Responding to New Demographic and Competitive Realities

Change, it seems at times, is happening at an accelerating rate. Preparing for the consequences should be very much on the mind of insurance carrier executives as we roll into the final few weeks of 2019. The reality that the Millennial generation will represent more than half the US labor force in 2020, and 75% by 2025, brings with it big changes in both labor markets and the array of benefits companies will need to consider offering to attract and retain critical talent. A recent article in Inc. noted that “companies including Ernst & Young and Accenture have already reported that Millennials make up over two thirds of their entire employee base.” These changes are no longer theoretical.

The percentage of American adults reported to own life insurance stood at 57% in 2019, down sharply from 63% in 2011. With demographics and lifestyle adjustments part of the new reality in this country, life carriers’ plans for the next decade have some hurdles to overcome—particularly in light of other headwinds facing the industry, including persistently low interest rates.

As employees increasingly see the annual benefit enrollment process as a key place to address their financial and insurance needs, a wide array of carriers have responded with financial wellness programs. Employee (i.e., plan member) needs are part of the backstory here, but another element is that employers (i.e., plan sponsors) increasingly recognize that they have a stake in outcomes as well. The CFPB reported that “many employers have seen how financial distress reduces worker productivity, increases absenteeism, and undermines employees’ health.”

The programs make broad sense, but given that health insurance, retirement plans, and dental insurance are the three top-tier coverages on employees’ minds at the time of enrollment, life carriers may need to find new and creative ways to ensure relevance at a critical time in the financial decision-making process. In other words, carriers need to think not just about the education portion of the wellness equation, but also the call to action they want to present.

In that light, MetLife’s recent announcement that it will introduce FSA, HSA, and commuter accounts to its portfolio of capabilities in time for 2021 enrollment seems to be a particularly interesting development. Since health insurance is the initial, key decision that many employees make during enrollment, finding a way to be an integral part of that decision without actually offering the product seems like a fascinating way to raise awareness and visibility.

It could also have a halo effect in other parts of the annual benefits review. Accounts like health savings accounts have many of the same kinds of asset accumulation and investment options that are normally associated with 401(k)/403(b) retirement plans, making them both easy to explain and capable of leveraging investments that a sponsoring carrier has already made. An interesting byproduct of this for carriers is that these are relatively high-transaction-volume products, which provide new and powerful insights into the spending habits of key customer cohorts.

HSAs are a relatively new product offering and are particularly interesting as an investment vehicle for Millennials, who have a long runway ahead of them to take advantage of the saving and tax deferral features. For a carrier like MetLife, introducing a product just as the generation takes full prominence in the labor force appears to be a very timely decision supporting deeper future engagement.

The numbers are interesting as well. At the start of 2019, there were more than 25 million HSAs on the books, holding an estimated $53.8B in assets, with growth in contributions for the prior year hitting 22%. These are serious numbers that others might want to consider in their own future-state planning lest the market be fully ceded to banks (e.g., Optum, Bank of America) and investment companies (e.g., Fidelity). This may be another example of the future already being here, but not being equally distributed.

Add new comment

CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.
2 + 18 =
Solve this simple math problem and enter the result. E.g. for 1+3, enter 4.

How can we help?

If you have a question specific to your industry, speak with an expert.  Call us today to learn about the benefits of becoming a client.

Talk to an Expert

Receive email updates relevant to you.  Subscribe to entire practices or to selected topics within
practices.

Get Email Updates