Insurers in the group and voluntary benefits space are focusing on digital and data as they plan for 2021.
The demographics of the North American labor market have shifted. Millennials now account for 50% of the labor force; by 2025, that figure could be as much as 75%. Concurrent with the changing labor force is the rapid increase of customers who expect seamless digital experiences.
The notion that the product that matured the company will continue to move the company forward may not be the case. Insurers should be aware of the shifts in employee and customer needs and be ready for what is coming. Product changes in the benefits space, in part to respond to the evolving pandemic, are increasingly important to plan sponsors, a reality that insurers may want to factor into future state planning.
Rationalizing 2021 IT budget: continued shift to digital and cloud
Understanding internal accounting is critical for insurers as they face headwinds that cause them to rethink budget spending. Budgets for the new year do not reflect any notable changes in total expenditures on IT as a percentage of top-line revenue; the reallocation of funding is notable. The continued push to increase OpEx while reducing CapEx is an ongoing challenge for IT organizations to navigate.
The most significant shift Novarica has seen in 2021 life insurer IT budgets is a greater focus on digital initiatives. Key areas of focus include distributor support, internal workflows, and digital customer engagement. One of the panelists at Group and Voluntary Benefits Special Interest Group noted that an API strategy is also critical for how his company approaches optimizing its digital capabilities.
The focus on digital capabilities also highlights how critical it is for insurers to have an effective data strategy, including fully operational curation and governance functions. Digital on top of bad data creates a bad digital experience. How one does better with data to enable digital capabilities will be important in the future.
Another area of focus for the group and voluntary benefits space is cloud as a deployment option. Determining which and how much data to migrate to the cloud continues to be a challenge for insurers as they plan to increase cloud expansion in 2021.
Insurers have taken a variety of approaches, and many have maintained a mixed model. One insurer decided to move most of its applications into the cloud, leaving behind security layers in data centers and the mainframe that hosts most of the core business. Another insurer focused on transformation and chose product lines that would move to the cloud, leaving behind workloads from older blocks of business for the moment.
The cloud can offer advantages in scalability, stability, and automation, but insurers should be purposeful and thoroughly plan the journey to cloud migration. At the same time, moving to the cloud for no other reason than being in that environment is a poor economic proposition.
Many insurers are now moving to get out of the data center business, allowing third parties to run assets like mainframe computers. Doing so enables insurers to focus development efforts on modern technologies that can create differentiation in the marketplace.
Future of work: digital transformation and working from home
Few expected at the beginning of the pandemic that remote work would continue for more than a few months. Now, many insurers don’t anticipate reopening the office in mid-2021. Extended periods of remote work have reinforced the need for insurers to virtualize work across the value chain. Likewise, it has pushed insurers to focus on digital transformation to make customer interaction easier.
Much of the conversation around digital transformation focuses on the consumer. But digital transformation is also about employees. Insurers are collecting information from employees on what they need to be more productive in the current remote work environment. Having the correct office equipment and network capabilities in place is a foundational element, for example. Many organizations have also noted that associates want to learn and leverage this unusual time to build new skills. The latter may contribute to the maintenance of or increase in productivity since the pandemic began.
Technology is a big part of digital transformation, but culture is another crucial aspect. It’s easy to throw in new technology and forget about change processes, but considering what type of culture and work environment the future labor force will want is critical to talent acquisition and retention.
If you’re interested in discussions on group and voluntary benefits, we will continue our conversation in the New Year. Visit our events page for more information on Novarica’s virtual meeting offerings.
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