Digital Transformation in Workplace Benefits

May 2024

Digital transformation is reshaping the workplace benefits industry. As technology advances and customer expectations rise, carriers are investing in new digital capabilities that allow them to streamline operations, exchange data seamlessly with partners and provide fast, intuitive, digitally enabled services to customers.

In a rapidly changing digital landscape, companies are striving to quickly grow their capabilities and differentiate themselves with enhanced digital offerings. Recent LIMRA research finds that over two- thirds of workplace benefit carriers spent more on digital initiatives in 2023 than they did the previous year, while only 7 percent spent less. This growth is poised to continue, with three-quarters of carriers expecting their overall level of digital investment to increase over the next three years.

Where will they invest, and how will the workplace benefits industry change as a result of these advancements? Carriers indicate that their plans for digital transformation will reshape many aspects of their businesses.

More than two-thirds of carriers say the development of application programming interfaces (APIs) and other integrations with third-party technology platforms rank among their highest digital priorities (Figure 1). Other key areas of investment include expanding customer-facing digital capabilities, upgrading or replacing internal legacy systems and automating business processes. Some carriers are also seeking to integrate artificial intelligence (AI) into their business operations and make better use of customer data.

API Development

APIs allow carriers to exchange data seamlessly with enrollment and benefit administration platforms and other external stakeholders, paving the way for more efficient processing and fewer errors. At present, more than 7 in 10 benefit carriers are currently using APIs to connect with at least one external partner. Almost all companies that aren’t already using APIs are planning to develop them, and those with current APIs intend to expand their use with more types of partners and customers, suggesting that the industry can expect a dramatic increase in API usage in the future.

Carriers are also planning a variety of investments within the next five years to support better API connections. Nearly 8 in 10 intend to build or purchase new internal systems that can accept APIs. Many carriers also plan to invest in centralized data platforms to simplify where APIs can retrieve information, new relationships with middleware vendors to support API connectivity and new middleware or conversion technologies.

In addition, companies intend to expand their use of APIs to a larger variety of business functions. At present, APIs are most likely to be used to exchange data pertaining to evidence of insurability (EOI), enrollment, ongoing eligibility and case setup. However, carriers plan to develop additional APIs for many other purposes, including census processing, quoting, claims and billing.

Digital Customer Experience

Workplace benefit carriers also intend to invest more in customer-facing digital capabilities. Most carriers already make a variety of digital service features available to brokers, employers and employees, and they are working on rolling out additional functions. Companies are most likely to be developing digital service capabilities related to enhanced reporting, real-time chat, secure messaging, portability, uploading claim documentation and the option for employers to file bulk wellness claims.

Mobile capabilities are also expected to grow. More than 8 in 10 carriers already make at least some digital functions available through a mobile-friendly website or app. Of those that don’t, half are working on developing this capacity. In addition, nearly half of carriers can communicate with employee customers via text message, and another 3 in 10 are working on this. Of those carriers that already have texting capabilities, only a few are able to support two-way texting, but more are looking to offer this in the future.

Upgrading Legacy Systems

Dated internal administrative platforms continue to present a variety of challenges for workplace benefit carriers. However, companies are making significant investments to address these issues. More than three-quarters of carriers have either built or purchased a new internal platform or system in the past five years, and nearly 8 in 10 have definitive plans to upgrade or replace internal systems over the next five years.

Many of these carriers intend to add new layers or connections to enable better integration between systems and with external business partners. Some carriers also hope to reduce or consolidate the number of internal systems they have and to move some or all functions to cloud-based platforms.

Artificial Intelligence

The business potential for AI is a hot topic across all industries, and the workplace benefits market is no exception. While only one-third of carriers are currently using AI for any workplace benefit-related business functions, many others are working on developing this technology — roughly 7 in 10 carriers are either using or working on AI in some capacity.

Carriers predict that AI has the potential to support a wide variety of business processes, most notably claims, chat bots and support for contact center representatives.

Many carriers are also taking steps to explore the business potential of the new wave of generative AI tools, which can be used to create original content. While there is considerable interest, companies express a lot of uncertainty regarding where and how they might implement this technology in their work, with most still in the early stages of discussing and exploring potential applications.

A Transformed Market

Digital initiatives have the potential to transform every aspect of the workplace benefits industry, from back-end operations to customer experience to relationships with external business partners. As digital capabilities expand, carriers that fail to keep up will find themselves at a competitive disadvantage, while those at the vanguard will differentiate themselves in the market. More importantly, the thoughtful, effective implementation of digital solutions will allow the industry as a whole to realize efficiencies, improve business processes and provide greater value to customers.

About The Research

In late 2023, LIMRA surveyed 32 U.S. workplace benefit carriers about their plans for digital transformation. Read the full report here.