Group Life & AD&D RFP: Aon–B. Braun Review Meeting

Meeting Context & Participants

  • Internal Aon working session with B. Braun Medical HR / Benefits leaders.
  • Purpose: review results of a Request For Proposal (RFP) for group Life and AD&D insurance; select finalists; outline next steps.
  • Key voices
    • Troy (Aon, lead presenter)
    • Miles (Aon underwriting & analytics)
    • Monique, Fiona (Aon account team)
    • Jennifer (Jen) – Director/HR Benefits for B. Braun, decision maker
    • Jesse & Lindsay – HR colleagues
  • Current incumbent carrier: Voya (Life, AD&D)
  • Current disability/leave carrier: The Hartford (renewal next year)
  • Geographic nuance: Lincoln has strong Philadelphia presence; Aon Philly office has close relationship.

Executive Summary of RFP Findings

  • RFP released to 10 carriers; responses scored on cost, plan design, admin capabilities.
  • Top three single-vendor solutions by cost
    • Lincoln Financial: \approx\ 1{,}600{,}000 annual premium → \approx\ 501{,}000 annual savings.
    • Aflac: \approx\ 1{,}670{,}000 premium → \approx\ 484{,}000 savings.
    • Securian: \approx\ 1{,}690{,}000 premium → \approx\ 483{,}000 savings.
  • Incumbent Voya offered only \approx\ 144{,}000 in annual savings (least competitive among finalists).
  • Rate-guarantee offers
    • Standard market ask = 3 yrs; Lincoln & Aflac met.
    • Securian offered 5-yr guarantee (industry-leading).
  • Volatility (rate-change) caveat
    • Aon requested \pm20\%; all three top carriers countered with tighter \pm15\%.
  • Aon internal RFI (Request For Information) composite scores
    • Securian 3.87 (highest on panel)
    • Aflac 3.44
    • Lincoln 3.19

Financial Analysis & Savings

  • Current Voya premium spend = 2{,}100{,}000.
  • All 10 quoting carriers delivered net savings (rare event: entire grid green).
  • Potential maximum annual savings \approx\ 520{,}000 (Aflac/Lincoln range after negotiation).
  • 5-yr cumulative savings projection formula
    \text{Total Savings}_{5y}=\text{Annual Savings}\times5
    Example using 500{,}000 → 2{,}500{,}000 over guarantee period.
  • Split of savings between employer-paid Basic Life/AD&D vs. employee-paid Voluntary Life
    • Negotiable; Jen favors allocating a portion of savings to employee rates to smooth change messaging.

Underwriting Experience & Loss Ratios

  • Aon independently underwrote last 5 yrs of Voya experience.
  • Results described as “best seen”:
    • Premium (grey bars) exceeded claims (red) in every product.
  • Incurred loss ratios
    • Industry breakeven =80\%-85\%.
    • B. Braun aggregate =47.6\%.
  • Conclusion: current rates overpriced → explains aggressive market pricing & room for further concessions.

Plan Design Changes

  • Only material change requested: increase Class 2 & 3 employee maximum from 400\,000 → 500\,000 to match spouse max.
  • Impact
    • < 1\% of population affected.
    • Nominal volume increase; no significant rate change from most bidders.
  • All carriers confirmed no-loss-no-gain provision → employees keep existing elected coverage during carrier switch.

Contractual Provisions & Negotiation Points

  • Rate Guarantee: target 5 yrs for finalists (Hartford & Securian already at 5).
  • Change-in-Lives / Volume / Incidence caveats: want \pm25\% threshold.
  • Billing grace period: desire 60 days (all but two met; to be negotiated).
  • Renewal notice: ask 270 days advance.
  • Termination notice: client can exit with 31-day notice; carriers rarely terminate unilaterally.
  • Slide colour code: red = below standard → focal negotiation items.

Credits & Performance Guarantees

  • Implementation / audit / communication credits requested =70\,000 total (50 k impl + 10 k audit + 10 k comms).
    • All carriers met except Hartford & Voya (need increase).
    • Aon will push to 100\,000 in BAFO (Best & Final Offer).
  • Performance Guarantees (PGs)
    • Ask: 3\% of premium at risk, tied to B. Braun-specific metrics.
    • Lincoln & Securian currently < 3\% → negotiation target.

Value-Added Benefits & Services

  • Carriers bundle ancillary programs (often under-communicated):
    • Will preparation, estate planning, grief counseling, financial education, travel assistance, etc.
  • Matrix shows green (included), yellow (negotiable), red (not offered).
  • Action item: verify employee awareness & leverage for OE communications.

Evidence of Insurability (EOI) & Enrollment Considerations

  • Desired open enrollment timeline: Oct–Nov 2025 for 01-Jan-2026 effective date.
  • Aon asked carriers to allow true one-time open enrollment with guaranteed issue up to plan max.
  • Annual QLE handling, salary increase auto-bump, digital EOI portals vary by carrier.
  • Slide 27 flags Lincoln red for >1 EOI form & unclear approval confirmation; Miles to clarify definition.

Customer Service & Claim Metrics

  • Lincoln scored lower on claims/service (3.13 vs. peers).
    • Issues: delayed callbacks, ambiguous claimant communication, slower life claim payout.
  • Slide 23 metrics (targets vs. actual)
    • Claim turnaround ≤ 5 days → Lincoln reports “≤ 3 days” but gives no volume %.
    • Call abandonment ≤ 3% → Lincoln “N/A – not tracked.”
    • Coding accuracy ≥ 99% → not reported by Lincoln.
  • Securian highest service/quality; Aflac investing heavily in new tech; Lincoln platform viewed as dated.

Key Concerns Raised by B. Braun

  • Seamless employee experience during transition (no new EOI for existing coverage).
  • Quick, accurate death-claim processing; payout timing critical for beneficiaries.
  • Ease of voluntary enrollment; minimal forms; intuitive digital journey.
  • Preservation of terminal illness (accelerated benefit) provisions.
  • Desire to share part of savings with employees to create positive OE messaging.

Proposed Next Steps & Timeline

  1. Short-list four carriers for BAFO round: Aflac, Lincoln, Securian, Voya.
  2. Aon to request:
    • Pricing sharpen (especially Voya) & convert employer savings → voluntary rate cuts (Aflac focus).
    • Red-area contractual concessions & PG uplift to 3\%.
    • Clarification of Slide 27 EOI items.
  3. Target receipt of BAFOs: week of 8 July (holiday permitting).
  4. Aon reconvenes with B. Braun to review BAFO deck; choose top 2 finalists (possibly excluding Voya if still uncompetitive).
  5. Schedule finalist capability meetings (prefer in-person; virtual acceptable): late July ↔ early Aug.
  6. Final selection & implementation kickoff → allow ≈ 60-90 days prior to OE communications build.
  7. Go-live effective date: 01/01/2026.

Practical / Ethical / Real-World Implications

  • Demonstrates fiduciary duty to employees & shareholders by eliminating overpriced incumbent rates.
  • Data-driven negotiation leverages superior loss ratios to demand longer guarantees & richer credits.
  • Enhanced voluntary rates create tangible employee win; aids change-management narrative.
  • Vigilance required on carriers in rapid growth mode (Aflac) → ensure scalability, service stability.
  • Benchmark-only carriers (Securian) show focus quality but lack integrated disability/leave ‑ consider future bundling needs.

Connections to Industry Standards & Prior Principles

  • Loss-ratio benchmarking (target 80\%) aligns with NAIC profitability norms.
  • “No-loss-no-gain” continuity clause standard under ERISA plan takeovers.
  • 5-yr rate locks increasingly common for strong experience cases; negotiation best practice.
  • Performance guarantees at risk \ge3\% of premium becoming table stakes among top carriers.

Formulas, Metrics & Statistical References

  • Annual vs. cumulative savings:
    \text{Cumulative Savings}=\text{Annual Savings}\times\text{Rate-Guarantee Years}
  • Loss Ratio (LR):
    \text{LR}=\frac{\text{Claims Paid}}{\text{Premium Paid}}
    Current overall \text{LR}=47.6\%
  • Volatility caveat threshold:
    \Delta \text{Lives},\,\Delta \text{Volume},\,\Delta \text{Incidence} \le \pm15\% (bid)
    vs. Aon ask \pm20\%; tighter threshold favours client predictability.