Modern challenges for a traditional system – how are fraternal benefits societies staying relevant?
Modern challenges for a traditional system – how are fraternal benefits societies staying relevant? | Insurance Business America
Life & Health
Modern challenges for a traditional system – how are fraternal benefits societies staying relevant?
The unique value proposition of the fraternal model is still resonant, CEO says
Life & Health
By
Gia Snape
Fraternal benefits societies have been around for over a hundred years and continue to thrive across North America. Though they operate differently from other insurance companies, they face the same industry challenges while battling for talent and customers amid a sea of modern and high-tech choices.
The American Fraternal Alliance recently polled leaders from its 52 not-for-profit fraternal benefit society members about their organizations’ biggest hurdles.
The survey found that more than 60% of society CEOs named finding distribution and growing their membership as their top two concerns, followed by operational challenges.
To keep up with rapidly modernizing competitors, three-quarters of CEOs said they have increased their technology spending in the last five years.
The majority of CEOs also agreed that their society’s mission helps recruit new employees, though talent acquisition and retention remain a significant challenge in the industry.
Despite these worries, American Fraternal Alliance CEO Allison Koppel (pictured), said the fraternal benefits model is thriving.
“It’s a really wonderful time to be leading this organization because there’s a lot of growth and energy and we’re seeing a lot of wonderful developments that I haven’t seen before in my career,” she told Insurance Business.
What are fraternal benefits societies?
Formed in 1886, the Alliance supports fraternal benefits societies from 50 states, the District of Columbia, and Canada. It represents more than seven million individuals, making it one of the largest member-volunteer networks in the US.
Fraternal benefits societies are unique to North America, combining the member-owned business model of a mutual insurance company with the social mission of a faith-based organization. They are tax exempt as recognized 501(c)(8) organizations but are regulated by state insurance departments.
As not-for-profit membership groups, they provide members with a variety of life insurance and investment products. Members carry out charitable giving and community service through their local chapters.
According to Koppel, fraternal benefits societies are rooted in the spirit of giving back.
“Most of them are over 100 years old, so they have a very stable, longstanding role in their communities and serve members in different ways,” she said.
The early versions of such organizations benefitted immigrant or religious groups that couldn’t get life insurance due to lack of access.
“Either they were discriminated against, or they were in dangerous jobs, or they just couldn’t afford life insurance. So, they would pass the hat around at churches or community centers to collect money, which would be passed on to the wives and children of members who had died,” Koppel explained.
COVID-19’s impact – technology and talent challenges
Like the rest of the insurance industry, fraternal benefits societies were rocked by technology and talent challenges during the pandemic. The Alliance’s members performed outstandingly in the face of
“Our members are older and established, and it wasn’t clear whether they could continue operations, but they truly responded,” Koppel said. “Many had disaster plans in place, so we were able to work remotely and come back to the office efficiently to pay claims.”
But as the pandemic persisted, many fraternals realized they “weren’t up to snuff with technology.”
“Agents and home office employees had to start using technology in a new way to keep operations going, but also to continue selling life insurance products,” Koppel said. “Admittedly, some of them were quite behind [on technology investment], so it forced them to catch up.”
The pandemic also sped up retirements, especially among leadership roles, which has led to a new generation of talent entering the industry. To boost talent retention, the American Fraternal Alliance launched a career development program to offer executives a way to enhance their management and leadership skills.
Communicating fraternal benefits societies’ unique business model
Koppel recognized that attracting new talent and new members to fraternals was a significant concern, but one that could be addressed by stronger communication.
“The new generation of leaders is recognizing that they need to be clear on their value proposition,” the CEO said. “Our members’ missions are attractive to younger generations, who want to do business with socially responsible companies. But communicating this unique value proposition is not so easy. It takes the right words and the right mediums.
“Likewise, growing their membership is not just about selling, but also engaging with the right consumers that will value their common bond and then become engaged with the community service side.”
Still, Koppel is highly optimistic about the future of fraternal benefits societies.
“We think they’re leaning into digital in just the right way, and that’s making a big difference. In terms of growth, we’re seeing them become more proficient at marketing, trying new things, and being creative,” she said.
“We’re seeing them invest in their talents and communicating better to their employees about their missions. Their willingness to collaborate is remarkable. The energy and camaraderie within our sector – that’s really what’s going to help them grow.”
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