Breaking the Mold: Changing Dynamics in Group Insurance
It’s officially autumn in New England. The leaves have turned, there’s early morning frost on the window and it’s dark by 5:30 pm. For us, these signs represent the inevitability of change. From seasons to weather, and yes, even group insurance, changing dynamics are afoot, just in time for the end of the year. As insurance industry professionals, it’s amusing to us how these new forces are taking hold, challenging the notion that insurance is a staid industry with an entrenched culture and ecosystem. This perception makes the industry ripe for future disruption, but for now, we’re seeing some immediate trends that are breaking from the group insurance mold. These include new product strategies, such as the bundling of financial health and wellness products and “segmenting” offerings by selling different packages to customers based on their generational cohort. Greater employee retention initiatives and new distribution models where employers make some purchases directly from insurers, but where brokers remain essential (and have also moved into more risk-advisory roles), are other developments we’ll discuss in this blog.
Bundling and Segmentation: The Elements of New Product Strategies
The key elements behind group insurance’s newest product strategies include bundling and segmentation. Insurers are bundling products together for tailored solutions to alleviate financial stress and help members achieve better holistic health and wealth. The idea of “financial health equals mental health” is the theory behind this dynamic, with insurers’ value propositions highlighting how they can help members build financial security while promoting physical and mental health.i For example, Voya, a New York-based provider of health, wealth, and investment solutions, has already developed the “myVoyage” personalized participant experience that offers members a holistic benefits package with financial wellness to address financial stress while providing their total financial picture.ii
Insurers and employers are also putting more emphasis on the concept that “one size doesn’t fit all,” when it comes to benefit offerings. Each generation has different benefits needs, and we are seeing some insurers considering how to roll out customized packages for different age groups. In other words, what a 60-year-old baby boomer requires is vastly different from what a 25-year-old millennial will need. The baby boomer will require more robust health insurance options, while the millennial will be interested in new, less-traditional offerings such as student loan repayments and financial wellness counseling.
The Race for Employee Retention
Across many industries, including insurance, we are seeing growing trends of management extending more hybrid options of remote and in-office work to boost employee retention, as well as enhanced engagement strategies to keep staff invested in their companies and individual roles. According to a recent LIMRA study about workforce benefits in the next five years, fewer than 50% of workers will be traditional employees in the office, as the robust gig economy and the “Great Resignation” will reshape the definition of the workforce and the nature of work.iii With the “Great Resignation” already a firm reality, insurers are expected to introduce more employee engagement strategies, such as virtual gym memberships, virtual yoga, mindfulness lessons, and online financial classes, to optimize interest and retain employees.iv The LIMRA study also predicts that insurers will need to expand benefits to further entice employees to stay on board, especially non-traditional benefits like tuition reimbursement, legal services, and even pet insurance.v
The New Distribution Models
Perhaps in response to the pandemic and the ease of digital tools for research and communications, employers have started to make some purchases directly from insurers. However, brokers remain critically important and have begun to expand their roles by providing advice on emerging risk management issues.vi According to Eastbridge Consulting, brokers will also rely less on in-person enrollments, become more consultative with employers, demand digital tools, and be willing to switch to companies that improve their situations. To respond to these shifts, insurers will need to offer increased data and support, provide omni-channel administration capabilities, and deliver competitive pricing, products, and commission structures going forward.
The beauty of change is that it prevents inertia and more importantly, indicates progress. This is the case for group insurance as the changing dynamics of new product strategies, intensified employee retention efforts, and evolving distribution models accelerate insurance ecosystem transformation. By breaking the mold, group insurance can set the stage for renewed strategies for long-term value and future success.
To see how Vitech’s V3locity solution can transform insurance administration operations, enable accelerated speed to market and product model objectives, while offering fluid configurability, click here.
i “Six Megatrends Defining the Next Wave of Life Insurance and Retirement,” Isabelle Santenac, EY, Oct. 2020
ii “Is Financial Wellness the Prescription for a Culture of Mental Health?” VoyaFinancial, May 2021
iii “Harnessing Growth in Workforce Benefits,” LIMRA Presentation at the 2021 LIMRA Annual Virtual Conference
iv “Employee Engagement Strategies During COVID-19,” Corporate Wellness Magazine.com
v Op. Cit., LIMRA.
vi “Forces Shaping Insurance Distribution,” PWC