Too many benefits brokers are rushing around generating the same spreadsheets that every other broker seems to be generating. In many cases, service is getting less personal even though enormous increases in health insurance premiums have pushed up brokers’ commission revenue.
I think brokers can do better.
The first step is to educate employers about how they can become better brokerage services consumers.
Although benefits eat up 29% of the typical employer’s payroll, many employers choose benefits brokers casually. Employers select a broker based on an old relationship or because they believe one agent has more “market clout” than another.
Other employers are starting to choose brokers several quarters before plan renewal dates, using the same careful selection methods they would use to hire law firms or accounting firms. These carefully selected brokers begin reviewing renewals 90 days in advance and, just as important, working on benefits management strategy.
The good broker starts by setting an objective, organizing the plan around the objective, putting an action plan into place, implementing the action plan and then evaluating the entire process. The strategic planning continuum is a circle that continues annually, and this process should be driven by a plan sponsor’s broker.
Here are the other characteristics of a good, modern benefits broker:
o People. An organization is only as good as the people on its team. Some brokers have a very talented sales team but then hire very inexperienced people to service clients. Other brokers show their “A” team during the sales cycle but then assign the “C” team once a prospect becomes a client.
o Carrier Relationships. One of the most overused sales tactics is for a broker to proclaim that “we are the biggest and therefore we get the best rates” or “we beat the insurance company down better than any other agency in the business.” In reality, there are only 5 to 7 insurance companies writing health insurance in any given marketplace, and they all have access to the same demographics and rates.
The fact is that the size of a broker matters but only when it comes to the value added services they are able to obtain from a carrier and/or the people they have access to within a carrier on all levels. For instance, if a broker obtains “Platinum” status with a carrier, many times their clients are able to receive better reporting data, a dedicated underwriting unit and direct access to dedicated underwriters.
In general, a broker makes between 3.5% and 5% commission from an insurance carrier for placing a client with their company. In this age of double-digit annual rates of increase in health insurance premiums, the modern broker should work on a fee basis or offer clients more services.
Value-added services and features might include access to benefits law attorneys; adding staff underwriters and actuaries who can generate claims reports, data projections and other reports; legislative guidance; Web-based and call center-based employee communications services; paper-based brochures and pamphlets for employees enrolled in the new consumer-driven health plans; national and international service capabilities; and transparent fee structures.