Original Article Appeared in Insurance Though Leadership April 2022
The pandemic has provided the sort of compelling event that is needed to propel employee benefits insurers to a digital transformation.
Digital transformation is difficult because it is as much a business change management issue as a technical challenge and often requires a truly compelling event to propel such a sweeping project. The COVID-19 pandemic caused such a compelling event in employee benefits.
A recent Zurich Sigma study of life, accident and health insurance (Swiss Re sigma 3/2021 – World insurance: the recovery gains pace) projects an increase in life protection insurance premiums such as disability, hospitalization and critical illness. At the same time, the nature of work is changing based on the global need to quarantine during the height of the pandemic. In a recent Bloomberg article, Prathima Choudhury, a Harvard School professor and expert on remote work, says, “We will probably in 10 years stop calling this ‘remote work.’ We’ll just call it work.”
Employee benefits insurers seek to enhance their operational processes, provide better customer service across their customer base as well as within their partner ecosystem and quickly bring new products to market. Addressing these goals requires a range of digital capabilities including software-as-a-service (SaaS) platforms that remove constraints around location and physical access; smart process management based on machine learning; better analytics and modeling tools; and user experience options that go beyond the traditional interface.
Making ‘Work from Anywhere’ Possible
Spurred by the pandemic, there has been a slow move toward “work from anywhere” models in the workplace, especially in the software world, but for a variety of reasons many companies have been slow to change. The employee benefits business is well-suited to this model due to the virtual nature of the product/service model and the recent advances in knowledge worker tools. However, some critical issues must be addressed.
Most insurers are still struggling with core insurance processing systems that are decades old and, in many cases, built before the internet became an essential element of commerce. Those systems were designed to support one product and aren’t capable of enabling service-based products such as government-mandated paid family leave and new business models such as voluntary worksite products.
Employee benefits carriers have done an admirable job wrapping their homegrown legacy systems with workflow software and robotic process automation (RPA) tools to provide some levels of digital process management and customer service. Nevertheless, the result is usually awkward to use and manage. Also, these hybrid systems are still mostly on-premise, requiring a physical data center or expensive custom hosting. Insurers tend to cling to these older systems because they have decades of insurance process and product expertise layered in.
The good news is that new SaaS systems and a wide variety of new technology from insurtechs and traditional software providers can meet the needs of the next-generation carrier. Here are a few key areas where new technology is helping:
- Modern SaaS core systems: There are core systems available today that serve the employee benefits market that were either “born in the cloud” or have become “naturalized citizens.” They go beyond basic hosting to leverage the natural advantages and inherent capabilities of the SaaS model. These systems tend to interoperate better with other SaaS-based systems used by brokers, benefit administrators and HR systems. The systems are capable of supporting the new, broader definition of employee benefits products.
- Machine learning: Employee benefits is one of the most complex insurance segments, with a B2B2C business model that has multiple value chain partners providing services to the employer, the employee and, in some cases, each other. Products have many options and are often heavily configured by the broker and presented in mixed portfolios across multiple insurers. Machine learning, which has been heavily employed in claims fraud and underwriting risk scoring models, is now being deployed in transaction segmentation, automated workflow and advanced user experience support.
- Rethinking the user experience: The employee benefits ecosystem has a lot of stakeholders, including the insurer, brokers, benefit administrators, consultants, enrollment firms, employers and, of course, the employee. That employee often gets the least attention in the broader user experience discussion. If all goes well for them, they have the least day-to-day interaction with the ecosystem, with the employer acting as the “customer.”
The introduction of voluntary benefits and workplace selling models has changed the dynamic. Employees have more options under their direct control when making plan choices, and some of those options require more understanding of the benefits and their interaction with others. For example, an employee needs to understand what combination of HSA funding and voluntary accident, hospital and critical illness insurance provides the best protection at the best price, all of which goes beyond their major medical insurance and company paid disability plans.
Employees need help in making these decisions, but insurance carriers realize that too much information can often be as bad as too little. The goal becomes to create a balanced user experience where employees get the information they need without being forced down a narrow path of a few standard choices. The same approach of balanced user experience applies to the claims process, where employees want as little friction as possible while still getting the full benefit they deserve. Using machine learning, purpose-built core systems and the right digital connections, a user experience could be as simple as a text from the insurance carrier informing the employee that their $10,000 claim payout was just deposited into their account and enabling issue resolution options as simple as a reply text to be connected to a case worker.
Employee benefits insurers have an opportunity to gain real competitive advantage and better serve their customers, and the pandemic has created the compelling event to make it happen.