I’ve been thinking a lot about the disruption tomorrow may bring. Most industries have already experienced more disruption than we have, so there has been much attention paid to potential disruption of our business in recent years.
Disruption takes place when the interface between a customer and a product provider is changed radically. Much of the disruption that has captured headlines is technology based. Think Uber, Airbnb or Tesla. Technology is just an enabling factor in disruption. The real point of disruption is the interface — the communications channel that brings customers closer to providers of products and services. The product or service itself is unchanged.
People want transportation from one place to another. Uber makes that happen. The interface is new, but what it does for people has not changed at all. But by changing the ability of a customer to summon transportation on demand, Uber has changed the economics underlying the service. Customers like the convenient process, but also the favorable pricing made possible by using in-place resources. Thus, the Uber disruption is one of communication between provider and customer, abetted by a distinct pricing advantage: resource management is much more efficient when it requires less capital.
There are lots of people thinking about how to disrupt insurance and the benefits business. Just crawl around the web for a while and you will find Fabric (“life insurance made easy”), Lemonade (“the first peer-to-peer insurance company”) and many others. Think of the impact Zenefits has had on distribution and service, despite their well-documented issues.
So, what will drive disruption in our business, and how can we position ourselves to be winners (Uber) and not losers (taxi companies)?
While we are not immune to disruption, there are some factors that protect voluntary benefits. A major driver of disruption of employee benefits is government actions. The ACA is a great example. For example, if the tax incentive for employers to provide health benefits to employees is eliminated, it could result in a transition away from employers providing benefits to simply encouraging employees to buy benefits on their own. This seems unlikely, because employers would still want to provide employees the value of simplified product selection and simple support processes.
The processing of employee benefit plans and eligibility tracking has already been disrupted by carrier web services, ben admin systems, and private exchanges.
Our process is already a disruption of standard insurance since the purchase process is comprised of the research phase, the purchasing phase, and the fulfillment phase. The employer has effectively cut the process itself by doing the research and making product/carrier decisions for the employee. Employers find value, because insurance companies are willing to offer guaranteed issue coverage to all the employees in the group.
Voluntary benefits feature the convenience of “check a box” enrollment, and the employer offers employees the convenience of payroll deductions, another improvement over the individual billing process.
As tomorrow arrives, we can expect the voluntary products and processes of today to evolve and potentially be disrupted. But in today's world, these products and supporting processes are already disruptors, paving the way for future evolution.