How technology and innovation are paving the way to greater success in the group market
by Leonard A. CavallaroMr. Cavallaro is Assistant Vice President, Voluntary Operations for Reliance Standard Life Insurance Company, a member of the Tokio Marine Group. In this role, Len drives voluntary benefits strategy and service delivery nationally through people, technology and strategic partnerships. He brings more than 30 years of group benefits expertise in sales, service and strategic management. Visit rsli.com.
In the property and casualty insurance world, one of the more exciting developments is the swift advance toward driverless cars. In Silicon Valley and around the world, people who are paid to know attest that in a reasonable amount of time, much less than a generation, human drivers will likely be outlawed because of their statistically greater risk of accident and injury compared to self-driven vehicles.
Whether this prospect excites you or scares the pants off you is immaterial. The lesson is that in many segments of our business, technology is working to supplement and even supplant homo sapiens. In the Voluntary Benefits market, technology is equally visible and development is aggressive. But unlike the example above, the key to driving growth is putting more control in the “driver’s” hands.
The Supplemental Health Segment
Voluntary, or employee-paid, benefits have been around for decades, enabling employers to, first, greatly expand their benefits repertoire with no commensurate spend; and, later, to cost-shift when consistently rising medical plan premiums siphoned more and more out of the corporate treasury. In recent years the growing incidence of high deductible health plans (HDHPs) has helped fuel the growth of a subset of Voluntary benefits called supplemental health. These typically include Critical Illness (and/or Cancer), Accident and Hospital Indemnity lines of coverage.
The function of all three are similar in that they act to mitigate the impact on an insured’s deductible by paying lump sum benefits for covered illness, injury or treatment. This can be transactional or somewhat more strategic. For example: Joe trips over his daughter’s bike and fractures his leg. It requires surgery, a short inpatient hospital stay and several weeks of outpatient follow-up care.
If Joe enrolled in his employer’s voluntary group accident policy he will receive payment based on a fixed inventory of covered benefits. Further, if he also enrolled in his voluntary hospital indemnity plan he will also potentially be paid based on his emergency treatment and/or inpatient admission. If he didn’t enroll in either, his family medical deductible – probably $5,000 or more – is far in the rear view mirror, and that’s before additional expenses like medications, transportation, child care, copays and others begin to pile up.
Critical illness works similarly but based on diagnosis of covered illnesses like cancer, heart attack, stroke, kidney disease and others. Critical illness (CI) typically has higher benefit amounts and provisions for subsequent (additional) and recurrent diagnoses, so that the insured, if he is unlucky enough to suffer several grim bouts with a “dread disease,” is at least lucky enough to be able to potentially receive some level of benefits for each occurrence. This can mean a lifetime maximum benefit payout of many times the face value of the coverage.
$10 Billion Annually…and Growing
If this looks like sound, reasonable financial planning to you, many of your clients agree. According to LIMRA, in 2018, group companies making up 90% of the supplemental health market reported a combined total of $2.7 billion in new sales, a 4% increase over 2017. The in force market stands at nearly $10 billion in annual premium, an increase of 8% over the prior year. While all three lines of coverage are trending up, CI sales have posted double-digit gains each year since 2010, according to Eastbridge Consulting Group.
Here at Reliance Standard, CI sales have more than doubled since 2012. Some of that growth has been the market tide, raising all boats. But an increasing factor is a product and service delivery model that emphasizes customization and control, something long absent in the group benefits market. Today, according to data collected by LIMRA (Q1 2019), Reliance Standard is the #1 fastest growing US Critical Illness and Accident carrier (341% growth and 301% growth year-over-year, respectively), and 3rd among 25 Hospital Indemnity carriers (313% growth year-over-year).
Growing awareness is key to growing sales. More brokers are recommending critical illness today, and more employers are including CI, both standalone as an employee-paid option and bundled with other voluntary/supplemental health plan offerings, than ever before. Critical illness doesn’t truly operate as a gap-filler coverage in that it does not align as directly to a specific medical cost the way accident and hospital indemnity plans do. Still, the growing incidence of high deductible health plans and the increased association in the workplace between CI, accident and hospital indemnity plans can cause people to consider critical illness insurance as a means to reinsure their medical deductible and, beyond that, their family nest egg.
Another market factor in the growth of supplemental health products has been the proliferation and popularity of benefit administration platforms. These online portals have made it easier for employers to offer as many voluntary lines as they believe may be of interest, with no commensurate direct cost. Where conventional wisdom used to dictate a limited slate of voluntary coverage options, online enrollment and benefit stewardship has made it easier and more efficient to consider, buy and utilize these coverages.
Finally, the recently improving job market has been instrumental in helping expand employer offerings of Voluntary products.
Broker, Take The Wheel
Many times, legacy supplemental health plan designs were rigid, with long lists of covered benefits or confusing categories, each with its own requirements and provisions. In the group segment, easy is as important as affordable, so Reliance Standard made the decision to retool its supplemental health plans to maximize the customization available to the group. This puts greater power in the broker’s hands, along with the ability to drive greater value to the employer and covered employees.
Wait, didn’t we just say “easy” was important? Customization sounds hard, not easy. Look at it this way: how many of us would love to drive a Ferrari? But, how few of us are skilled driving a racing-tuned, manual-transmission sports car? As brokers, you get to bring shiny, powerful cars to the masses – and they have cruise control!
Goodbye categories: today we have crafted a roster of 28 separate triggers so you can help employers build a plan as broad or as targeted as desired, based on the characteristics of their work force. Removing categories also ultimately helps the insured employee access benefits, particularly if subsequent or recurrent benefit coverage comes into play.
New triggers in response to market demand include benign brain tumors, Alzheimer’s disease, multiple sclerosis, Parkinson’s disease, ALS (Lou Gehrig’s Disease), occupational HIV and occupational hepatitis. And we added a suite of childhood disease triggers, like cystic fibrosis, muscular dystrophy and Down’s syndrome. Instead of picking a plan design, you can help craft one for better adoption and superior value. This build-on-demand strategy is also a strategic tool if the group has a predetermined price point it’s trying to hit based on employee tolerance or medical plan changes.
Traditional group accident plans can look simultaneously robust and rigid. Plan designs created by actuaries may be statistically sound but aren’t always ground-level relevant. And customization in the group market has traditionally been a no-no. Our product approach was to expand the number of covered conditions and services (adding pain management, chiropractic and youth sports injuries for example), and creating a “multiplier” approach to allow maximum customization of benefits, amounts and premium. The outcome is a plan that is relevant, valuable, affordable, easy to use – which means high participation and employee satisfaction.
Like the critical illness example above, attaching a multiplier (from 0 to 5) to each available benefit allows you to craft a plan based on the makeup of the group workforce. But in an environment where more Voluntary sales are takeovers from prior carriers, it is also a great shortcut to matching an existing plan if that is what’s called for. I find a best practice is delivering two options: a legacy plan match and an enhanced plan design that solves an identified problem. That can be as strategic as looking at medical claims data and designing a high-value supplemental plan, or as simple as reducing benefit multipliers to ensure the broadest coverage at the smallest possible cost.
The most interesting factor we see potentially impacting both product and sales is the relationship between plan design and the enrollment experience. Basically, any Voluntary product can be only as complex and robust as the eligible employee has ability to understand and evaluate it. In the online enrollment and benefits admin portal space, this reality has manifested two ways: in streamlined plan designs with limited customization; and in more sophisticated and layered decision support to the eligible employee. Both strategies can help increase participation and understanding.
For my money, I think you get the best ROI on human intervention and expert counsel. That’s why, at the same time we’ve assertively moved into the online platform space, we continue to field salaried, licensed and certified voluntary benefits experts to help brokers and clients design and enroll plans nationwide. This commitment to expert advice doesn’t change based on how the employee ultimately enrolls, via platform or paper, and the positive impact remains constant regardless.
In conclusion, the Voluntary benefits road ahead is broad, well-paved and inviting. An informed, articulate and committed broker, with a few qualified, reliable partners, could be wildly successful driving sales, participation and satisfaction for years to come. ◊