Down Market Opportunities Beckon Benefits Insurers
Anthony Grosso | May 08, 2017
You have surely heard it said that small businesses are the growth engine for America. Today, the phrase has a special ring to it for benefits insurers. The small business market is often viewed as an opportunity attractive to growth-minded insurers because the focus of the majority of carriers is on the larger, highly-competitive end of the market.
Yet there have been notable instances of carriers moving down market to win smaller cases, and failing. What is different about today’s down market opportunity? How big is it and what is driving new interest in it? And why is new technology making capture of the opportunity more possible today than before?
Are you feeling the squeeze?
A slow premium growth rate of two to three percent in the benefits market is pushing interest in small case markets. Add to it the fierce competition in the large/jumbo case market where most new business is “take over” business, and a down market strategy is compelling. The numbers appear to support it. Overall, the small case market of firms with between two and 100 employees, accounts for approximately 90 per cent of all firms in the U.S. and approximately one-third of the total U.S. workforce.
Is small the new big?
The majority of the employees in the small employer market of 100 or less employees are currently not buying voluntary benefits products. This amounts to a big opportunity that gets greater as it gets smaller. The smaller the firm, the fewer the products offered. Micro firms (between two and nine employees) employ approximately 20 percent of the total workforce, but well over half do not offer a single voluntary product.
Across the whole market segment, a full 36 percent of employers do not offer single voluntary product, according to Celent. However, the take rate is high where they are offered. Within companies of 10 to 49 employees, 48 percent of employees own at least one voluntary product, according to Eastbridge Consulting Group. This signals a receptive market, if it can be reached.
Too big to succeed?
Several insurers have staged down market expansion only to find out they were ill-equipped and lost time, money and a bit of reputation in the process. They were stymied by underwriting and business processes tailored to the large-case market and experienced difficulties trying to support the level of automation and service required to be profitable with small cases.
The small-case market requires a different product mix, underwriting, and distribution approach and employer and employee expectations for service differ. For example, small-case producers work with a smaller roster of insurers and expect more support from them for enrollment and other services. And small-case employers expect streamlined interactions and more recordkeeping from insurers.
What is now allowing benefits insurers to cross the divide is newer more flexible technologies that can deliver both the straight-through, high-volume processes for small cases and also accommodate the bespoke product packaging, self-administration, and high touch desired by large cases. Add the agility to put products to market many months quicker and with less cost than is the norm for the market and what was once untenable is now a real possibility.
Go where everybody knows your name
Another appealing market characteristic for strong, growth-minded brands is the penchant of small employers to work with a single carrier. Almost half of the employers in the small case market of 10 to 99 employees use only one carrier compared to the 100 and over market where only 15 percent of the employers use a single carrier, according to Eastbridge.
The bottom line? Small businesses offer a loyal market with lower levels of competition and an employee base that is receptive—an attractive target for business expansion. Carriers that can unshackle themselves from their legacy constraints, embrace new flexible technology and leverage their brand will go down market and win.
Tony Grosso is vice president of product and Industry Marketing at EIS Group, and can be reached at firstname.lastname@example.org.
- ITA Pro Magazine May/June 2019
- Spotlight on the 2019 IASA Conference
- ValueMomentum Selects Erie as Site of Regional Development Center
- Capgemini and Majesco Become Alliance Partners
- Electronic Chat with Dr. Dan Shoham
- Electronic Chat with Todd Greenbaum
- Martha Notaras: The “Outsider” with an Amazing Inside View
- ProSight Direct Offers “Effortless Insurance for Today’s Professional”
- Electronic Chat with Larissa Tosch
- Martha Notaras Will Join ITA LIVE 2019 as a Keynote Speaker
- Five Things to Consider When Evaluating Your Cyber Risk
- ITA Pro Magazine, January/February 2019
- Major Ransomware Attack Could Hit U.S. with $89B In Economic Damages
- ITA Announces 1st of Three Keynote Speakers at ITA LIVE 2019
- Electronic Chat with Jeroen Morrenhof
- Legacy Systems Are Dead. Really? Don't Count On It.
- Now Accepting Nominations for the 2019 ITA Bridge Awards
- It's time to register for ITA LIVE!
- Registration is Now Open for ITA LIVE 2019!
- What to Expect from a Digital Experience Platform Implementation
- ITA Pro Magazine September Edition is Now Available
- It's National IT Professionals Day
- Save the Date for ITA-LIVE 2019
- OneShield Software and UrbanStat Work Together to Improve Real-Time Analytics and Risk Decision-Making
- ITA LIVE 2019 - SAVE THE DATE!
- Insurance Technology Association Announces New Editor-in-Chief
- August 2018 Edition ITA Pro Magazine is Now Available
- Enterprise Architecture in an Agile World
- Top 10 Tips for Securing Your Mobile Devices and Sensitive Client Data
- Industry Insight: 4 Global Insurance Trends in Digital, Data, Content Services and Security
- Diving Deeper into Prioritizing Your Strategic Digital investments
- Why Content Rules
- How Mass Personalization Will Open the Small Business Benefits Market
- At Year End 2017, Will Your Organization Be Protected from Cyber Risks?
- Do Insurance Bots Dream of Mitigating Risk?
- Conditioned to Respond
- Managing & Mobilizing Insurance Data in a Connected World
- Race to the Finish Line
- New Tools, New Opportunities in Claims
- ITA LIVE: Reaching Insurance Industry Crossroads
- Advice to Insurance IT Leaders: Keep Your Eye on the Ball
- New Date, Venue for ITA LIVE 2017
- Guidewire Makes Major Push to Small and Midtier Market by Acquiring ISCS
- Insurance Disruption is Happening Right Now
- Insurity Adds Strategic Investment Partner, General Atlantic
- Beyond Transformation: The Convergence of Finance, Risk, and Actuarial Functions
- The Rapid Evolution of Consumer Protection Regulation
- Talent Hunt: Finding, Attracting, Retaining Top People
- Insurers Flexing Their Distribution Models
- Technology Driving Disruption in Insurance
- Fear of ‘Next Bubble’ Challenges Life, Annuity Carriers
- Technology Allows Commercial Lines Insurers to Stand Out
- Single Sign-on Viewed as Biggest Tech Challenge for Agencies
- ISCS Observes 20th Anniversary; Scurto Predicts Major Changes Ahead
- Policyholders and Their First Impressions
- Progressive Making Progress on the UBI Front
- High and Dry: Insurers Search for Disaster Recovery Plans
- Insurers Sign The (Un)Dotted Line
- Reflections of a Retired Insurance CIO
- Mobile Device Management Just One Answer to BYOD Issue
- Lessons from GEICO and Progressive on Winning the Critical Buying Stage
- You Are a Target for a Cyber Attack
- Web-based Systems are the Next Evolution in Claims Technology
- Gaining a “Wow” Experience from Web Users
- Time to Shift from Business/IT Alignment to Business/IT Alliance
- Healthcare Insurers Changing to Consumer Model
- Organization is the Key for Selecting Software Vendors
- Analysts Expound on the Needs of the Mid-tier Insurance Market
- Finding the Cure for Obamacare’s Website
- New Software Solutions Benefit Insurers on the Inside and Outside
- Products, Market Impede Investment in Systems for Life Insurers
- Combatting Cyber Threats: Predict, Prevent, Persist
- The Future of Telematics Heads Beyond Insurance
- The Shame in Cyber Security Lapses
- Building Policy Administration Systems for the Future
- Insurers Look Into The Eyes of Their Policyholders
- It’s a New Dawn for the ITA
INSURANCE IT NEWS
- Eight Critical Areas for Customer Experience Transformation
- ASNOA Enters New Enterprise Agreement with Agency Revolution
- Rewards, cashback and instant feedback. Sygic and Onlia have committed themselves to making Canada safer
- EMC Insurance Announces Commercial Agreement with Betterview
- LexisNexis Risk Solutions Selected by GM as Preferred Insurance Data Partner
- Shift Technology Joins Guidewire PartnerConnect Alliance Program
- New Report Highlights Critical Developments That Are Accelerating Transformation in the Insurance Industry
- Norima Consulting, Inc. Joins Quadient Partner Advantage Program
The Email Chat is a regular feature of the ITA Pro magazine and website. We send a series of questions to an insurance IT leader in search of thought-provoking responses on important issues facing the insurance industry.
ITA LIVE 2019
The tide is up! It's time to register for ITA LIVE 2019, our annual educational and networking conference! Our theme is "The InsurTech Revolution: Cutting Through the Hype." and we'll be bringing in a torrent of industry thought leaders, amazing insight and wonderful perspectives on the world of insurtech and its impact on the insurance landscape.
ITA LIVE 2019 will present real-life examples of true startup technologies that are helping insurers gain real advantage -- and a competitive edge -- in the marketplace. We’ll highlight the more successful InsurTech partnerships, while offering case studies that demonstrate exciting innovation and cutting-edge techniques impacting all aspects of the insurance ecosystem.
Ride the wave to LIVE 2019. Sign up today! We look forward to seeing you in May, 2019!
BLOGS AND COLUMNS
Customer experience is an essential component of the transformational journey... READ MORE
Insurance companies can serve customers better when they have access to accurate data and use it to send personalized, relevant messages that deliver... READ MORE
You have surely heard it said that small businesses are the growth engine for America. Today, the phrase has a special ring to it for benefits... READ MORE
With stagnant growth and lingering low interest rates, the life insurance industry faces a challenging future... READ MORE
Finding insurance carriers willing to write commercial lines risks has always been a challenge for producers... READ MORE
As Guidewire Software prepares for the start of Connections, its 11th annual user conference that begins on Nov. 2, Brian Desmond, chief marketing... READ MORE