As life insurers know all too well, overall levels of life insurance ownership are down in the United States. The problem is particularly pronounced in the middle market — the 52 million households with annual incomes between $35,000 and $100,000. In this segment, only 23 million households, or 44 percent, have life insurance. Yet, despite all of the debate and attention focused on this issue over many years, the industry has made little progress.
Making the most of this opportunity requires a top to bottom realignment of the value chain, as well as products that are built for the unique needs (and the more limited spending power) of the middle market. Insurers enjoying success in this area are, for the most part, focusing on the workplace, which, to paraphrase Willie Sutton, is where the middle market is.
With its lower distribution costs, the workplace is becoming increasingly compelling as a channel for reaching middle market consumers. Employers are rapidly making voluntary benefits a significant part of benefits strategy, and, in fact, we have seen that a large majority of employees say they value the ability to buy voluntary benefits at work.
There are five key elements to successful participation in the voluntary benefits market:
Develop a clear and focused strategy. Each employer market segment behaves uniquely, requiring different strategies, capabilities and competencies. Carriers trying to be all things to all employers often sub-optimize their voluntary benefits value proposition.
They need, instead, to identify their most easily leveraged assets, and then develop a clear and focused segment, channel and positioning strategy around them. For example, if the target segment is largely white-collar, multi-national companies attempting to leverage an independent agent distribution model will not work.
Such a segment will need a highly complex inside sales force that partners with clients and their consultants to offer the appropriate product choices, enrollment and service experience.
Offer a broad portfolio. Studies show that almost half of employers that currently offer voluntary benefits say they are likely to increase the number of products offered in the next two years. That’s because employee interest in receiving more voluntary benefits through their employer continues to grow.
Having a broad portfolio of voluntary products will be a competitive advantage, and can lead to deeper relationships with employers and employees alike. Offering nontraditional voluntary benefits, such as auto and homeowners’ insurance, can also increase employee interest and provide competitive differentiation. New entrants to the voluntary market have sometimes launched one or two products, trying to dip their toes. Unless that one product is a game-changer, there is little probability of sustained results.
Just because critical illness has been the fastest growing product, launching critical illness and hoping for success is not a viable strategy. Carriers will need to deliver a broad portfolio that includes a range of supplemental health products, life insurance and other protection products, and, potentially, disability, dental and vision insurance to satisfy the needs of their target segments.
Make it easy and seamless for employers. Carriers that can combine product, enrollment, billing and administration into a single, seamless package will be rewarded. While employers are often skeptical that one carrier can be excellent at every component of a bundled, end-to-end solution, the fact is that carriers will need to transform their capabilities and offerings, making each component the best in its class, to protect and enhance the employee experience.
Irrespective of target segment, employers will continue to value simplification more and more. Small employers do not have resources to dedicate to benefits administration, and therefore need very simple end-to-end systems and processes that can be managed easily. Large companies have multiple systems that already complicate their benefit environment and do not want additional complexity.
See also: Five voluntary trends to watch in 2014
Re-imagine, simplify and personalize the employee experience. Employee benefits are an extremely personal business. That explains why today’s education-based, face-to-face enrollment meetings at the workplace, and the subsequent one-on-one meetings with employees, yield significantly better participation results than self-enrollment approaches.
Self-enrollment is certainly more efficient — and almost always necessary for large, geographically dispersed employers — but not nearly as effective as face-to-face meetings. Technology is now at a point where consumers can be treated like individuals. Replicating a face-to-face experience on a self-enrollment platform is now possible.
This concept of mass personalization will enable forward-thinking carriers to infuse every employee interaction with greater engagement and intimacy. The experience can also be designed to allow employees to navigate seamlessly among a portfolio of channels, such as digital and call centers depending on the employee’s needs and preferences at any given time.
Allow employees to enroll at any time. While linking voluntary benefit enrollment to the annual enrollment for core benefits ensures visibility and provides a window during which employees must act, health care sticker shock may dampen employee enthusiasm for voluntary benefits. In addition, employee needs do not always coincide with an annual, one-time enrollment period. Allowing employees to enroll at any time transforms what is often a static marketing process into one that becomes a direct-to-consumer opportunity for carriers. This capability is key to fully leveraging a broad portfolio. From life-event marketing to upgrading existing policyholders to enhanced plans, the ability to enroll any time can drive penetration and share-of-wallet.
The voluntary benefits business has the potential for being a meaningful growth engine for life carriers. At the same time, the workplace is the most efficient and effective channel for accessing the underserved middle market. Employees are enthusiastic about the opportunity to purchase financial services products through the workplace, and say they want more offerings and choices.
Capturing this market, however, requires more than just investing in marketing, creative and digital capabilities. Insurers seeking success in workplace sales of voluntary benefits need both operational excellence and a realignment of the value chain that puts employee customers at the center of a coordinated effort. Carriers following this path have the potential to realize significant growth in the elusive middle market.