying retirement. In line with these changing needs, there are several voluntary benefit options that are expected to grow in popularity from 2016 to 2018 among mid- to large-sized employers, according to the Willis Towers Watson study mentioned above. These would include:
- Long Term Care — from 30% to 52%
- Student Loan repayment — from 4% to 26%
- Pet insurance — from 36% to 60%
- ID theft — from 35% to 70%
- Critical illness — from 44% to 73%
The customer journey for Group and Voluntary benefits is a unique digital issue
In individual direct sales, insurers are waking up to how important the customer journey really is. With Group and Voluntary products, the customer journey is even more crucial because it is a key facet of selling the product idea to the employee through the employer. Employers are looking for products that can either be completely administered between the employee and the insurer OR those that can be easily plugged into their existing online enrollment tools making the enrollment and servicing process easy. By leveraging employee benefits software, Group and Voluntary benefit providers can build a plan that simplifies customer experiences.
To help insurers jumpstart their Digital Insurance 2.0 playbooks, we have leveraged our key research findings, assessed the new business models and products that have entered the market via InsurTech, and looked at them against the playbook frameworks to provide guidance in developing their unique playbooks. In the Digital Insurance 2.0 Playbooks report, we review some of these innovative new products in detail.
Competing at a Digital Insurance 2.0 level
Beam Dental, for example, makes a superb case for what happens when a group health insurer uses an innovative new model with Digital Insurance 2.0 technology and precepts to build an award-winning product.
Beam offers group dental coverage targeted at small and medium businesses. Its insurance plan includes a smart Bluetooth-connected toothbrush with a mobile app that allows users to track brushing performance, find dentists and take advantage of plan incentives. Brushing “scores” result in discounts.
Below is a sample of Beam Dental’s Digital Insurance 2.0 Scorecard. For a more in-depth look at Beam’s Digital Insurance 2.0 framework, download the report.
Beam has proven that digital preparedness and innovative thinking can open new doors of revenue to Group carriers. Is your organization next? The time is ripe for creative business models, products and services such as employee benefits software that shifts into the realms of Digital Insurance 2.0 by re-envisioning models within the context of digital possibilities and desired engagement. Using the framework and a playbook model, insurers can paint an effective picture of their unique value proposition, considering it against the backdrop of competitive playbooks.
You may be sitting on the next new innovative model or product for the Group and Voluntary market, but you are unsure where to begin. For inspiration and a plan for Digital Insurance 2.0 playbook development, be sure to download Digital Insurance 2.0 Playbooks for L&A and Group Insurers. As you look to capture the growth and innovation wave and you begin your journey to Digital Insurance 2.0, we also encourage you to put your playbook into action with the digital capabilities available through the Majesco Digital1st Insurance, Majesco L&A and Group Core Suite and Majesco CloudInsurer® platforms.
[i] “Work Redefined: A New Age of Benefits,” MetLife, https://benefittrends.metlife.com/us-perspectives/work-redefined-a-new-age-of-benefits/
[i] Willis Towers Watson, Employer-provided voluntary benefits grow in importance with expanded offerings: Key insights from the 2016 Voluntary Benefits and Services Survey, March 2016