The Road Ahead: Group Insurance 2023

Group insurance companies will face some speed bumps in 2023, but the increasing awareness of product value and continued progress of product innovation and process modernization should keep them on the road to success. With an expected softening of the economy in 2023, unit premium volumes will likely decrease but be offset by targeted pricing increases in product lines such as group short-term and long-term disability. The COVID pandemic’s impact of delayed medical treatments and extended, related recovery times have kept mortality and morbidity trends elevated, but these started turning positive in 2022.

Rising health insurance costs will continue to pressure employers and directly impact group insurance companies. Employers want to provide enhanced benefit offerings to help attract and retain employees, but core medical insurance that now averages nearly $23,000 per family can crowd out wage increases and employer and employee spending on benefit products.i The high cost of core medical insurance has made it incumbent upon group insurance companies to minimize their operating costs and maximize service levels to maintain and increase sales of their core group life, disability, and voluntary benefits offerings.

Brokers want to offer price-competitive products to their employer customers, and now indicate that competitive pricing has become table stakes. When recommending group insurance companies, they seek innovative products and responsive service for themselves, their employer customers, and employers’ employees (enrollment to post-enrollment). To protect their renewal commissions, particularly for voluntary benefits products, brokers want improved post-enrollment and administrative technology solutions to reduce billing, commission, and claims issues.

With the need to reduce costs while increasing service levels, group insurance companies will continue to invest in technology in 2023, albeit more carefully and selectively because of the uncertain economic environment. Gartner expects life insurance companies to increase IT budgets by nearly 8% annually from 2023-2026, often tying the spending to improvements in customer experience, automation, and cyber security, with all the above enabled by analytics, machine learning, and artificial intelligence.ii Expect the role of core administration platforms to shift even more to efficient, API-based integration with enrollment, HRIS, and payroll services to streamline the enrollment process. For voluntary benefits products, there will be increased investment in claims integration and automation to both improve the customer experience and employee participation in these products.

Recent survey data shows the U.S. and overall global workforce facing major stress and mental health issues after two years of lockdowns, COVID-19 restrictions, constant changes to the structure of the workplace, and a perpetual state of economic and overall uncertainty. Employees want their employers to provide more flexibility with their work arrangements and only 45% say they’re holistically healthy (financially, physically, mentally, and socially), but would be 74% more likely to be satisfied with their job/current employer if they were.iii In response, many employers plan to offer new employee offerings for mental health in 2023 (bundled with hospital indemnity and critical illness products) and counseling services (either standalone or bundled with other products). Although usage of telehealth services leveled off in 2022 as the pandemic receded, expect telehealth services to accelerate again for behavior and mental health services.

Group insurance companies will continue to invest in new technology, product, and service offerings in 2023 to maximize the value they provide to brokers, employers, and employees. They will be careful about tying their technology investments to better customer experience, automation, and cyber security outcomes. New mental health and flexible work offerings will help employees overcome the lasting impact of the pandemic, burnout, and economic uncertainty. With a long road ahead of us, I’m excited to see where the group insurance industry is headed this year.

i Kaiser Foundation – 2022 Employer Health Benefits Survey.
ii Gartner. ”2023 Outlook Presentation – Enterprise IT Spending Forecast for Insurance“.
iii MetLife Employee Benefits Trends Study, 2022.

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