Group and voluntary benefits is an area of increased interest for many insurers, including some that operate in adjacent spaces like individual life insurance and group health. There is a promise of growth in this segment, even in light of the compressed margins on traditional group life/disability products.
Scale Matters
Most real growth comes from the voluntary benefits and worksite segments. Critical illness, accident, and term life products are showing strong expansion. Dental and vision care offerings are gaining attention, and a considerable number of market participants are adding Health Savings Accounts (HSA) and similar products to their slate of offerings. Even voluntary lines are seeing a significant number of takeovers from other insurers.
Traditional group benefits are a slow-growth business in which scale matters to address the economic impacts of compressed margins. Plan sponsors continue to push insurers for lower costs, driving them to improve efficiency while still delivering the basic functions of benefit and policy administration, enrollment, marketing, and product design. The demand for efficiency is also spurring merger and acquisition activity.
Group Demographics and Investments
The companies in this space are a mix of group and multi-line life/annuity/health players. Few companies write group life or benefits as their main business. Often, insurers will also write individual annuity, life, or accident and health business. Larger health insurers often package voluntary life offerings with traditional health products. L/H/A insurers frequently offer voluntary benefits products as part of their portfolios, though specialist companies exist as well. Group health insurers are increasing their voluntary benefits offerings to complement traditional ASO, PPO, HMO, and DMO products.
Digital capabilities for plan sponsors and employees are a focus for insurers. Insurer technology investments are the most substantial in distribution, underwriting, claims, billing and marketing data and analytics, and customer experience digital processes and data and analytics. To a lesser extent, insurers are investing in digital product development, marketing, and billing processes, as well as core customer experience and billing systems.
Analytics and an Interest in Data Standards
Insurers are using analytics primarily in the voluntary benefits space, with applications in enrollment, identifying claims fraud, member conservation, sales reporting, and underwriting, among others. Analytics and reporting are important to plan sponsors and insurers for increasing participation rates.
Group life and voluntary benefits insurers may understand employers and plan sponsors better than they do individual participants; this leads to challenges across fraud detection, member conservation, and product design. In some areas, voluntary benefits providers are ahead of group peers in leveraging data and analytics.
Benefits Administration and Enrollment
ACORD has proposed an enrollment standard, but traction is uncertain. LIMRA also recently introduced post-enrollment data standards with participation from several insurers and vendors. The potential for these standards to take hold on a wide scale remains uncertain, at best. Insurers may find alternatives to standards in creative approaches to managing enrollment and change function data. InsureTechs may also provide creative solutions for insurers seeking to create competitive advantages through AI, ML, and NLP.
Group and voluntary/worksite insurers are exploring partnerships or other relationships with benefits administration and enrollment players. Insurer interest in partnerships is based on a desire to differentiate through customer experience, streamline enrollment processes, and combat potential disintermediation. Countering insurers’ acquisitions of or partnerships with benefits administration and enrollment solution providers is the consolidation of benefit administration solution providers.
Product Development
Voluntary/worksite insurers are in constant pursuit of innovative solutions to differentiate themselves. Newer offerings include discount purchase programs for fitness wearables, identity theft, and student loan assistance.
Digital experiences, important before the onset of the COVID-19 pandemic, have increased as a priority for insurers looking to develop broader, deeper, and more resilient relationships with plan participants.
Many plan sponsors continue to investigate wellness programs to lower health care costs and increase employee productivity. Some insurers are offering wearables to gather data and monitor progress. Group life insurers need to remember that group health insurers are growing wearable technology support and their ability to create a sense of shared accountability. Wearables also offer insurers the opportunity for more frequent yet relatively inobtrusive consumer engagement.
Acquisition and consolidation in the absence management space have opened doors for claims solution vendors to expand their offerings. Group life and voluntary benefits providers are wary of working with competitor-owned service providers. Some insurers view absence management capabilities as differentiators that complement other disability product offerings. Only the largest group life/DI insurers offer FMLA support through internal capabilities; others often turn to TPAs for a solution.
Top Technology Priorities
Top technology priorities remain sales, marketing, and tools for enrollment and for explaining product offerings; robust, flexible group administration capabilities, including reporting and analytics for plan sponsors and insurers, payroll deduction date flexibility, porting to other groups, and converting group contracts to individual contracts; multi-channel marketing and sales, including calculators and planning tools as well as self-service functionality; and administrative capabilities in billing, claims, enrollment, and financial and non-financial transaction processing.
For a more in-depth look at the trends in this space, read Novarica’s latest report, Business and Technology Trends: Group Life and Voluntary Benefits. Novarica clients and Council members can also join us on March 11 for a Special Interest Group Virtual Meeting on the topic.
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