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.