No portability in benefits? No loyalty among workers, says Capgemini

Employers who offer traditional group benefits packages may no longer be meeting the needs of their workforce, especially younger employees who are increasingly disengaged with outdated offerings.

That’s the central belief espoused by Samantha Chow, global head of life insurance, annuities, and benefits at Capgemini, while highlighting the firm's recent World Life Insurance report. 

She acknowledged life insurance is being overlooked, both by employers and the younger generation of workers. She sees a missed opportunity, particularly in Canada, where voluntary individual policies are rarely offered through group plans.

According to Chow, younger employees may say they understand life insurance, but they don’t see how it fits into their lives. Additionally, while many under 40 acknowledge its importance, they also believe it doesn’t meet their current needs, noting that for many under 40, the idea of paying extra for coverage that disappears when they leave a job feels like a waste.

“I think we missed the mark in offering individual policies in the Canadian market and that’s a big miss,” she said. “That under 40 group is focused on savings. They're focusing on preparing for their future. They're delaying all those milestones that have, in the past, been much younger [like] getting married at a young age, buying a home at a young age. All those things were much more attainable, given different economic conditions and it was expected. Now, there's options. Their goals and objectives are just wildly different than previous generations have had.”

Chow believes that basic employer-provided life insurance offers little beyond coverage tied to the length of employment. Instead, younger employees prefer options that offer flexibility and access during their lifetimes.

Chow also pointed to a broader industry problem. Even when policies are portable, they rarely include embedded living benefits that justify the investment. What’s needed, she said, are products “worthy of being portable… that can provide the savings, the flexibleness of a life insurance product.”

She stressed that early exposure to portable insurance options could lock individuals into lower rates and long-term value, underscoring that if insurers build flexible, well-structured policies, they could become far more beneficial to the policyholder over time.

Without portability, young workers are penalized as they age and change jobs. Contrastingly, securing coverage early, even if it seems costly on a smaller paycheck, could lead to significant savings decades later, she said.

Chow acknowledged that “living benefits” in life insurance need a fundamental overhaul. Right now, most are sold as add-ons, but she believes going forward, they should be embedded and become part of the policy. She emphasized living benefits should go beyond critical illness or disability coverage and give policyholders ways to access their money throughout their lifetime, much like borrowing from a retirement savings plan.

That, she said, is what true living benefits look like: the ability to use a life insurance policy as a flexible financial tool. But she warned that today’s products rarely allow this and even penalize policyholders for accessing funds.

“These policies need to be flexible enough to provide individuals the opportunity to utilize those funds when they need it, how they need it and when they want to.”

Chow suggests employers haven’t modernized their benefits offerings, particularly with portable and flexible options, because internal HR functions have been significantly scaled back. With fewer resources in-house, companies leaned more heavily on insurance providers, at the cost of innovation and focus in the benefits space.

This lack of attention is proving costly as a new generation of workers, who are less likely to stay with one employer long term, enters the workforce and that transience makes loyalty harder to earn and even more important to cultivate.

Employers need better tools to create loyalty through meaningful, lasting benefits, she asserted, adding that if employees can’t take their coverage with them, the value disappears the moment they leave.

According to Chow, one of the core issues at work here is the lack of education around how life insurance works and how it can benefit people throughout their lives, not just after death is also a core part of the problem. She argues this shift won’t happen unless insurers are willing to modernize their offerings and unless employers demand it.

Notably, insurers have been selling the same types of products for decades. While those products serve a purpose, she warned they’re increasingly out of sync with the evolving financial needs of employees.

She emphasized it’s up to the insurers to shift their thinking when it comes to delivering group benefits, moving from rigid, one-size-fits-all plans to more dynamic, tailored ecosystems – a kind of “retail shop” which will allow employers to pick and choose the elements that will resonate with their people. This includes everything from childcare support and telehealth to mental health services and retirement planning tool.

“Your workers’ needs at 25 are completely different than their needs at 60,” Chow said. “If they aren't flexible enough to grow with the individual and their needs and the life stages that they experience, and if you can't work with those individuals to bring everything together, then you're also going to miss the mark and someone or something else is going to take over.”