Heroic Simplicity: Rebuilding Disability Insurance and Absence Management Operating Models

Imagine that you own a trucking company doing business in the neighboring states of Oregon, Washington, and Idaho, hiring drivers from all three states, and staffing distribution centers in all three of them too. The employees you hire don’t necessarily do most of their work in the state of their residence. You frequently shift workers from one distribution center to another, depending on the season and the level of workload. Keeping track of your workers’ schedules and their taxes used to seem like your most difficult HR task, but then came dealing with employees on leave.

Washington, for example, has active Paid Family Medical Leave laws. Oregon has laws, but they are not yet fully enacted. Idaho has no Paid Family Leave laws. If you own a company in Idaho, it’s your choice whether you cover employees or not using some other way.

In theory, state-sponsored PFML is outside of an employer’s voluntary benefits plan, but in reality, it interacts with Disability Insurance, Critical Illness Insurance, Voluntary Short-Term Disability, and Long-Term Disability plans. Any corporate benefits program, from basic PTO to Worker’s Compensation insurance can be affected by the differing regulations related to PFML. As an employer doing business in three states with varied rules, your HR team may not have the bandwidth to keep it all straight and your workplace software probably can’t handle it either.

Can your insurance company help?

Maybe. In fact, if an insurance company could help you keep it all straight, you might be inclined to love your insurer and never leave, give them great reviews on social media, and send a holiday gift. In this day of rapidly increasing business complexity, the company that can keep it simple is a business hero. Can Disability Insurance and Absence Management make insurers heroic?

That’s what Majesco and Deloitte wanted to find out. Drawing upon a series of round-table discussions with insurance executives, Majesco and Deloitte co-produced a valuable thought-leadership report, Raising the Competitive Bar: Simplifying the Operational Complexity of Disability Insurance and Absence Management. It offers both the rationale for why insurers should want to transform their DI and Absence Management abilities, plus the steps insurers should take to introduce simplicity through technology. Today, we’ll look at what the report says about simplifying operating models.

Eliminate Complexity. Enhance Experience.

Complexity within the insurance organization can never provide simplicity to insurance customers outside the organization. Simplicity starts within. It isn’t about putting on a simple face or creating simplified interactions — it begins with simplified processes created in a dramatically-optimized operating model. The operating model makes simplicity possible.

Increased complexity leads to increased risk, and this holds true for systems, employees, and customers. Insurers should work to standardize products and service offerings across their portfolio. This will reduce confusion among customers and allow for a standardized customer experience across product offerings.

Insurers can accomplish this through a focus on process simplification and standardization, followed by a focus on redundancy and exception reduction. Data can impact both.

• Insurers can further limit operational variability and create effective operations through managed KPIs that focus on reducing processing costs and cycle times (i.e., auto-adjudicating 80% of Absence claims).
• Products and processes can “learn” from one another.

For example, what would happen if LTD carriers could shift the claims management mindset from outcome-focused claims operations to speed-focused operations? Developing rates by industry, utilization, and consumer demographics by using past STD and LTD data could further support operating model simplification. These are whole-process changes that will naturally remove steps, decisions, and costs from the model while improving speed across all processes.

Decoupling the technology ecosystem is another foundational tool for improving delivery speed. By focusing on the value of the technology being leveraged, instead of the individual components, insurers are able to modernize and digitize core systems and processes faster and more efficiently.

Emphasize event-based over transaction-based

Approaching standardization on the transaction level will lead to disjointed customer experiences and lead to additional complexity, both from a process and application perspective. Instead, insurers should focus on the journey level and on creating a holistic customer experience across transactions.

Using the notion of a leave event as an anchor point, insurers can develop more meaningful and targeted experiences for employees. How can insurers better serve an employee during their leave event? This is an area that is ripe for enhancement. Additional value-added services will improve leave experiences and potentially support newer avenues for growth through differentiation. After all, employers are also interested in retention. What everyone wants within a leave event is some level of success.

The technology, analytics, and ecosystem foundation

While true “group” models are still relevant for medical and disability, the voluntary benefits market is increasingly leading growth opportunities with the shift from employer to an employee for most other products — including non-risk related products and value-added services. 

To compete in this new digital era, insurers must develop an ecosystem strategythat aligns their operational and strategic priorities with a broader ecosystem of players to meet evolving customer expectations. The result is a network of internal solutions and external partners and integrations. These link employees and employers, core group and voluntary benefits solutions, enrollment capabilities, payroll administration, third-party administration (TPA), and internal and external data sources.

One of the key ecosystem solutions is absence management, particularly for Tier 1 insurers who focus on both large and mid-sized markets. These carriers see absence management as a competitive differentiator and added service to their disability product offerings.

Returning the “human” to Human Resources

With the increased complexity of both federal and state-level absence and leave laws, as well as the increased complexity of maternity, mental health, and COVID-related illnesses, it has become difficult to manage employees’ absences and leaves with empathy. HR teams want to encourage employees, helping them recover and get back to work. The logistics, however, have become increasingly complex. Time previously spent in caring is now spent in compliance.

Employers need integrated claims and absence management to optimize business processes and return some of their valuable time so they can foster a healthy employee population and a supportive culture. This is where the following two components are crucial:

• Integrated Claims and Absence Management – Automation of claims assigned by complexity, and compliance to optimize operations and ensure adherence to legal requirements at both the federal and state levels. 
• Data & Analytics – Use of AI models to improve consistency and operational effectiveness, and assess the medical or disability data to drive insights, improved processes, and customer experiences. 

These solutions must be cloud-based, open architecture, with API-enabled access to AI models that can ingest and analyze multiple data sources and embed that intelligence into the processes.

This is the heart of simplification. As technology moves masses of complex tasks into automated processes, HR and benefits consultants will free up to do the work of helping employees at the human level of care and concern. New models can do more work with fewer resources.

Advanced capabilities + speedy claims + simplified experiences = engaged employers, happy employees, satisfied regulators

Advanced capabilities are taking on even more importance as the group and benefits ecosystem continues to stress and challenge the status quo with growing customer expectations, increasing regulatory changes, competitive pressures, and technological advances.

Adding to the imperative of transformation is the increasing focus on claims, where competitive differentiation with same-day claims payment is shifting the leader landscape. Rules-based claims auto-adjudication and auto-notification are increasingly important for operational optimization. Disability providers must improve outcomes by shortening claims duration, identifying potential fraud, meeting compliance requirements, assisting in return to work, and improving loss experiences. 

In addition, insurers must look at advanced call center options that innovate how they engage with customers. For many, the phone remains a primary channel. However, new channels of communication have emerged that include SMS, chatbots, and emails as an alternative to the phone.

While live voice continues to be a prominent channel of customer interaction, insurers should rethink their contact center to support the broadening mix of communication channel options that are integrated with the next-gen core solutions.  This gives customers choices based on preferences and helps insurers with resource challenges.

Carriers who are focused on disability and absence management must deal with multiple existing state leave regulations, plus additional types of leaves being added by states regularly. The complexity places tremendous pressure on carriers’ employees to know the ins and outs of each kind of leave. A system, platform, or ecosystem that removes this burden pays for itself immediately in resource relief and premium growth.

A new generation of work requires new capabilities

Digital experiences have increased in priority due to the pandemic’s influence on employer and employee relationships, and ultimately retention. Digital capabilities, including claims submission for absence and disability, offer an opportunity to enhance the customer experience through a new method of engagement. Digital portals, mobile capabilities, and the use of IoT wearables will offer new ways to improve engagement and experiences.

In addition, data and analytics are increasingly important for providing “Claims Guidance” to get the right claim to the right examiner, or to predict how the claim might evolve, such as which STD claims might become LTD claims. To make this work, it’s no longer acceptable to have the teams that manage different leaves in their own separate silos. Instead, a “total absence management” approach where employers and employees can have a single point of contact for any type of leave question or claim is crucial, from a regulatory, operational, and customer experience perspective.

As the L&AH industry enters a new decade, many recognize the significant need to improve, both operationally and innovatively, to create immediate business results and long-term value. However, a majority of L&AH insurers have significant legacy debt in terms of operating models and core systems that hinder their ability to improve operations, let alone innovate. While some companies have made technology investments, most investments are incremental with limited overall impact. These investments and the pushing of legacy debt into the future are not sufficient to differentiate their companies from the competition as the industry experiences tectonic shifts in market demographics, customer needs, and expectations, rapid adoption of technology, and shifting market boundaries.

With so much change, and so many challenges and opportunities continuing to influence the L&AH industry, it is increasingly crucial for insurers to assess and establish a business strategy and investment in technology and innovation that can adapt to the changes. Here are six reasons why a new model makes sense right now.

1. Employer and employee needs and expectations are changing. From the demographic changes of today’s employees to shifts in their needs and risk profiles, customer expectations are exerting pressure and creating disconnects between what customers need and want and what insurers are providing.
2. Customer experience change is mandatory.  Increasingly, customers are seeking simple, holistic, embedded, and direct experiences…that can be delivered digitally and effectively. 
3. Complexity is here and it will increase. The complexity of insurance products and processes has plagued the insurance industry for decades. Technology can simplify the business operation and solidify customer relationships by making business processes and transactions simple, convenient, transparent, and fast, like other businesses.
4. State and local regulations are changing. States are continuing to expand family leave programs. This will add complexity to managing absence and disability. A majority of employees and managers are already unaware of the leaves available to them, posing a serious compliance risk. (Majesco’s 2021 research uncovered this risk during a knowledge assessment of the Federal Family & Medical Leave Act (FMLA) and  state-paid family leave (PFL) programs.)
5. Volume is here and will increase. The increased demands for absence and disability insurance by employers and employees have accelerated due to a greater understanding of them and their value post-Covid, intensifying pressure on insurer operations to handle the volume with technology. 

From changing employee and customer demographics and behaviors, to increased regulatory demands, legacy debt, and demand for a broader portfolio of insurance products and value-added services like absence management, insurers must balance between managing today’s business while creating a future business that can adapt and scale.   

Insurers need to apply today’s technology in ways that simplify, predict, enable and improve the lives and businesses of those they serve. Is your company ready to be a hero to those you serve? Find out more about Majesco’s ClaimVantage solutions for L&AH, DI, and Absence Management. And be sure to read the full Majesco and Deloitte report, Raising the Competitive Bar: Simplifying the Operational Complexity of Disability Insurance and Absence Management, including dozens of insights and quotes from insurance executives on how and why DI and Absence systems need to change.

Todays blog is co-authored by Denise Garth, Chief Strategy Officer at Majesco, Abhishek Bakre, Senior Manager, Deloitte Consulting and Santosh Kutty, Principal, Deloitte Consulting