In a never-ending search for new sources of revenue from the middle market, products in the group and voluntary benefits arena are increasingly being explored by insurers that previously had sold only individual life. Understanding the nuances of group business is a good first step, followed by assessing the level of technological readiness.
The group life insurance industry is in the midst of major shifts, many of which have been brought about by trends happening on the fringes of the industry. The Affordable Care Act and the consumerization of benefits are driving employers into a new philosophical position. Instead of viewing themselves as simply benefit providers, they find the need to be educators. Rather than just pushing benefit decisions to their employees they need to simultaneously assess how their offerings stack up against industry standards and how to provide enough information for employees to make wise decisions.
This push to consumerization and individual education is raising the importance of portability and individual records for the carrier community. Life administration solutions need to be fine-tuned for these changes in group sales, streamlined for easier individual underwriting, and measured for their ability to treat voluntary products with individual care.
Technology as Opportunity in Group Sales
Human Resources departments are continually searching for the 'best deals' in benefits to cut costs. Because open enrollment cycles happen each year, benefits providers are under annual review, therefore carriers need to work extra hard to retain more of the profitable renewal business and gain additional market share by providing competitive options.
Flexibility is clearly going to continue playing a significant role in group sales. Though large group providers have cornered the market for years, their legacy technology platforms are often hindering their competitive ability. Many of these carriers are running on home grown systems that are increasingly becoming difficult to maintain, expensive to run and are less agile than modern technology platforms.
The analyst community is also weighing in. According to a recent Novarica report, "Benefits or policy administration systems replacement is the top area of investment for group life/annuity/benefits insurance carriers, as the ability of legacy systems to support rapid product development as well as pricing and product changes is increasingly limited."
[Previously from Stockwell: Riding the wave to better policy service]
Product development and pricing are only the tip of the technology issue for group providers. Because a group sale no longer simply means group administration in the traditional sense, every facet of the system needs to perform group and individual administration seamlessly. It has leveled the playing field for both group and individual life insurers because both types of companies will need to make functional and technological upgrades to be able to meet demand in the middle market.
A great example of these upgrades is portal development. The group insurer likely has a well-developed administrator's portal for use by their clients' Human Resources personnel. These portals or those provided by enrollment and benefit administration firms will allow for easy census-based enrollment, effective status changes and quick claims submissions. The individual insurer may lack these, but have attractive agent-facing portals, and portals for policyholders to accomplish self-service status changes as well as claims submissions. Both types of insurers could avail themselves of needed functionality by adopting a modern administration system built to specifically deal with today's group business.
Flexibility Leads to Opportunity
At every level, flexibility is where the opportunity lies in technology transformation. When looking at group life as an expansion opportunity, an insurer needs to look for a technology solution that will give them flexibility in these areas:
- Enrollment – Can the system handle automated group enrollment via electronic data submissions as well as individual enrollment for voluntary products? Is it built to set up accounts with group setup, sub group setup and employee class definitions, etc.? Will it handle group underwriting analysis? How well is enrollment integrated into individual underwriting functions for voluntary benefits?
- Back office administration – Can the system handle portability and conversions of voluntary products to allow for the insurer to capitalize on relationships and grow premiums? Does the system offer improved workflow capabilities than can improve margins?
- Portal development – Is policy data accessible to everyone who needs it? Is the process broker-friendly and consumer-friendly? Can the individual, HR benefits administrator and broker all make changes?
- Product development – Will the system handle all types of products and product hybrids? Are there pre-installed templates for product development that also take regional regulatory issues into consideration?
An ability to create and handle portable products is essential. Today's employees understand that their life responsibilities don't end when they switch companies. In years past, a lost employee was a lost premium for a group insurer. Today's voluntary products should be flexible enough to help the insured to remain insured, while allowing the insurer to keep that customer's business.
- Billing -- As new products enter the group space, billing will need to persist. Does the billing system handle consolidation, with multiple billing models and potential payroll integration, plus the ability to easily transfer payment types (e.g. group bill to direct bill) when an individual switches policy type or leaves the company?
- Reporting – How transparent is policy data on both group and individual levels? Will reporting capabilities help to hone voluntary products and keep an eye on underwriting rules and actuarial knowledge? An error on one policy is damaging, but an overestimated mortality rate or an underwriting rule error over an entire block of business can be financially crippling.
These are only a sampling of areas where group business will be positively impacted by technology modernization. For life insurers with plans to expand into the group/voluntary/annuity space, a modernized insurance platform can enable true business transformation, and mean the difference between success and failure. For insurers already involved in group benefits, adding new functionality will help enhance the business, improve service and satisfaction to existing clients, and provide a stable platform for growth.
About the Author: Erik Stockwell is senior vice president and head of MajescoMastek's Life/Annuity Insurance Division.
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