Carriers’ Views: Distribution Trends in Workplace Benefits

September 2024

As part of a larger study regarding distribution trends in workplace benefits, LIMRA researchers surveyed carriers over the spring and summer of 2024. The survey covered a range of topics, including expense allocations, technology and drivers of distribution in the workplace benefits market. Over 25 carriers responded, representing companies across the workplace benefits ecosystem.

Distribution Channels

Many carriers do not see significant changes on the horizon, particularly within the distribution channels. While the respondents indicated that they see independent brokers and consultants increasing their share in the next five years, it is only by 1 percentage point. Another channel of note is career agents, which carriers predict will decrease their stake in distribution, moving from 11 percent to 9 percent (see Figure 1). The other options carriers noted in their responses highlighted unions as a distribution channel. While this was not a significant percentage of the total, more than one respondent noted this as part of their current and future distribution channel breakdown.

Expense Allocations

Similar to channel distribution, most carriers estimate that their expenses, internal and external, will not change significantly within the near future, with no changes in any category more than 2 to 3 percentage points.

High-Value Areas

Carriers were also asked what services they see most valued by brokers. All indicated brokers value implementation and onboarding support and support from sales representatives, and almost all believe brokers value sales and marketing materials, service support from account managers and product training carriers provide. These thoughts are reflected in carriers’ perceptions of what brokers actually use, not just value.

Growth Opportunities

Continuing this look to the future, carriers also expressed the biggest growth opportunities for their internal investments. All respondents identified the use of data and analytics as an opportunity for growth, and the majority also indicated bundling multiple benefits products and expanding voluntary benefits and offerings as a source of growth. Carriers were also asked to write in the greatest opportunity for companies to capture profitable growth over the next five years, and many referenced technology and expanding the current distribution model. To complement this prediction, almost 90 percent of carriers indicated that the influence of technology firms is an impactful factor in their distribution strategy as are digital employee engagement and customer experience. In addition, 75 percent of the respondents consider sales capacity and growing their workplace benefits offerings highly impactful.

Technology

Given that technology is considered significant in impact, carriers were asked about technology investments, and where these might change over the next five years. There were two areas where carriers predicted growth in investment for distribution technology. Integrations with outside systems and data transfers via application programming interface (API) are expected to increase, as is artificial intelligence (AI) through vehicles like machine learning and harnessing data. These responses are consistent with findings from LIMRA’s 2023 Digital Transformation Study, in which two-thirds of carriers invested more in digital projects in 2023 than they did in 2022, and almost 75 percent of the carriers expected to see an increase in their level of digital investment over the next three years.

While these investments are expected to increase, carriers also predict that they will decrease investment in core or legacy system replacement, sales support technology and contact management software. These are areas with significant current investment, so it makes sense that carriers will spend less as they move into more of a maintenance phase on these large technology projects. Contact management and sales support are likely part of the legacy system modernization story, and so those will also reduce the size of investment.

With that, carriers do see system modernization as a current top priority. Over half of the respondents ranked legacy system modernization as a “top three” technology investment. Enrollment systems and digital customer service enhancements are also highly rated. As noted earlier, carriers view these as high-value areas for their brokers. When asked what considerations drove technology investments for distribution, new technologies are most influential, followed by cybersecurity concerns and pursuing administrative efficiencies.

The prioritization of enrollment and digital customer service investments also makes sense given carriers’ perceptions of funding for benefits, now and in the future.

Over half of the respondents consider new technologies as having a major or extreme impact on their technology investments, but the new technologies also need to be monitored for data and cybersecurity threats, which is the next highly rated area of impact (see Figure 2). Interestingly, a few companies consider the regulatory landscape as part of their technology investment considerations, but most consider it to be of no-to-moderate impact.

Benefit Funding and Enrollment

The average percentage of fully employer-paid benefits is predicted to decrease, while contributory (employer and employee share the cost) and voluntary (fully employee-paid) funding are projected to increase. This prioritization also reflects employee wants; according to LIMRA’s  2024 BEAT Study, digital enrollment is considered the easiest method for employees to enroll in benefits, and 75 percent of workers are already enrolling in this way. However, a total of 83 percent of employees would like to use this method, which means there is still a gap between worker preferences and technological reality.

Conclusion

Carriers have much to consider as they look to the future for growth opportunities. Many are looking at expanding their current distribution models, bundling multiple benefits products or expanding voluntary benefits, but all identify using data and analytics as key to supporting that growth. System modernization is a top priority. Enrollment systems and digital customer service enhancements are also at the top of the list. Integrations with outside systems, data transfers via API and the use of AI are all expected to increase and become part of the distribution landscape. Although none of us can predict the future, it is clear that carriers will have no shortage of options when considering technology investments for years to come.