Everything changes with time, and no industry is exempt from this fact. This is particularly true in the insurance industry.
In the past five years, the health insurance industry has changed in incredible ways. Depending on your point of view, these changes may be good or bad, but I believe that any advisor or provider who is able to adapt to the changing environment can see these changes as beneficial to the industry. Here are the five primary ways I have seen the health insurance business change over the last five years and what I see coming in the future.
The Affordable Care Act (ACA) may be the biggest change in the business. The primary thing we are seeing out of ACA, from an advisor perspective, is that the best agents in the business are rising to the top because of it.
ACA is a complicated piece of legislation. Members of the public have countless questions about it, and they can glean only so much correct information about it from the media. Consumers want answers from their advisors. The advisors who are prospering and who will continue to prosper are those who have taken the time to understand the bill and its effects on the market and who have become engaged with their peers and carriers to learn as much as they can about the law. Advisors at the middle and lower range either are losing business or are getting out of the health insurance business completely. The best advisors are learning not only what their customers want, but they also are guiding those customers toward what they really need.
The implementation of ACA will mean a great deal of number shifting as companies and individuals shop for new policies that best fit their needs and budgets. As a result of ACA, many advisors are experiencing reduced commissions. That alone stands out as a negative. But the bright side for the industry is that advisors are finding ways to replace those lost commissions. Many advisors are cross-selling more products and ancillary products, such as life insurance. Lost commissions on specific policies are being replaced with sales of new products, and that is a great thing for the market as a whole. The best advisors will be diligent in what they are offering, and sales of products such as cancer policies, critical illness policies and short-term disability policies will help the market grow in the ways it needs.
Members of Generation Y, or millennials, entering the risk pool have changed things from both an advisor and a carrier perspective. Your brand, as an advisor or as a carrier, is extremely important to the baby boom generation. Millennials, on the other hand, do not care as much about your brand identity. Instead, they trust the opinions of others – especially those of strangers. A recent study by the online network Bazaarvoice found that 84 percent of millennials have stated that user-generated content from strangers has influenced what they buy. In fact, 65 percent of millennials believe that online user content is more genuine and a good indicator of quality and service.
While boomers would work with you simply because they recognized your brand, attracting millennials requires a new methodology. Insurance carriers have introduced consumer review sites, and advisor review sites are likely to be on their way, if not already in existence. While a brand is still important, it is much less so than it was five years ago. Meanwhile, good customer service is more important than ever.
With millennials entering the risk pool, we also are seeing the balance of power shifting away from carriers and into the hands of the consumer. Today, we have a complete range of information at our fingertips anytime we want it. If a company provides poor service, it will undoubtedly be reported online within minutes and others will read about it. However, the same is often true for good customer service. People trust the comments they read online. That can be dangerous for some companies. But if good customer service is a key focus, online comments should work in your favor.
The way companies are marketing both themselves and their products has shifted: Companies are moving away from a generic brand strategy and instead are moving toward a strategy focused more on ensuring that their customers are engaged with the business and happy with the service they are experiencing. Overall, the shift has been a positive change. It has given the industry a new transparency, allowing consumers to trust and understand both carriers and advisors much more.
Predictive analytics is evaluated historical data used to predict future probabilities. For years, the insurance industry has used the data from an actuarial standpoint. Now, carriers and advisors are starting to dig into legacy systems to use that data to shape both the products and the benefits they offer and, more important, to shape their marketing efforts. By reviewing the data, carriers and advisors can figure out who is most likely to purchase a policy, what benefits are important to those people and why they choose to purchase. We now can target those who are most likely to buy, and carriers are able to sell consumers on their most profitable products.
A Look Ahead
While it is impossible to know the future for certain, there are emerging trends in our industry. Within the next five years, we likely will see the health insurance industry become very consumer-driven. We will see consumer-driven health plans and high-deductible health plans coming for both private employers and individuals. With the implementation of ACA, many employers will move toward plans such as these in order to keep their premiums lower.
A move like this also will impact the health care industry by slowing the use of health care resources. Today, no tools exist for shopping for health care because the cost often does not matter to the buyer. Whether a surgery costs $2,000 or $8,000, the price is ultimately the same for the consumer. In the future, with high-deductible plans, we may see five different surgeons offering quotes through a “shopping” tool, and we even may see surgeons competing for business.
The future of the insurance industry will continue to bend and reshape as ACA and other industry regulations are put in place. The most important thing to remember about all of these changes we will see is that adaptation is the key to success. Advisors and carriers alike have to adjust to the changing times. While it may be trying, those who learn to change with the times will continue to see success.