Diversify Your Portfolio into a Well-Stocked Toolbox
By Nelson L. Griswold
Are you still using just a hammer in your benefits practice?
Too many benefit brokers have been showing up at the jobsite equipped only with the hammer of medical insurance, limiting their ability both to add new revenue and to be consultative and solve other HR problems.
As the psychologist Abraham Maslow observed, “If you only have a hammer, you tend to see every problem as a nail.”
In a minute, I’ll share a story about how having just the medical hammer caused a D.C.-area broker to lose a lucrative 400-life account.
A fully equipped toolbox
To survive the coming industry shakeout, benefits agencies will need a fully stocked toolbox of products and services. Swinging your health insurance hammer – tweaking the plan design, carrying quotes, negotiating down the renewal – is no longer sufficient to either get or keep the account.
“If you only have a hammer, you tend to see every problem as a nail.”
In the 2011 MetLife “Broker and Consultant Study,” almost 60 percent of brokers and consultants report that consultative selling and cross-selling are their two primary strategies for meeting the challenges of the post-reform marketplace. However, you can’t solve many client problems or cross-sell without a broad portfolio of valuable product and service solutions.
As I’ve stated previously, agencies that survive the shakeout will have transformed themselves in four critical areas: Selling, Marketing, Management…and Portfolio.
One broker’s true story demonstrates the importance of having a well-stocked toolbox.
A winning edge
Several years ago, a 400-life construction firm in the D.C.-area was facing a 22-percent renewal on the medical. Looking for relief, they invited the broker on their construction bonds to quote the medical. He took a consultative approach and interviewed the HR director to identify pain points besides the high renewal.
He discovered that the construction firm had a severe turnover problem due to a competitor that paid an additional dollar per hour, but provided no benefits. Despite a full and generous benefit plan, this company continued to lose employees to the higher hourly rate. HR was unable to communicate the value of their benefit plan because over 95 percent of their employees spoke only Spanish.
With a clear understanding the firm’s needs, the broker brought in a new carrier that saved the firm $150,000 on the current year’s medical spend. Plus, he introduced a benefit communication and enrollment firm that could provide a full Spanish-language enrollment including one-on-one meetings with every employee to explain the value of the benefit plan. Finally, he showed how a new Enhanced (formerly known as “voluntary”) Benefits (EB) offering would pay for the roughly $17,000 cost of the benefit communication, meaning zero impact on the company’s budget.
Not surprisingly, after learning of the threat to his account, the incumbent broker brought the same new carrier and medical plan. But having only a health insurance hammer, he never asked or knew about the client’s turnover problem.
The employer awarded the Broker of Record letter to the new broker on the strength of his bilingual enrollment solution to their retention problem. The benefit communication services and the Enhanced Benefits in his toolbox gave him the winning edge on the BOR.
The Enhanced Benefits toolbox
This article is about much more than Enhanced Benefits but I’m starting here because EB provides an entire toolbox by itself. The EB toolbox is stocked with not just a broad range of desirable products but also the valuable ancillary services that can be offered as part of a EB enrollment.
In addition to the more common worksite voluntary products (i.e., permanent life, critical illness, accident, hospital indemnity, and short-term disability insurance), there is a wide selection of more specialized, non-traditional EB products, including:
- Limited medical plans;
- Long-term care insurance;
- Personal lines coverage (home/auto);
- Legal plans;
- Identity theft plans;
- Pet insurance;
- Payroll deduction loans;
- Vacation & travel programs; and
- Employee purchasing plans
While the traditional Enhanced Benefits will continue to be the mainstays of voluntary programs due to their broad appeal, high utility, and robust commissions, these others can be useful additions to a benefit plan, providing valuable benefits to employees and revenue to the broker.
EB as a service play
Most brokers overlook the substantial value to their clients of the benefit communication and ancillary services that the EB enrollment can provide to solve serious HR problems.
When you consider that many of these value-added services can be provided at no hard-dollar cost to the employer, you can understand the powerful competitive edge that EB can provide the progressive benefit broker.
In addition to the bilingual enrollment we saw in the story above, these services include communication of both core and voluntary benefits; dependant eligibility audits; employee surveys; and total compensation benefit statements. Any of these could be a solution that gets HR to open the door to a EB offering.
Benefits strategic planning is a guaranteed route into the C-Suite.
Enhanced Benefits may be one of the most versatile tools you can have in your portfolio, but there are many other product and service solutions that deserve your consideration. In our industry bestseller, DO or DIE: Reinventing Your Benefits Agency for Post-Reform Success (a survival manual for agency leaders & producers), we go into detail about a wide range of solutions in addition to EB. Let’s look at some of them.
C-suite in E major
For many brokers and consultants working in the mid-market and up, access to the C-Suite remains the Holy Grail, with the goal of forging a relationship with a C-level executive (CEO or CFO, usually) and becoming a valued trusted advisor.
Since the benefit broker’s relationship usually is with HR, employee benefits generally does not afford even an introduction to the ultimate decision makers in the executive suite. Viewed by the C-Suite as a mere HR vendor, most brokers can only dream of access to the CFO or CEO.
Executive benefits, however, have provided innovative benefit brokers and agencies a direct path into the C-Suite. While executive benefits are certainly a specialized area of our business, to get their agency into the C-suite determined brokers do the work to get themselves up to speed or the agency hires producers with an executive benefits background. Once in, it’s just a matter of leveraging the executive relationships to get a shot at the BOR on the benefits.
Products, however, are just one way to establish a beachhead in the C-suite. There is one service brokers definitely should have in their toolbox that will firmly establish them on the client’s executive floor.
A strategic service
Benefits strategic planning is a guaranteed route into the C-suite.
By its very nature, the benefit strategic planning process must include the CFO and/or CEO, as the architect(s) of the enterprise strategic plan. Since the purpose of benefits strategic planning is to create a sustainable benefits program that aligns with the enterprise strategic plan, the C-suite must be party to the planning process that their broker will facilitate.
Benefit strategic planning puts you on the same side of the table with both HR and the CFO, at least. This is perhaps the most advantageous – and strategic – service you can offer your clients. Not only can you engage the C-suite in a strong advisory role, with benefit strategic planning you can both lay the groundwork for future product offerings such as voluntary and, most important, build yourself into the client’s benefits plan for the next three to five years. And you can charge a handsome fee for the privilege!
There are programs that provide you an easy shortcut to learning and implementing benefits strategic planning in your practice, but ultimately this is a consultative service that you provide your clients.
Services to order
There are, however, a number of third-party vendors providing services extremely useful to HR that use broker distribution and either put you in the revenue stream or are priced to allow a very profitable markup. These services include:
- Dependent eligibility audits;
- HR & benefit administration systems (including broker-friendly Zenefits-like platforms);
- Private exchanges;
- Automated employee onboarding (new hire orientation & enrollment);
- Telemedicine services;
- Data analytics software;
- Results-based wellness programs;
- Financial wellness programs;
- Professional employer organizations (PEO); and
- Payroll services.
A troubling trend in employee benefits is the move by national payroll providers such as ADP and Paychex into the benefits space with their own brokerage services. These companies seek to leverage their key role as payroll vendor into a much more lucrative role as broker of record on the employee benefits.
Along with a range of both insurance & non-insurance products, your agency toolbox must have a strong mix of services.
To go on the offensive and preempt the payroll giants, brokers can license a payroll service that both generates a steady revenue stream and keeps the payroll companies out of your accounts. Moreover, some payroll services also offer an extensive range of HR outsourcing solutions, providing you with a particularly strong value prop and differentiating you from the competition.
Pain of disconnect
Payroll services are a prime example of ongoing services you can provide the client that create what is known as “pain of disconnect” if the service is ended. These services are difficult and troublesome to replace and are usually available only to your current clients. In other words, if you’re fired as the broker, the client loses the service.
These services are of particular value because the client’s desire to avoid the disruption and hassle of replacing the service can increase your retention substantially. Other examples besides payroll are benefit administration/HRIS systems, online perpetual enrollment systems, online benefit communication programs, Work Opportunity Tax Credits (WOTC) services, and employee onboarding systems.
Revenue & retention
Some services can generate a lucrative fee or a meaningful revenue stream. Other services are value adds that produce little or no revenue but can strengthen the broker/client relationship and boost retention. Some, like benefit strategic planning and ben admin systems, can do both.
Along with a range of both insurance & non-insurance products, your agency toolbox must have a strong mix of services that boost your bottom line and/or lock in your client. It’s do or die.
After the inevitable thinning of the herd, only the fittest agencies will be left standing. Those agencies will boast a loaded toolbox, their hammer joined by a broad range of products and services that give them both a competitive edge and a healthy bottom line.
So, what’s in your toolbox?
A version of this article previously was published in Employee Benefit Adviser magazine.