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 US, 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 (who are also employees), 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 upon 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.
Millennials and Gen Z are carrying large student debt loads, and many Baby Boomers are delaying retirement and are facing rising health care 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:[i]
- Long Term Care – 30% now, 52% by 2018
- Student Loan repayment – 4% now, 26% by 2018
- Pet insurance – 36%, 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 who 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 who design self-funding plans into their overall offering, stand to gain, because they can offer it as a “future” option for employers who may want to transition or as an instant option for those who 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 proactively 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 1-9 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 their 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.
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 utilize 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 incentivized 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 in order 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 new 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. The next wave of growth is expected to come from their ability to provide superior customer experience – not just in comparisons to 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.
[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