Promise of Leverage: Automation in a Commodity Line of Business
27 April 2009
Celent just completed a survey of Medicare Supplement providers concerning market issues and technology usage.The results reflect a commoditized product that is poised for growth, but supported by sales and administration technology which is limited in its functionality.Without automation implementation, Celent expects costs to increase proportionately with the future increase in business.For some companies, system investment and effective implementation will yield valuable leverage in this space.
Medicare Supplement (Med Supp) insurance covers medical costs that are not typically paid by traditional Medicare program.The Federal Government sets basic standard policy conditions, individual states regulate the product and distribution, and the private sector sells the coverage.According to a America’s Health Insurance Plans study,Med Supp is purchased by 29% of Medicare beneficiaries (Medigap: What You Need to Know, 2008).
The Celent survey was sent to approximately 200 attendees of a conference on Medicare Supplement insurance.Over 65 responded – most of them were independent agents or insurer employees involved in sales.
Regulation constantly changes the product and the respondents expect upcoming modifications to both complicate the contract and increase sales.However, the existing technology does not appear to be positioned to help support this increase.When asked about current sales and issuance activities, 60% said that less than half of the process was automated. Fewer than 25% policies are now handled using straight through processing (STP). Interestingly, when asked, a majority felt that over 75% should go through via STP.
Given the product and demographic characteristics of this marketplace, winners in this space will leverage technology to drive down unit costs and support their marketing efforts.