Earlier this month, we attended the third annual William Blair Benefit Technology Exchange and Broker Conference in Boston. This year’s conference focused on the changing health insurance landscape and its stated purpose was to explore and begin delineating the key issues that will drive the sector over the next couple of years. Leading up to the conference, Assurant announced in late April that it would either be selling or closing down its once-mighty health insurance division. The company lost $150 million in the last five quarters, a costly loss even for an insurer that covers an estimated 1 million people. Given the timing of the William Blair conference in early May, naturally Assurant’s demise was on the tip of everyone’s tongue. What does it mean for the rest of the industry? How could it have happened? Is this the beginning of a trend? And how can something similar be avoided? At the conference, we participated in the “New Environment for Health Insurers” panel hosted by financial services and technology analyst Adam Klauber. During the panel, a few important points were raised, echoing an industry-wide, collective understanding that big changes are coming. Here’s what stood out for us:
The Tipping Point
A microcosm of an industry in the throes of huge changes, Assurant’s sale is yet another sign that we are close to a tipping point, a shift toward trends that can reshape an industry. One of the most important new trends is consumer engagement, a harbinger of widespread adoption of the e-commerce approach. Consumers of health insurance are looking for a dynamic experience—they want choice, information and interaction. And health insurers have a long way to go before they can compete with the consumer engagement icons of Amazon or Petsmart.com. A recent customer experience survey conducted by the Massachusetts-based Temkin Group asked 10,000 Americans to rate their interactions with 293 companies based on three dimensions: success, effort and emotion. Health insurers scored just above the bottom, perceived only slightly better than cable television and Internet Service Providers. At Array Health, we’ve seen how the private health insurance exchanges that we are building for our insurer clients can power ongoing communication and deepen relationships between insurers and consumers.
The New Environment
So, what catalyzed this shift? Competition is becoming a significant factor, and emerges in a number of forms. Competition among regional and national health plans is one, but also of note is the emergence of new IDNs (integrated delivery networks) and ACOs (accountable care organizations), which are deeply tied to consumers. Another important disruptor is occurring in the world of brokers, with their approaches changing by necessity from transactional to more consultative in nature. New technology entrants also make the list. All of these disruptors for health plans signal a need for agility, including: responsiveness to new regulations, awareness of incoming market players, understanding of changing trends in market segments and evolving with tech advancements. Assurant attributed its losses to a reduction in 2014 estimated recoveries from the ACA risk mitigation programs. Clearly, insurers need to find innovative ways to prosper in this new environment.
What is a Health Plan to Do?
According to the panel, there are few key areas on which insurers should focus their attention. First, marketing: they should invest in their brand and increase brand equity. Second, sales: insurers must manage their channels properly. Third, focus on customer or consumer: health plans need to prove that they understand their customers, not only in order to increase sales but to illustrate care and attention to the experience and the product. This customer-centric approach should include use of new technologies to provide tailored offerings.
Ultimately, there was an undeniable trepidation around some of the disruptors being discussed at the conference. But the panel discussion also confirmed our strategy. Our industry is sitting on the precipice of monumental change. This new environment can be daunting for health insurers, but Array sees opportunity. Through a health insurance e-commerce platform, insurers can address the needs for consumer engagement and retention, while offering simple administration. This type of platform also allows them to constantly improve technology and keep up with an industry that will continue to evolve. We built that product, and we’ll continue shaping it in parallel with these changes, allowing insurers to better adjust and even thrive in this new environment.