Last week, as part of Novarica’s largest ever annual Research Council meeting, we had the opportunity to facilitate a Special Interest Group session focused on group and voluntary benefit carriers. This represents a fascinating portion of the industry, heavily influenced by a series of concurrent factors, which are changing customer expectations, approaches to delivering benefits, the vendor landscape to support these businesses, as well as demographics in the populations being targeted for these products. As we noted throughout the broader Research Council agenda, the industry is in the midst of a significant transformational period, and carriers in this space represent, in many ways, a tip of the spear as we head into the century’s third decade.
The discussions from this session focused on three main categories of interest or concern for the participating carriers. These included:
Data Standards for Information Exchange
This continues to be a “hot topic” for carriers involved in both the traditional group life/DI lines as well as the emerging voluntary benefits space. The cost and complexity of the current model supports the interchange of data between various participants in the ecosystem without the benefit of any specific standards. This clearly creates a significant level of manual activity with a high potential for error. With cost pressures on these businesses representing a constant theme, finding better ways to exchange data remains an area of high interest.
As we discussed, however, the complexity of the ecosystem itself creates significant headwinds against the idea of data standards. Although insurance carriers can easily articulate the benefits, other participants including payroll providers, benefit administration platform solutions, enrollment providers and broker platforms, all have potential reasons to see the idea of true standards as being contrary to their own economic interests. One carrier noted that they have experienced a significant expense associated with creating a better integration between themselves and Workday (the HRIS/financial system provider), and that a move towards a more “standardized” approach to information exchange would curtail revenue flow on their end. Similar circumstances likely exist around other participants in the ecosystem model, notably including the enrollment platform providers.
Another interesting discussion in this area focused on the fact that the idea of standards could adversely impact a variety of solution providers. These solution providers could lose some of their flexibility and adaptability if they chose to follow standards promulgated by larger competitors who could view this as a mechanism for protecting and consolidating market share.
Efforts in the recent past, including one promulgated by ACORD, have failed to move the ball forward in any meaningful way. Currently, another effort is underway under the auspices of LIMRA. Several carriers involved in the discussion are participants in this effort and did note that there has been some progress made towards defining possible elements of standards. To date, this has not required any major investment of financial resources, or changes in business practices. It remains to be seen what the level of participation will be when, and if, the effort moves into an investment phase.
As a possible cautionary note about the future, several major players in the space have ended their participation in this effort. One option for these carriers, that we discussed during this session, was that they continue to “defensively” participate so that they are aware of what others are doing, even if they really don’t have a specific intention to make the necessary investments on their own.
Irrespective of what happens with standards, the exchange of information is an important area for carriers, and we discussed several approaches to building internal capabilities that allow them to manage and consume census information and change files more effectively. These efforts give carriers more control of their own destiny and, concurrently, can create a competitive differentiator. This led to a discussion on a new set of risks that the creation of standards could impart on bigger carriers. In effect, broadly implemented standards would reduce a significant barrier to entry into this business for other players. At some level, this is a fascinating example of being very careful of what one asks for, given the potential for unintended consequences.
APIs and Integrations
APIs and integrations are very much top of mind. From carriers across the size and product spectrum, we had fascinating discussions about the evolving need for “an API strategy” as well as a better approach to integration with various participants in the ecosystem. This led to a discussion of APIs in general, with many carriers moving aggressively forward on the use of private APIs for internal integration of capabilities. This is a very logical development which can make systems more fluid and flexible, allowing for a reduction in the rigidity that has been a result of alternative approaches in the past.
There is a now heightened interest in the use of public APIs to integrate players in this space. It appears that some of this interest, and the resulting pressure from IT organizations, is coming from marketing and sales organizations that understand that the historical models for case installation and support make them appear to be “hard to do business with”. APIs to support integration could create a better customer experience for institutional relationships even while reducing costs for participating carriers. Since a wide variety of participants in the ecosystem do expose public APIs for consumption, the operating theory is that the use of this as a mechanism for integration could represent something of a Holy Grail for these carriers.
The reality, of course, frequently is somewhat different than the theoretical promise. The lack of data standards means that the use of these APIs can be both complex and error prone. With the lack of data standards, some carriers have noted that the use of these APIs is little more than a fancy and more complex alternative to the current use of flat files.
Some participants noted that if there was a sufficient volume of business going between specific players in the ecosystem, it could be valuable to build out specific API integration capabilities for targeted participants. This is a way of both exercising the technology and creating business value in those targeted circumstances where the economics of implementation are positive. As a bonus, there may also be marketing value to this in terms of messaging that can be used in preparing responses to inbound RFIs from plan sponsors. Novarica is gathering information from carriers now which will contribute to a “map” that will illustrate the integration complexities in this ecosystem.
Core Systems Options and Alternatives for Implementation
This is an area of high interest to carriers in these lines of business. Many are working with rapidly aging core environments that are a mix of vended and home-grown solutions and frequently depend on support skills that are difficult or expensive to acquire.
Main, core systems in the group and VB space are younger than their contemporaries in the individual life and annuities lines of business. This, however, doesn’t make them “less legacy”. In fact, some of the underlying technologies being deployed in group, which originated as early client/server solutions, can be riskier than older mainframe-based platforms due to the durability of older programming languages (i.e., COBOL).
With that in mind, the discussions centered on two different thematic approaches to modernization and transformation. For existing blocks of business where conversion and disruption risks can be significant, decomposing the technology “stack” into components and addressing peripheral functions first (e.g., claims, comp, underwriting) can be a winning strategy. It is important to build organizational “muscle” around doing system replacements while minimizing the possibility of a death march project; a project that may simply be too big to succeed. This discussion led into a review of specific vendor solutions, as detailed on Novarica’s Market Navigator Reports.
An alternative approach focused on the idea of greenfield capabilities, allowing carriers to leverage suite solutions to get a new product line up relatively quickly and with minimal disruption on other “business as usual” functions. For some, the establishment of a new voluntary benefits line has been a terrific proving ground for the approach. In addition to reviewing specific solution sets, we also explored alternative deployment models, including the option to leverage BPO providers.
On the BPO option, one of the strong suggestions is to look carefully at the underlying technology platform as well as the service capabilities. BPO providers that are adept at handling closed blocks of business may be poorly prepared to deal with the dynamics of a new, open, rapidly growing one.
Most carriers in this space are very interested in moving key workloads to the cloud. As with the balance of the insurance industry, the preferred providers are Amazon (AWS) and Microsoft (Azure). An interesting nuance in the group space is that data domestication/location can become an issue that plan sponsors can dictate solutions around. As a result, enterprise solutions optimized for other use cases may need to be modified to achieve an appropriate level of compliance.
The discussions were both wide ranging and informative. They also set the stage for our next Group/VB Special Interest Group session, which will be hosted by MetLife on September 11 at their Global Technology Office in Cary, NC. The registration for this carrier-only event is now open by clicking here.
Add new comment