Transformation in Group Benefits: Why Preparation is Everything


The pressure is on Group Benefits insurers to modernise their ecosystems, to allow for greater product innovation and the higher level of service that plan members and groups are expecting in the current business climate. To catch up with more advanced insurance lines, such as P&C, many insurers are planning and implementing much-needed transformation initiatives.

There are several significant barriers and challenges to transformation in the Group Benefits space, making extensive preparation for these projects even more critical. In this blog, we’ll take look at these issues and explore how insurers can enable powerful transformation right from the start.

Slim Margins and Complex Models

Because profits are comparatively low in the Group Benefits space – typically around 2%-4% – it’s harder to show a clear route to positive ROI and make the business case for transformation compared with other insurance lines of business.

Group Benefits have other complexities that also make transformation more of a challenge. Public sector organisations, for example, often come with union agreements that need to be supported.

Large organisations are often in a position of power when they negotiate group policies, because they offer large quantities of premiums. That negotiating power often leads to highly customized and non-standard group policies, which makes it difficult to simplify and rationalise client offerings to prepare for transformation.

Changing Responsibilities in the Distribution Model

Due to their complexity, Group Benefits tend to be distributed through intermediaries such as brokers or third-party administrators. These intermediaries are highly experienced in dealing with complicated products and have an interest in the status quo, as this complexity justifies their role in the process. This is another barrier to product simplification.

Some distributors and technology players are now also assuming administrative tasks previously carried out by insurance carriers. This means that carriers need to be able to support a variety of different operating models, including one where they handle an even smaller portion of the value chain, from quotation to administration to claims.

Complex Legacy Systems

Group Benefits insurers frequently rely on in-house legacy systems, often developed decades ago. These systems are often not well documented, and it can be difficult to determine all of their exact functionalities.

As a result, system administrators have frequently developed workarounds to compensate. These workarounds, as well as the systems’ other peculiarities, have become the norm.

These systems are also often highly tailored in-house for the very specific needs of the insurance carrier, making it harder to move to a streamlined system. When the time comes for the move to the cloud, these factors can make it difficult to change the mentality of the staff and introduce them to an entirely new system.

Making Transformation a Success

Given these challenges, what do Group Benefits insurers need to consider for a truly effective transformation?

Executive vision

Firstly, all stakeholders must fully understand the executive vision and motivation for the transformation. Across stakeholder groups, there may be many different goals from a business and technology standpoint, such as moving into new markets, reducing operating costs, or introducing new technical capabilities. Identifying these different goals (and making sure that all stakeholders are on the same page before the transformation begins) avoids project and budget creep, which can even lead to the project being cancelled further down the line.

Making the business case early

In cases of specific stakeholder groups that are more resistant to the transformation, the business case needs to be introduced and explained much earlier on in the process.

If the initial profitability is low, the first version of the business case may not show a positive ROI. Additional time might be necessary to describe the business benefits in greater detail and identify areas that have been missed (such as business retention, new sales, greater market share, more operating efficiency, and less time maintaining IT systems).

Setting a realistic scope for project success

Making the project scope too large can be tempting once the business case has been fully accepted by all stakeholders. Smaller and more feasible scopes, however, reduce the chances of project failure. This approach allows greater agility, delivers results more rapidly, and provides more value than a larger project that ultimately fails to deliver anything.

Cutting the cost of data migration

The conversion strategy element of a transformation can be very costly. This cost is often generated by the data migration, so exploring migration alternatives can be helpful.

Although there’s a temptation to migrate the data for all legacy processes and systems onto the new platform, this may not be necessary or efficient, and there may not be a business case for it. Creating a new book of business for new clients, for example, and leaving existing ones on the old system until their contracts have ended may make more sense.

Beginning with the right knowledge

It’s critical to make sure that the right people are available for the project before it actually starts, so that the correct business knowledge and information will be applied right from the beginning. This may involve making sure that other resources are brought in to free them up for the project.

Rationalise product and business rules

Many Group Benefits insurers find that transformation is a good opportunity to tackle the necessary rationalisation that has never risen high enough on the priority list. This often identifies further benefits for the business case, and highlights areas that need greater optimisation.

Product and business role rationalisation makes the project more cost-effective and accelerates implementation. It’s important to consider whether any exceptions are absolutely necessary, as we often see large numbers of exceptions that increase complexity but do not create much value.

Adopt, don’t adapt

Group Benefits solutions tend to be less prescriptive and more configurable than in other insurance lines such as P&C. Because of this, taking more of an ‘adopt rather than adapt’ mindset means the system’s potential is more likely to be realised.

At the same time, it’s also important for insurers to develop a clear vision of how they’re going to work within these solutions. In some instances, they don’t come with standard processes, so these particular systems won’t provide all the answers.

Final Thoughts

By adopting these measures in the early stages of a transformation initiative, it is more likely to run smoothly and be completed quickly and on budget. Insurers are less likely to see the ‘back-and-forth’ discussions that can happen a year or two into the project, when stakeholders begin to question whether it’s achieving what they want, and when costs and complexity can grow.

Making sure that everyone is on the same page where the transformation is concerned also helps when stakeholders leave and are replaced with people with a different vision, disrupting progress. Finally, Group Benefits insurers are likely to see a stronger ROI if they avoid trying to adapt the solution too quickly. This allows them to realise the true potential of transformation – and of their business.

About the Author

Mathieu Beauchesne

Mathieu Beauchesne is a Strategic Advisor and Expert Leader in personal insurance (individual and group benefits) at GFT Canada. In addition to an MSc in Information Systems and an MBA in Information Technology Management, Mathieu has 10 years of experience in business architecture and IT consulting. He played several key roles to support the modernisation and transformation of ecosystems for many insurance clients. He also participated in the decision-making committee that determined the target ecosystem for the group insurance of one of the largest mutuals in Canada, as part of a merger. His specialties include Business Architecture, Strategic Advisory, Strategy Development (Business & IT) and Business Analysis.