Estimates peg the number of U.S. small businesses at 25 million, making this business segment the country’s fastest growing. Yet, it is the least penetrated market as regards employee benefits. This void creates a huge opportunity for those who choose to pursue the small business marketplace.
Many of the major insurance carriers target larger employer groups (250-plus employees) and design services to accommodate this market segment. In turn, many insurance brokers and financial representatives devote their time and energy to larger groups. In general, the insurance industry lacks a focus on the product, service and distribution needs of many small group employers.
There are key differences between small business owners and their counterparts at larger organizations regarding employee benefits. Most importantly, many small businesses do not have an established human resources function within their organizations. In fact, HR issues often become a secondary need and frequently are handled by an office manager–or even the company’s president/CEO.
Consequently, these individuals rely heavily on knowledgeable advisors who can provide a connection to a carrier that focuses on, and understands, the needs of the small group segment. Time is essential to small business owners, and they need an ally–someone who can assist with the product and service needs of their company.
A second, more obvious difference between the two markets is cost. Many small businesses do not have the financial wherewithal to fund robust employee benefits packages. These organizations are looking for options that are cost-effective, easy to administer and will help retain valuable employees.
Satisfying employees is important. To attract a quality work force, small businesses must be able to offer cost-effective and competitive benefits packages. Once the needs of small business owners are understood, the advisor must think about the best way to approach potential clients.
Small business owners will respond well to a big picture focus that outlines plan and funding options, rather than a one-size-fits-all approach. Clients in this marketplace need advisors to provide a “map” that outlines a complete employee benefits program.
The map details the scope of coverage available and the associated risk and retention benefits to the employer and employees. Initially, small business clients are likely to select only a medical insurance offering. But as their businesses grow and they are able to fund additional benefits, they are likely to turn to advisors who already have provided a complete outline of what’s available to employers in the small group segment.
Education is paramount for both clients and advisors. Partnering with an insurance carrier that has a clear understanding of the small business marketplace will ease the sale. The sales process for this market is quite different than that for large employers.
It is fast and solutions-oriented. A small business owner wants to work with organizations and individuals who can provide immediate answers, which requires a complete understanding of the products and services available.
Some insurance carriers already have established a commitment to the small business market segment. An organizational commitment to this marketplace is quite different than a marketing theme. Some insurance carriers may simply have a marketing program for small business owners; however, other companies already have developed products and services that are geared toward small businesses. These are the carriers to choose as partners–the organizations that understand the needs of small businesses.
Insurance carriers that have an established commitment to small businesses understand that these employers have limited experience deciphering benefit plans for their employees. In addition, these organizations know that small business owners also have limited resources to administer coverage and limited financial resources.
Consequently, the organizations will have a product and service suite dedicated to small employer groups–those as large as 20 employees or as small as just two partners. Offerings can include dental, disability, life and vision insurance coverage.
Small business owners recognize that their needs are quite different than larger employers’ needs, and they look for a team of professionals who understands that. Companies and individuals dedicated to serving small businesses possess an understanding of the market and are better positioned–because of their speed, responsiveness and constant availability–to satisfy clients’ needs.
Targeting small business owners as clients will help build business for both insurance carriers and advisors. And it will help fill the void that has been left by much of the industry.