To seize the opportunity and achieve sustainable market leadership, insurers must commit to continual self-disruption and ongoing innovation. Routine tech upgrades and operational refinements for increased efficiency, while important, are insufficient.
Innovation will be necessary across the entire value chain. Processes must be data-driven, personalized, contextualized and automated. New offerings (including absence management, voluntary benefits and wellness programs) must be fully integrated and designed for flexibility, portability and affordability. They must also reflect the diverse and evolving needs of today’s workers. For example, they should help address the stressors associated with remote working and the erosion of traditional employment relationships. In planning for future growth, carriers must aim to get ahead of these major market shifts and adopt a holistic approach to transformation, which we describe below, to ensure their strategies align with where the market is going.
State of the workplace benefits market, circa 2021
Before the COVID-19 pandemic struck, worker benefits offerings produced growth for many carriers, thanks largely to low unemployment rates and expansion of voluntary benefits. However, continuing headwinds impede the ability of many carriers to capture available growth opportunities. The barriers include:
- High expense ratios driven by inefficient legacy processes, which limit scalability
- Sub-par digital experiences for brokers, plan sponsors and employees, which limit engagement
- An aging workforce, contributing to a loss of institutional knowledge, and challenges in attracting the next generation of workers
- Poor data quality and inability to effectively leverage external data sources, which can limit product flexibility and personalization
- Additionally, the broadening interest in employee well-being — financial, physical and mental — drives the need for more non-traditional holistic and connected offerings.
Collectively, these factors can prevent insurers from taking full advantage of the increasing demand for new solutions. For instance, technology, data management and process limitations will prevent insurers from developing and participating in the integrated ecosystems and platforms through which more holistic and flexible solutions will be offered and managed. We expect these ecosystems and platforms to become the primary method of product distribution over the next 10 years.
COVID-19 shined a spotlight on many of these challenges. The almost overnight migration to full-time remote work highlighted the need for large-scale digitization and more robust technology. EY research confirms how employer priorities are shifting and that technology matters more than ever to employers; 65% report that tech is a critical consideration in selecting group benefits providers. Consumer needs are changing, too. For example, the pandemic generated and expanded interest in new products and services, solutions offering protection and promoting financial well-being.
We believe these demand signals are an invitation for insurers to fulfill their purpose of helping individuals, families and communities prepare for unknown risks and recover from adverse events. Indeed, purpose-led strategies will help insurers increase their relevance to consumers’ lives and provide competitive differentiation.