Talking About Financial Matters That Affect You and Your Organization
2018 Year in Review: What to keep an eye on in 2019
Jan 28th, 2019
The war on talent is real. Jobless rates are at 1976 levels with a 5.9% Canadian unemployment rate as reported in October 2018. Over 4 million workers aged 55 plus in the workforce. The fight to keep your talent is only slightly easier than recruiting, and creating the right environment with the culture and support is critical for success. With everything that is unfolding in the insurance arena, there’s still an incredible amount of opportunity for advisors to provide real value to clients and their plan members — which is really the whole point, to help companies attract and retain top talent — but right now, I feel like we’re collectively missing it.
Between technology disruption, consolidation, HSAs and fraud – I’m holding no punches with my year in review rundown, along with how I see the landscape playing out for 2019.
Let’s get to it.
What do we mean by personalization of benefits?
The personalization of benefits plans was tapped as the top item to be addressed heading into 2018. The time has come for employees to be treated as individuals and therefore driving for solutions tailored towards their specific needs — but we need to be mindful of the need for sustainability.
You look at the scale and the size of a company and you think about the premiums and the risk associated with the coverage, and it might not be big enough to sustain true personalization. But advisors that truly understand their customers will use have to get creative and use all the information available to personalize a solution that caters to their needs.
I believe that personalization is going to settle in an area along the lines of a modular flex plan for organizations with less than 500 employees, for example, a Gold, Silver, or Bronze option where employees can choose the level that best fits their needs — rather than every individual getting the custom treatment. The organization will establish a contribution rate based on wages, and plan members will pay for any desired upgrades via payroll deductions, or receive flexible spending dollars if they choose to receive less coverage. For larger organizations, cafeteria flex or core plus options will continue to gain adoption.
You see, this approach to personalization provides the element of choice for plan members, access to coverage that is not affordable or available individually, while establishing parameters around the plan sponsor financial commitment.
Remember, the goal here is to manage the experience for clients.
People don’t want to have to manage a plan
Companies don’t want to be in the business of managing a benefits plan. Ideally, they would facilitate the payment of it to a threshold so that it makes it easy for them as an employer.
Just like people don’t want to have to manage their pension — they just want to know what their pension is going to be on the back end. I really believe it’s the same with benefits over the longer term, but it’s only going to work on an “exchange” basis due to the market size and the need to manage adverse risk.
I envision a time when employees might say, “here is my benefit plan I have and I want you to plug it into your payroll and HRIS system”. The employer will financially support it as per employment contract negotiations and the member is self-serve on the program.
It gets employers out of the game of having to design a plan to make everyone happy down to the finer details – and focus their attention on growing their business.
The days of the HSAs are numbered
As we know, people aren’t great predictors of their future needs, but traditional group insurance still has a lot of value, and what we believe about this younger work force isn’t true. The reality is they do want choice, they do want flexibility, and they do want insurance but many companies want to remove the risk because they don’t want to actually manage the benefits.
Giving everyone a health spending account is an employer cop-out, and a dangerous game of roulette for plan members who get unexpected changes in their health or the health of their dependents. For advisors and clients, it’s about being mindful of the different levels of risk and awareness people have and to what level the want to manage the program.
The evolving role of the broker
The traditional role of the advisor has evolved from being the bottleneck or gatekeeper to being the educator and coach.
What I mean by this is that the educational component of our role coaches plan members to take ownership of their benefits program in managing and eliminating fraud or other risks. The job as a broker has changed from simply disclosing information to now being more of a coach, mentor and advocate for the decision-making process — and helping plan members with their responsibilities.
And I think that if people want the trade-off of having choice, it comes with accountability – which requires coaching from an experienced broker.
Technology rippling throughout the industry
The technological revolution can be a threat if you do not adapt to it. In a lot of ways, the advisory channel will see the most disruption via technology and have to change the way they work.
We talk a lot about technology disruption and the reality is, all technology is doing is taking low value work and automating it, but the idiosyncrasies of humans and their behaviour is very complex. Technology will never be able to fully replace the human touch. And while there’s going to be a lot of change around customer engagement, it’s up to the broker to effectively demonstrate and communicate their value to the client.
Brokers are still a fundamental part of the insurance industry, but the ones that just focus on trading dollars for a service instead of communicating the value of the service will find themselves on the outside looking in. There’s a lot of opportunity here to reinvent the value proposition in customer-centric approach.
So it’s not about being afraid of how technology might render functions of the role obsolete, it comes down to understanding the new ecosystem of the workforce and using technology to improve the overall customer experience to drive value.
Consolidation is a very hot topic in the insurance industry
The costs of doing business as an advisory firm are increasing heading into 2019. Our obligation to meet the regulators requirements, reporting standards, the delegation of work, increasing client expectations are going to continue to drive consolidation.
I think we’re starting to see that as some of these firms become consolidated by larger companies, that size does not necessarily drive value for the customer. Some of these thought leaders and advisors aren’t staying on beyond their deal terms because it’s not an engaging workplace within these consolidators.
I also think that the true innovation will come from advisory firms who are fighting it out in the trenches. Big firms have the luxury of doing the same thing and collecting compensation because they are large. Independent advisors must not get complacent and always need to be innovating and moving forward — providing real value to clients — to stay relevant and therefore alive.
What happens to the value proposition and the end user?
The value proposition is worse in the scenario of consolidation because large companies really only care about the bottom line, not customers. End users need to be prepared for a more commoditized approach — which will diminish the value of some advisors, as expectations become less.
This will really cause more cookie cutter solutions when talent really craves a customized one.
You’re seeing it in the “technology-first” approach some of the big insurance companies are taking to try primarily to maintain relevance. They have a cool app, and they think it’s a difference maker. But again, what’s the value they’re driving? To me the value proposition is simply compliance – you’re meeting the minimum standards around your human capital to avoid liability. Technology (at least at this point) does not intimately reviewing each client’s needs in terms of risk, culture and goals like the independent relationship first advisor delivers.
Which in my opinion, this where the value of independent and vibrant advisory firms comes in, because of the personal touch that comes in the form of customized solutions to meet individual client needs.
The real value add here is going to come down to how well you engage and manage the workforce. To be able to look at the whole workforce and truly improve engagement are huge wins by this convergence of technology — but I’m not hearing anyone auctioning on it.
These large, behemoth entities will ultimately have a very distant connection to the customer and the individual who is supposed to get value.
Making meaningful moves in mental health
There’s no doubt there’s an underlying problem with mental health issues and the Canadian economy.
I’m not sure that we are equipping people to manage conflict and loss adequately. Are we working with our workforce to reduce fragility, and help people manage the stressors that are upon them? It’s a taught skill to have people reach out and use the tools available, and it all goes back to education and coaching as elements that benefits advisors and wealth managers can use to help people understand the spectrum of services available.
Again, this all ties back in to education and advocacy, and how advisors can play a pivotal role with how they work on the spectrum of services available and how to use them on a daily basis.
As the Canadian insurance industry continually sees its landscaped being reshaped, there will always be a need for the forward-thinking broker to help steer companies through that change and navigate the uncertainty.