2021 GROUP BENEFITS OUTLOOK SERIES
Changing Distribution and Go-to-Market Models
This article is part of our Benefits Outlook Series where we provide our outlook on the group benefits market while highlighting specific success stories and opportunities to drive go-to-market success.
Rapid Change to Benefits Distribution and Go-to-Market Models
The COVID-19 pandemic has sparked the rapid change to benefits distribution models. First and foremost, the employer-via-broker go-to-market remains dominant but the push to virtual posed a challenge for many — particularly those carriers and brokers that historically relied on in-person enrollers. Many employers responded to the pandemic and employee demands by adding new voluntary benefits to supplement gaps in coverage, but struggled to communicate benefit value, and as a result did not see participation rates materialize. For instance, Accident and Hospital Indemnity saw substantial increases (>35%) in employer participation, but employee participation rates were remained flat from the prior year. Last but not least, changing employment and growth in the Gig-Economy means new markets to penetrate—and new go-to-market models.
In Part 1 of our series, we dive into the specific go-to-market models for benefits providers as they face the challenges mentioned above. From employer-via-broker to direct-to-consumer models, read on to see what’s happening and where things are going. We share strategies, imperatives, and foreseeable opportunities for benefits providers and their senior executives.
Employer-via-Broker Channels Continue to Boast Biggest Profits
Employers are still the biggest drivers in the Voluntary and Dental markets. With distribution taking over underwriting as the main profit-driver, Agents need to keep momentum in shifting to digital approaches. 50% of agents indicated that building new customer relationships remotely was one of the biggest challenges of the pandemic. And the annual enrollment meeting—once the primary face-to-face touchpoint for brokers—is increasingly ignored or done electronically, making it harder to strengthen those relationships, and creating space for disruptors.
So, what should carriers be doing to help enable their brokers/agents to overcome these challenges? Brokers now rank administration and service over product features/benefits as key carrier selection drivers. “White glove” services to minimize enrollment, change, and claim hassles are increasingly important. Yet, as Carriers launch new technologies to facilitate delivery of those services, they need to be mindful of the “yet another system to learn” which is often more of a drag than a benefit to brokers and agents. All of this means the right kind of agent enablement is key.
Strategies to Build the Right Agent Enablement
Carriers that arm agents and brokers with data-powered benefits tools will help drive informed decision-making among employers and employees. The use of benefits enrollment and benefits administration platforms has increased dramatically over the last several years, with nearly ¾ of employers utilizing these platforms today. As the enrollment and administration platforms become ubiquitous, carriers must increasingly focus on the data and insight they can provide—independent of platform.
Instead, arming sellers with data-driven insights such as plan value based on utilization, historic participation rates, proactive benefit eligibility notification based on medical claims, and even pre-qualifying the right leads, handing them off with the right context, content, and messaging, are best practices that will drive broker mindshare.
This 30-minute on-demand webinar covers how to equip direct and indirect sellers (agents and brokers alike) with data-driven targeting, messaging relevance, and unique differentiation.
Direct-to-Consumer Models Need to Tap Into the Gig Economy
Growth in the “gig economy”— young 26-35 year-olds—and early retirement under-65, pre-Medicare seniors, represent crucial acquisition opportunities for carriers. These cohorts are best accessed directly. Penetrating these new markets, like acquiring a newly-uninsured 26-year-old or pre-Medicare retiree coming off an employer plan, could mean a loyal customer, and carriers will need to explore the feasibility of direct-to-consumer go-to-market models or risk losing share to carriers and/or disruptors with D2C models.
Innovators in Benefits Distribution – Spotlight on Aflac
In January 2021, Aflac launched group dental and vision as their first expansion into products based on a provider network. Aflac’s integration of direct and employer go-to-market models drives pull-Through and shifts market power to the carrier. Their strategy is:
- Pull-Through: The Aflac model depends on employee and HR/benefits coordinator awareness and affinity to pull brokers through and drive take-rate in the enrollment process
- Portability: Aflac’s focus on portability is also a significant factor for modern workers who are more likely to switch jobs frequently
- Awareness over Comprehension: Over 20 years, awareness jumped from 10% to 90% through a relentless focus on the Duck; the current campaign focuses on comprehension and driving concern for potential surprises
Opportunities/Challenges in Benefits Distribution – Spotlight on Specific Markets
Despite new opportunities in direct and channel-based distribution models, some sectors may find themselves facing headwinds in the new year and beyond.
- Dental
Yet some service providers advise against direct enrollment in dental plans when outside of employer subsidies, suggesting these plans are a “bad bargain.” New entrants like Troy Medicine and Oscar, are driven by technology to enable easy direct-to-consumer purchase, along with new entrants like Smile Direct, QuipThe dental market is still highly fragmented, with stand-alone providers, medical carriers, and ancillary carriers all bringing plans to market. Medicare Advantage and Health Plan providers are increasingly embedding dental, among other voluntary benefits. In fact, enrollment in Medicare Plans providing dental coverage increased from 48% to 74% between 2010 and 2020.
- Payroll Companies
Expect broker consolidation to expand to the acquisition of smaller Payroll companies as brokers converge on PEO-type offerings. As insurance exercises move digitally, many PEOs that long ago developed digital platforms have a leg up, as employers are tempted by the comprehensive set of offerings managed at a single source. - Medicare-for-All
A “Medicare Advantage” model may be a likely outcome of a potential shift towards Medicare-for-All, in which consumers choose managed and a-la-carte options to enhance traditional Medicare. This will drive an existential reckoning for employee benefits brokers, whose primary role has been managing major medical plan selection and renewals. Companies could quickly pivot to focus on delivering financial benefits—retirement, student loan debt management, and potentially disability and hospital. Brokers focused on HR solutions—in other words, providing “total care” of the workforce including recruiting, talent management, and financial health—will survive.
The Path Forward: Go-to-Market Agility
As we learned last year, buying behavior can change very quickly. While the pandemic clearly accelerated the rate of change, many of these changes were already underway. It forced carriers and brokers to rapidly adapt their go-to-market models to those changes.
Moving forward, carriers and brokers must adopt more agile go-to-market approaches that are built around both customer-centricity and commercial agility. It will require greater alignment between sales and marketing, deeper customer knowledge, and a greater return on investments in data, analytics, and technology in order to identify and deliver the data-driven insights to your distribution channels which will differentiate your solutions.
Next Up: Employee Segmentation!
