With the demand for talent increasingly outstripping supply, and a third of U.S. workers considering a job change in the next year, employees are paying more attention than ever to their financial security and their emotional and physical well-being in the workplace. In fact, surveys show shifting demographics, a diversifying workforce and new employee expectations are redefining the workplace benefits market beyond traditional health care insurance products.

In response, employers, too, are placing significantly more value on their nonmedical benefits programs as they look to address emerging and unmet needs. A new study conducted by LIMRA and Ernst & Young (EY) surveyed employers and workers, and interviewed brokers, benefits administrators and technology providers, to explore the different perspectives on the current and future state of the U.S. workforce benefits market.

According to LIMRA and EY, there are now four generations firmly entrenched in the workplace: Baby Boomers, Generation Xers, Millennials and Generation Zers. At the same time, there are more contingent (i.e., freelance or gig) workers and increased racial and ethnic diversity among the labor force. Another evolving trend is the increased use of remote work. All in all, the U.S. workforce is more heterogeneous than ever before. With this comes a greater variety of benefit needs and preferences that evolve over time, LIMRA and EY say.

A significant number of employees across all generations view insurance benefits offered at work as more valuable today than before the COVID-19 pandemic. Millennials lead on this front, with 47% saying they are now more likely to look for employers that genuinely care about their well-being. The same is true of 33% of Gen X workers, 29% of Gen Z workers and 24% of Baby Boomers. All the generations agree that generous and responsive benefits are among the best ways employers can demonstrate such care.  

The LIMRA and EY survey data shows a majority of midsize (defined as having 100 to 999 employees) (66%) and large (1,000 or more employees) (69%) employers are prepared to offer more benefits in the next five years as they compete for talent, while 45% of small companies (fewer than 100 employees) indicate the same. Almost none say they will be offering fewer benefits.

“Our study finds three-quarters of employers (76%) believe their employees will expect a wider variety of benefits options in the future,” says Patrick Leary, corporate vice president and head of LIMRA workplace benefits. “Employers see benefits as a necessary tool to be able to compete in the war for talent. Despite 54% of employers reporting a decrease in revenue in the past year, the vast majority are not planning to cut back on benefits and almost half are considering offering a customized menu of benefits to help attract and retain talent.”

While benefits are important, many employees do not fully understand them, a challenge that will only become more difficult as benefit options expand and become more complex. Only a small number of employees don’t understand benefits such as medical/health insurance (2%), dental (3%), life insurance (4%) and retirement (5%), but the number increases when they were asked about disability insurance (13%), accident insurance (14%), critical illness insurance (18%) and hospital indemnity insurance (18%).

Employees say they are looking for clearer information and recommendations about the benefits best suited for them, and they cited multiple challenges to understanding what’s offered. The survey found the most common challenge was having insufficient time to make informed decision at 32%, and after that, 28% cite the complexity of benefits. Twenty-seven percent say ineffective communications prevented them from better understanding benefits.

Employers recognize the need to improve and enhance digital applications and services that support benefit implementation, education and enrollment. Up to 80% of employers across all business size segments believe technology will play a larger role in benefit carrier selection in five years, as they feel technology makes processes more efficient.

There are a significant number of digital services that employers don’t have but want, which LIMRA and EY say signals unmet needs and opportunities for digital support by providers. The most commonly cited of these services are same-day claim payments, at 46%; self-service and real-time quoting, at 34%; employee and employer mobile app access, at 29%; and decision support tools for employees, at 28%. Only 56% of employers said they were very satisfied with the technology provided with their insurance and benefits carriers today, and 57% believe they will be more reliant on insurance carrier technology in five years.

“Not surprisingly, COVID-19 has accelerated the transformation in workplace benefits. Not only did it heighten workers’ awareness of the value of life insurance, disability, leave and income protection products, [but] it also revealed a significant need for streamlined digital access to information and services that employees can access from wherever they work,” says Chris Morbelli, EY Americas life and group insurance transformation leader. “Ultimately, rich, personalized benefits that support increased work-life balance and meet the needs of a diverse, multigenerational workforce will be critical to attracting and retaining top talent in the future.”

The full research report can be viewed here.