Strategic Alliances Create Another Path To Worksite Gold

Many industry insiders feel that successful worksite carriers come in two sizes: jumbo carriers that can provide all the products a producer might want, and small niche companies that specialize in just one worksite product.

Suppose you are a smaller company, and dont feel you have the expertise to develop and implement a broad worksite portfolio. At the same time, you may not consider yourself a niche player if your company has not established a reputation as a leader in any specific worksite product line. Does this keep you from competing in the worksite arena?

Absolutely not. There is another path into the worksite market: strategic alliances. Its a path that can lead youand your field–into the marketplace, bearing expertise and a broad array of products and opportunities.

What is a “strategic alliance”? Simply stated, it is a formal arrangement between companies to provide a product and marketing program to a specific market. An alliance might include consulting actuaries, reinsurers, marketing organizations, and administrators. Each partner brings its specific expertise to the venture.

Strategic alliances enable a life insurance company to get into popular worksite markets such as dental and disability. While producers and employers like to offer a broad product portfolio, many companies (especially smaller ones) lack the expertise or size to develop and implement such a portfolio on their own. This strategy helps them get there.

What does an insurer need to be successful in the strategic alliance arena? First of all, strong financials and stability are essential for every party to the venture. Any partnership is only as strong as its weakest link.

Success also depends on a companys corporate culture. To be a successful partner, a company needs to be creative, flexible, and quick to respond. Opportunities often arise because of a sudden change in the marketplace, and a marketing organization may find that it needs a program in as little as 60 days. A top-down decision-making process can slow your companys response.

Working through strategic alliances is not easy. For example, each party to a deal has its own agenda, so negotiations can be time consuming. Because the relationship is vulnerable if any of the partners changes course, contracts must address this possibility. You might, for instance, need to scramble on short notice to replace a partner that has decided to leave the program.

Since the relationships do entail some loss of control–you must rely on other organizations to make the deal workit helps to develop contingency plans in case of unanticipated changes. If you expect the unexpected, youll be better prepared.

To really succeed in this arena, create an internal team dedicated to implementing and monitoring strategic alliances. This is often better than expecting staff to juggle regular duties with management of these important partnerships.

Despite the risks and time demands, the benefits of strategic alliances are substantial. The insurer avoids the need to hire people with specific expertise in each market. Even after creating a special strategic alliance unit, you can expect to save in human resource costs. And, since alliances often include third-party administrators, there is no strain on your administrative systems.

Alliances also have important benefits for producers. When a company uses alliances to broaden its portfolio, producers can gain the convenience of conducting all business for a worksite case with one carrier. Alliances also give agents the assurance of selling quality products, since each company in the alliance is an expert in its respective market.

These benefits spill over to the employers, too. For instance, employers gain the convenience of consolidated billing and policyholder service. Furthermore, they are able to choose the product that best suits their needs, rather than being forced to take the only choice available in a limited product portfolio.

Certainly, when it comes to worksite marketing, the giant companies have economies of scale and the ability and expertise to develop a full range of products. And, without question, niche companies can develop in-depth expertise in a specific worksite market.

However, for those companies willing to invest in relationships and consider creative approaches, strategic alliances offer another path to worksite gold.

Paul L. Laroche, CLU, is vice president-worksite marketing at The Baltimore Life Companies, Baltimore, Md. E-mail him at paul.laroche@baltlife.com.


Reproduced from National Underwriter Life & Health/Financial Services Edition, June 29, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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