This Web Pioneer Survived By Supporting Brokers

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Some Web companies once bragged that they were going to replace the benefits middlemen.

Digital Insurance Inc., Atlanta, is one of the Web benefits pioneers that survived by supporting the middlemen.

When the company started up in 2000, it hoped to help health insurers sell coverage directly to individuals and small groups. A few months later, the company began to specialize in handling benefits brokers small group benefits clients.

Today, “our entire model is built around helping agents,” says Mike Sullivan, an executive vice president at Digital Insurance.

The company manages health, dental, life, disability and 401(k) plan benefits for more than 10,000 small groups. The typical group has about 15 employees, and Digital Insurance usually hands administration off to its broker partners when the head count exceeds 30, Sullivan says.

The brokers pay Digital Insurance by giving it a fixed percentage of their base commission revenue. Turning small groups over to Digital can help a broker lock in a smaller but steadier revenue stream, and that can be appealing at a time when “commissions are either being compressed or being locked into a certain dollar amount,” Sullivan says.

Digital serves many big benefits brokers, but Sullivan says working with Digital Insurance could make sense for a broker that generates as little as $30,000 in annual gross benefits commission revenue and has as few as 30 small group customers.

Originally, Digital billed itself as a “provider of Internet solutions.” Small employers and their employees are starting to conduct more benefits business over the Web, but Digital Insurance decided early on that it had to add traditional call center services.

These days, “most of our customer experience happens over the telephone,” Sullivan says. “You cant tell the customer what to do. Youre dealing with decades of tradition of people talking to each other.”

Thesco Benefits L.L.C., New York, is one of the brokers that has been using Digital Insurance to handle small groups.

The arrangement “is certainly not saving us any money, but it was not intended to save us money,” says Richard Fleder, Thescos chief executive.

Thesco hired Digital Insurance to improve service for the smaller groups and give them access to specialized services, such as customized benefits Web sites, that Thesco could not have supplied on its own, Fleder says.

Thesco handles the most complicated service problems, such as tricky claims disputes, in-house, but Digital Insurance can handle the complicated problems as well as routine customer service issues, Fleder says.


Reproduced from National Underwriter Edition, August 5, 2004. Copyright 2004 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.