On occasion, I’ve been critical of the group insurance business. I’ve used the term lethargic to describe the pace of change and have been critical of what I thought was a far too rigorous embrace of the status quo. There has been some innovation over the years, but it has paled in comparison to the pace of change happening elsewhere.
I still think we have a long way to go in this business before anyone would call us leading edge. For example, I still believe there are fundamental and profound disconnects between plan design and the evolving nature of risk. Risks are growing, and yet we still remain focused on protecting reimbursement of relatively routine and affordable claims at the potential expense of covering potentially catastrophic expenses. Also, there really hasn’t been much innovation in the area of risk-sharing.
In the last 24 months, however, I’ve seen more innovation in the vendor space than ever before, with new solutions entering the market on a seemingly daily basis. Traditional demarcations in the overall vendor supply chain are being challenged or — as a minimum — are blurring. Insurers are providing products and services that might have historically resided within the advisory community, while advisors are increasingly showing interest in providing products. As well, technology firms are entering the market, potentially disrupting the entire value chain. We’re entering into a period where traditional boundaries are being tested and where shades of grey are replacing black and white.
All of this isn’t necessarily bad. Change is inevitable, even in the rather staid insurance business. And amid the changes, there are many opportunities to truly transform the business and add value in new and different ways. No one can, or should, put a box around a traditional role and reject the market forces shaping our world and our industry. The status quo no longer exists.
Still, within this changing world and the blurring of traditional roles, how should an employer navigate this new dynamic? They should do so carefully. While the number of options is increasing immeasurably, we can no longer rely on traditional decision criteria to determine the best way to proceed. Insurers are no longer just insurers, advisors are no longer just advisors and technology firms are a whole new dynamic altogether.
The following is how I think plan sponsors should view the emerging value chain:
It’s always about where the value is and how you extract it. And it isn’t where you’ve received value in the past; it’s where you expect to see it in the future. As we move into an increasingly digital world, technology will be critically important.
However, it isn’t technology at any price. Insurance is about sharing and managing risk. Does a technology firm really understand that foundational aspect of group benefits? It’s about more than enhancing the user experience. Is an advisor able to effectively market and distribute products? Can an insurer truly provide unbiased, market-based data? And, as much as we may think of benefits as a commodity, considerable differences do exist and the traditional value chain has evolved in recognition of those differences. Don’t sacrifice the expertise that each of the players bring to the game in exchange for something that may look new and shiny.
- Back to basics:
Why do you provide a benefits program? What’s important to you? Is it a cost or an investment? What’s the relative importance of the user experience compared to the cost? It’s important to be able to put any new solution within the context of whether it supports the core principles and objectives you’ve established for your benefits program.
As we move into this new world where traditional lines are blurring, transparency becomes critically important, particularly when it comes to cost. Understand the revenue model. What are you paying for and how are you paying for it? Remember that nothing is free. And where appropriate, demand an accounting of the cost to you, the plan sponsor.
- Capacity and capability:
Look before you leap. If a vendor is entering into a new business, what’s its commitment to stay? What’s its future development road map to ensure it remains current and relevant? Does it have staying power?
It’s a brave new world where shades of grey may become the norm. Within this new world order, there will be many gems, but there may also be wolves in sheep’s clothing. Embrace change and seize the opportunity to do things differently, but understand the new value proposition and beware of the wolves.