Technology and Broker-Centric Competition in a Fast-Changing Voluntary Benefits Market

Introduction

In the evolving voluntary benefits market, insurance carriers are facing new and preexisting challenges. Industry disruption because of the pandemic challenged sales for many carriers, while others experienced growth over the year. To further examine this and other notable trends, Vitech recently hosted a webinar in partnership with boutique voluntary benefits advisory firm Eastbridge Consulting Group, titled “Voluntary Benefits: Technology and Broker-Centric Competition in a Fast-Changing Market.” Over 45 representatives from a variety of insurers and insurtechs attended, featuring Nick Rockwell, President & CEO of Eastbridge Consulting and myself as moderator. The webinar focused on Eastbridge’s recent research about executive priorities and perspectives for voluntary benefits in 2021, and what follows is a brief overview of the webinar, along with some of the general findings and conclusions.

Current Business Landscape

The voluntary benefits industry has proven to be remarkably stable and yielding consistent growth over the past few decades. While last year’s pandemic undoubtedly impacted voluntary sales, posting a 15.5% decline, this decline was only the second decrease in sales over the past 24 years.

At present, there are about 90 or so companies that consider themselves in the voluntary benefits market. The top 15 companies in the voluntary benefits space represent a majority (over 75%) of the market share, but other companies have been growing their segments. Employers are also becoming much more sophisticated when it comes to carrier selection, looking beyond product and price as major selection factors to now take into account administration and service capability offerings.

Voluntary benefits market penetration remains robust in terms of current customers and there is future potential for sales in accounts without voluntary benefits, as well as employees in voluntary accounts who have yet to make purchases. Each segment requires a different marketing strategy. When it comes to enrollment, the companies that had or were quickly able to adopt virtual sales methods may have weathered last year’s downturn better than others. But another contributor to voluntary market growth has been a proliferation in the expanded types of products offered in accounts of all sizes, from traditional options such as life, disability, and supplemental health to wellness benefits and more nontraditional benefits like ID theft, legal, or pet insurance. This indicates that employers are willing to offer these products to engender employee satisfaction and long-term loyalty.

2021 Obstacles

From the executive perspective, a sizable market obstacle has been the uptick of technology fees and subsidies eroding profitability, which may be prove to be an ongoing problem. Although keeping up with technology is not a new concern, it does remain a persistent one as many companies have had to contend with legacy technology and finding ways to improve their digital customer experience, especially during the pandemic and the subsequent rise of online usage.

Sources of Competitive Advantage, Critical Online Services, and the Rise of Claims Integration

Many executives agree that new innovative technologies are central to competitive advantage, especially as they often enable greater customer service. Further reflective of executives’ prioritization of greater customer service was their almost unanimous agreement that employers are expecting better administrative solutions and processes. Employers rate various online services as critical for both employers and employees, including the ability to check claims status, view available benefits, change coverage, and view/pay bills.

Claims integration has also become an important priority for carriers, with the data from executives indicating a huge jump in offerings from 2019 to 2021. The varieties of integrations have also grown, with disability claims integration the most popular, but several carriers are working on medical and integrations between their own voluntary product portfolios.

Wrap-up and Takeaways

Following the data presentation was a lively wrap-up session featuring questions about growth opportunities within voluntary benefits, as well as some of critical areas that carriers need to focus on for wider product penetration. A critical focus for carriers is greater employee education of the products available to them, which can be amplified by the use of data as well as a more advanced and effortless digital experience.

To remain competitive, carriers must excel at administration and service. More sophisticated administration systems may help to better support brokers and attract their business, by providing streamlined portals for case intake, quoting and commissions, as well as claims visibility, reporting, and analytics. Claims integration remains a highly popular differentiator, and one that more carriers are embracing, especially with added functionalities such as product integration and predictive payouts, to name a few.

As the voluntary benefits industry continues its post-pandemic rebound, both Nick and I agree that nimble carriers who can quickly assess how they need to support distribution in virtual selling methods, enhance employee education, and manage administrative needs in response to the market’s ebbs and flows should do particularly well. Stay tuned.

For more information on Eastbridge Consulting’s research about executive priorities and perspectives for voluntary benefits in 2021, click here.

To see how Vitech’s V3locity solution can transform insurance administration operations, provide an effortless digital user experience, and offer unparalleled security, click here.