Employee Benefits Brokers Lead Other Channels In Worksite Sales

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The nature of the worksite landscape is changing. Historically, career agents and brokers specializing in voluntary or worksite sales dominated the worksite-voluntary benefits marketplace. But employee benefits brokers now claim the largest percentage of worksite sales in 2003 of any single producer segment, according to our companys 5th annual U.S. Worksite Study.

Several years ago, Eastbridge conducted a market segmentation study to learn more about the different types of producers who were selling worksite or voluntary products. (The terms “worksite” and “voluntary” are used interchangeably here to mean products sold to employees where they work and paid for by the employee through payroll deduction. The products can be either group or individual platform.)

The segmentation study found 6 segments of producers: 1 career agent segment and 5 broker segments.

Career agents are producers who work primarily for a single company. AFLAC and Colonial reps are examples of career agents.

The 5 broker segments are defined as follows:

Employee benefits brokers. These producers typically focus on traditional group and non-worksite individual benefits.

Classic worksite brokers. These producers focus on worksite sales.

Worksite specialists. This segment also focuses on worksite sales but tends to be larger organizations offering a wide variety of support services (Section 125 administration, billing, customer service and claims payment, for instance).

Occasional worksite producers. These producers are insurance generalists. They have a small agency that also sells insurance products other than worksitegroup, individual or property/casualty.

Multiline agency. The producers in this segment work in a worksite department of a large agency. The agency does not focus on worksite marketing, however, the department and its producers do.

Table 1 shows that, in 2003, the employee benefits broker took the top share of new sales.

If we were to go back 10 to 15 years, we would see a very different picture, with career agents having a substantial share of the market and most of the rest belonging to the classic worksite and worksite specialist brokers. But for some time, we have been reporting that the employee benefits broker segment is experiencing the fastest growth of all voluntary producer segments. Sales for this segment have increased by 1.6 times the rate of the market, in general, since 2000.

Table 2 shows the sales for the Employee Benefits Broker and 3 other segments (the Career Agent, the Classic Worksite Broker, and the Worksite Specialist) for 2000 and 2003.

Over the 3-year period, the overall market sales increased 39%.

As Table 3 shows, there was higher than average growth in the classic segment and virtually no growth in the specialist segment. We believe there are 2 factors causing this trend.

First, there are no new specialists coming into the market.

Second, many producers are being lured away from large brokers and agency carriers by the availability of street-level services to support them (enrollment companies, billing companies, software providers, etc.). This means they can start their own classic agency dedicated to worksite marketing without having to build the extensive infrastructure that specialists were required to build in the past.

The growth of the employee benefits broker as a significant worksite-voluntary producer is further supported by another new Eastbridge study, which found that over 90% of employee benefits brokers sold voluntary products in 2003, up from 70% in 2001. It also appears that the role of voluntary for employee benefits brokers is shifting from a cross-selling tool to an integral part of the brokers portfolio. In fact, just over half of the employee benefits brokers in this survey describe voluntary products as part of a “total benefits” solution.

The picture of the worksite producer is definitely changing. We see an evolution going on whereby all types of brokers are selling a wider variety of products. In this shift, the classic worksite broker and the employee benefits broker are likely to start looking more and more alike. But we still see the employee benefits broker (or the benefit advisor) emerging as the dominant player because the longer they sell voluntary, the more comfortable theyll become with itand the more theyll sell. Indeed, its not too difficult to imagine that, in the next 5 years, the total solutions benefit broker (aka employee benefit brokers) will control 55% or 60% of brokerage sales.

Gil Lowerre is president and Bonnie Brazzell is vice president of Eastbridge Consulting Group Inc., a marketing consultancy for insurance and financial services organizations in Avon, Conn. Both can be reached at info@eastbridge.com.


Reproduced from National Underwriter Edition, September 23, 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.