With Core Modernization, Group Insurance Companies Can Only Benefit
As someone who has worked with group insurance companies for quite some time, it’s a relief to see that they’ve (so far) been able to withstand the coronavirus pandemic and its subsequent industry disruption. Some have even wisely used the crisis as an opportunity to modernize their digital user experience considering increased website traffic, as customers are even more eager to monitor claims, provider options, and perform self-service. Unfortunately, group insurance companies have traditionally underinvested in core system and advanced solutions, and as a result have lagged other industry segments in modernizing and transforming their platforms. It’s encouraging that recent digital experience upgrades by some group insurance companies should accelerate the trend among group insurance companies overall to modernize their core systems. Why? An advanced core system with straight-through processing, more granular pricing approaches, and other enhanced capabilities that make benefits processing and operations more efficient reinforces group insurance companies’ value proposition to employees and employers alike.
Setting the Stage for Modernization
To provide some background, group insurance companies have traditionally benefitted from a successful business model, with two particular advantages. First, employers vet insurance products on behalf of their employees, eliminating for employees a time-consuming, individual product selection process. Second, group insurance companies benefit from the lower distribution costs and better risk pooling (from employee groups of varying ages). As a result, the long-term growth for these products remains robust.
But a longstanding problem for many group insurance companies is that preexisting, manual internal processes and phone- and paper-dominated customer engagement approaches too often result in inefficient and poor customer experiences. The complex insurance benefits ecosystem also hinders straight-through processing. This issue is further compounded by group insurance companies having to integrate with multiple layers of different enrollment providers, benefit administrators, and data providers, with each employer customer requiring different combinations of the above.
What’s more, this highly complex ecosystem has made it difficult to increase efficiency and deliver a compelling user experience to employees, employers, and brokers. I’ve seen many group insurance companies delay or refrain altogether from needed upgrades to their core systems. But the cycle continues as pressing concerns, such as overly manual internal processes, increased demand for effortless user experiences, low interest rates hindering profits, and emerging new competitors, have now made modern core systems even more critical.
Core Modernization’s Benefits
To break the cycle, group insurance companies need a componentized, core benefit administration platform that will enable necessary improvements to the user experience, operational efficiency, and effectiveness that can facilitate modernization and benefits system integration. Modern, advanced platforms enable more efficient and seamless benefits processing overall, through the following system capabilities:
- Greatly increased straight-through processing. Employees, employers, brokers, and insurance personnel should never need to enter the same data more than once. Natural language processing makes it possible to further minimize manual data entry.
- Easier enrollment. The core system should be easy to integrate with third-party benefit enrollment, human resource, and payroll systems and services with out-of-the-box, self-service portals. Easier enrollment should particularly assist small businesses that cannot afford benefit enrollment services and those employees who want to make benefit changes outside of annual enrollment periods.
- More granular pricing approaches. To price group benefits products (disability, life, accident, dental, and others) more accurately, providers need better data sources, other than previous customer claims. In addition, targeted use of machine learning and artificial intelligence, along with the increased use of third-party pharmaceutical and other data sources, can provide the real-time pricing and risk selection benefits that already exist for individual customer products.
- Highly flexible billing alternatives. To increase efficiency, small employers (less than 100 employees) and the largest employers (5,000+ employees) will continue to use self-billing approaches to determine monthly premiums. Midsize employers will usually still require the insurance provider to reconcile differences between current and previous payroll data. The benefits administration platform, however, must support all potential billing alternatives, including advanced list bill reconciliation.
- Efficient and effective claims processing. For high-volume disability and dental claims, providers need to further increase their auto-adjudication rates and make it easy for employees to submit claims, receive status updates, and payments through their preferred channels and methods. Advanced analytics should flag suspicious claims using internal and third-party data, continuously streamline claims workflows, and optimize auto-adjudication rules over time. Further integration with medical claims data can help align group and voluntary benefits claims with medical claims to increase usage and protect the long-term value proposition of these products.
Group insurance companies have established a lucrative industry whose long-term growth and profitability remains very attractive. But the facts on the ground are obvious: to build on their current success and invest in long-term, seamless functionality, insurers need to implement modern core platforms that enable necessary improvements to the user experience and operational effectiveness. An advanced core system with robust enterprise capabilities can provide the most value by enabling better user experiences, benefits processing efficiency, and overall streamlined operations, and give market players yet another advantage in a longstanding, successful industry.