Health care strategists predict that the individual health insurance market will generate more than $100 billion in premium growth over the next few years, rapidly becoming the biggest and most promising growth sector for health insurance carriers and brokers. We estimate the market will see at least 20 million new individual and family paid policies in less than 5 years.
Much of that new business will come through the Internet, which is rapidly becoming the destination of choice for individuals seeking health insurance education and coverage options. Insurance industry studies and surveys by my own company indicate that the vast majority of individual prospects use the Internet at some point in their health insurance purchasing process.
Catalysts for change
Rapid growth in the individual market is occurring due to a convergence of 3 key trends:
1. The erosion of small and mid-size group health insurance coverage.
As group health premiums continue to increase, a growing number of employers in the price-sensitive small and mid-sized markets are opting out of their group plans, shifting the burden of coverage and costs to individuals. According to a November 2007 study of 3,000 employers, the percentage of groups with 200 or fewer workers offering health insurance fell to 61% in 2006. The cumulative impact of decreasing group coverage is having a tremendous effect on the number of uninsured in America. In fact, a 2007 report by the Economic Policy Institute, Washington, revealed that the 8.6 million increase in uninsured Americans between 2000 and 2006 was “driven primarily by the continued erosion in employer-provided health insurance.”
2. Growing pressure on state and federal governments to find affordable health insurance solutions for America’s 47 million uninsured citizens.
America currently has 47 million uninsured and underinsured residents whose unpaid medical bills are creating a huge ripple effect throughout the healthcare system and the entire economy. In an effort to contain these skyrocketing costs, legislators–and even presidential candidates–are developing proposals to expand insurance for all individuals. As these new programs are fleshed out and eventually developed, the uninsured will have choices that will drive new sales in the individual market.
3. The increasing dependence of consumers on the Internet for health care information and products.
Consumers are rapidly turning to the Internet to educate themselves about health insurance, to compare coverages and costs, and to buy individual health plans. According to Internet solutions company Trellian L.L.C., Torrance, Calif., the keyword “health insurance” was searched an estimated 109,011 times in September 2007 across Yahoo, AOL, MSN and Ask. In addition, Celent L.L.C., Boston, predicts that the percentage of health insurance purchases initiated, influenced or completed online will increase from 52% in 2007 to over 90% by 2011.
But most consumers find that shopping for health insurance on their own can be a daunting task. Due to the complex terminology, packaging and pricing of policies, consumers are overwhelmed by the sheer number and intricacy of their health insurance choices. Shoppers, especially parents and older adults, realize that making the wrong purchase can have significant financial consequences. According to industry studies, fewer than 5% of consumers will buy a policy online without any guidance. Consequently, brokers will play a growing role in the sale and marketing of individual health plans, educating, supporting and guiding consumers to the plans and options that best suit their budgets, family situation and health needs.
When demand explodes
Carriers and brokers who hope to gain a competitive edge in this emerging marketplace must have the technology platforms and multi-channel sales tools that will enable them to respond to market needs and capture individual prospects on their own shopping terms.
Forward-thinking carriers and brokers are adopting new technology, such as branded product websites and quoting engines geared to individual shoppers, automation software and electronic applications that help with attracting, capturing and retaining individual health customers efficiently. These tools help marketers reach customers at a far lower cost than such standard outreach tools as direct mail. In fact, brokers using such automated individual health applications have reported reductions of 30% to 50% in overall customer acquisition costs.
Individual health sellers who lack the in-house technological resources to develop their own branded quoting engines, drip marketing tools and websites can form alliances with technology companies that can rapidly launch multi-channel sales platforms.
Remember the broker
One of the most important steps a carrier can take to respond to the coming expansion in the individual market is to grow its broker sales force and nurture agent/broker productivity. The fact is that 95% of shoppers will want and need help from a professional advisor before making a health insurance purchase decision. Brokers and agents are uniquely positioned to assist consumers in the comparison and purchase of individual health coverages.
Carriers can create tremendous broker loyalty and enhanced broker productivity by investing in tools that engage broker interest and support broker sales. The most robust broker support programs are end-to-end programs that help agents leverage the power of the Internet.
A typical end-to-end program links carriers, brokers and consumers. It includes tools such as Internet lead programs, automated quote engines, workflow automation tools, Web sites, and concierge selling and service tools that blend high tech with high touch at each stage of the selling process. In addition, the best programs provide initial and ongoing online broker training through seminars, webinars and newsletters.
Both carriers and brokers can benefit tremendously from a carefully planned investment in a complete end-to-end sales solution. These solutions can maximize the effectiveness, profitability and productivity of broker partners by increasing the visibility of brokers with consumers, streamlining the application and sales process, and lowering the cost of acquisitions and sales.
Fred Karutz is senior vice president of business development at Norvax L.L.C., Chicago, a health insurance technology company. He can be reached at