Exchanges: Better for all, but hard on insurers; reflections on the LIMRA Benefits Conference

I recently attended the 2014 LIMRA Group and Worksite Benefits Conference at Baltimore Harbor which has grown dramatically, driven by the disruption and opportunity to be found in the US group and worksite benefits marketplace. There were excellent prepared sessions and many good discussions at the conference, which left me thinking of what I see as the next conundrum in this market, the need for simplicity, transparency and clean customer experiences in a complex business. It seemed almost every session had the word “Exchange” somewhere in the title and most were trying to explain how exchanges of various kinds benefit insurers, employers and consumers, and how to leverage the opportunity this transformation presents. It was stated that exchanges are making things simpler for all parties: broker, insurer, employer and employee. But these new automated marketplaces make things considerably more complex for insurers. 

There was little discussion of public exchanges as a change agent or how they are meeting their mandate to promote the public good, other than as a way for existing distribution channels to avoid low margin business. Most of the discussion I was part of was around the role of single and multiple-carrier private exchanges and the best way to align them to supplement existing distribution. The other point of concern was how to prepare to play across multiple exchanges and work with multiple enrollment/service technology vendors to ensure market coverage.

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As an insurance technologist, I am happy this shift is enabling the creation and deployment of new technologies that can enhance the employer/employee experience in benefit education, product choice and streamlined service. My concern is can the insurers support this channel and product proliferation when the hardest part of the equation is not the exchange but the back office.

I am currently working with insurers that are trying to support this faster and more complex distribution and service channel, while launching new products for a changing market and meet shifting regulatory rules. They have their work cut out for them as they upgrade layers of complex legacy policy administration, billing and claims systems to support these new product and channels, and the hardest part is the business models are still evolving. IT leaders are frustrated as they attempt to put systems in place to support these evolving business models and the one thing that is clear is flexibility is critical and change is inevitable.

Bottom Line: This market disruption can easily overrun an insurer’s ability to keep pace with change when their infrastructure wasn’t built for this new model. 

I would be very interested to hear your thoughts as to what do you perceive as the greatest hurdle for insurers in these new exchange-based marketplaces.