(View of Allen Street, Tombstone, Arizona. Photo credit: Grombo.)
The group life market is in a dynamic period of transition brought about by the Affordable Care Act (ACA), Health Exchange (HIX) options, and the rising cost of medical insurance that has employers shifting away from traditional benefit packages. This transition presents the opportunity for group life carriers to rethink how modernizing their administration systems and processes can position them for the future.
This protean transition period in group insurance could be likened to the Wild West in terms of its vast open opportunity and numerous challenges to unlocking this time’s potential. In the past, many group carriers went on the path of building homegrown systems as the best way to deal with the flexibility needs of the market. More recently, vendors have stepped up to create compelling off-the-shelf packages to meet the increased challenges and opportunities created by ACA and continuing legal interpretations of the law. Just as the railroad, the pick axe and barbed wire helped tame the Wild West, modern configurable billing and policy administration systems can help group carriers tame the current changing environment.
For years, basic group life policies required only moderate administration finesse. The employer paid in bulk for coverage. If they had 250 employees, they paid for 250 employees. The details of each covered individual were sparse. Only recently has the consumerization of insurance through exchanges driven real change in the way that group insurance is bought and sold.
In the past, the majority of group carriers were not seeking help from vendors. With traditional group insurance, there was a belief that every employer was different and every carrier was different, so flexibility and customization were required across the market. Group carrier CIOs did not feel that there was a system available from vendors that would be able to handle the number of variations that they needed, so they stuck with their homegrown systems.
So Why Change Now?
Three key factors created the perfect timing for change in the current group environment and the desire for pre-built solutions. The ACA’s individual mandate and the HIX consumer-driven website environment were two of those key factors. Because of ACA mandates, consumers and employers began looking at more individual needs and options. Consumer driven education and choices on HIX websites created opportunities for individualized approaches to benefits.
These circumstances coincided with the advent of the latest technology, the third key factor, which gave rise to vendors’ abilities to provide flexible, robust systems that are functionality rich and configurable enough to meet the needs of group benefits insurers
Encroachment of New Entrants to Group Business
Adding to the Wild West feel is the encroachment of new entrants to the market. The “individualization” of group benefits created by voluntary benefits, worksite, and public and private exchanges has gained the attention of traditional individual life carriers. Group life insurance is now taking on all of the nuances of individual products with individual needs analysis, target consumer education for individuals to make informed choices, and the handling of details such as billing at a group and an individual level.
With traditional group providers slow to respond to the changing group market, individual insurers are starting to see this as an opportunity to capture a market that is “headed in their direction” operationally and technologically. As a result, more and more traditional group insurers are recognizing their need to adapt in order to compete. Because they were the original settlers in this territory, group insurers currently understand the market better than individual insurers. For them to continue to compete, however, they need to lay new track into the uncharted regions and to catch up technologically to the newcomers (the individual insurers) before these new entrants capture greater market share.
Getting the Modernization Journey Underway
A group carrier contemplating modernization needs to start by finding modern system technology that includes pre-built product libraries and templates to provide the speed-to-market and flexibility needed in the fast-changing group, voluntary benefits and worksite space. Every group life relationship may require a custom approach, which can be addressed with templates and configurable rules. The transformation can happen faster by working with an experienced vendor and implementing a proven vendor solution.
Taming the Wild West of group life will also certainly require bringing data under control and finding ways to use it as strategic resource. When selecting a system, a group carrier should be sure to analyze how the system handles data. Gaining more information about the individual provides a better chance for a 360° view of each consumer and not simply a single relationship at the plan sponsor level. Knowing the consumer as an individual provides the opportunity for better customer service, greater upselling potential and additional information for employers that will add value during renewal conversations.
Change and opportunity on this scale creates time-sensitivity. Group carriers should look to stake claims now on their modernized future and their share of the Wild West territory.