When you meet and interview benefits agents, you are presented only the advantages, not the disadvantages, of their model. Here are some of the more common models you will run into as the person responsible for selecting your company’s benefits agent.
Catch and release
You meet a really smooth, talented agent who promises to deliver personal attention and value from years of experience. You hire this agent and start your agent honeymoon with a twinkle in your eye.
At the very next renewal time, you find yourself working with someone different within the agency. This person is decent but not the same person who sold you on changing agents.
Did you do something wrong? Did you put on weight? Why did you get dumped? That is when you realize that you have been caught and released.
Some agencies find success in having their best agents focus on catching new clients, then handing them over to a team. The first person you met was not your agent but your salesperson.
The principal reason you use an agent is to get the best advice, council and leverage. You need this advice every renewal, not just the first year. Choosing your agent is like choosing an attorney — you need to work with the very best every year.
Jack-of-all-trades
On the surface, this approach sounds pretty good, one agent for all your insurance needs. This agent is typically a property and casualty agent who also shops employee benefits. If all you want is someone to bring you quotes, then the Jack-of-all-trades is an acceptable model.
However, most employers need more expertise and service than having quotes brought to the table. Employee benefits have evolved over the years and will continue to evolve into an extension of the HR department. HIPAA, COBRA, HRA, HAS and FSA are just the tip of the iceberg of the complex laws and plans that require a master of the trade.
Large block of stagnant business
Having a large block of business is a value, but if the agency is not growing by adding new clients, its leverage is diminished. All insurance carriers need to grow their business.
Most insurance carriers renew 90 percent or more of their clients. When it comes to getting favors, exceptions and rate relief, it’s the agent placing “new business” with the carrier who has the better chance than the agent simply “getting quotes.”
When interviewing an agent, ask about the last three years of growth, not in revenue but in the number of clients.
Solo practice
This is the most common agency model. The pitch is that the agent who handles everything can have a more hands-on, personal relationship with the group. In many cases, that’s exactly what is happening.
Employers have a difficult time changing from this model because they have such a strong personal relationship with their agent.
But this model fails across the board. Limited growth thus limited negotiating power, limited agency services and limited access for employees with claim problems. The best analogy is the local hardware store being put out of business by Wal-Mart and Home Depot. This agency model will continue to fades.
No agent at all
This is the model some employers have moved to out of spite. They see their agent playing an insignificant role in negotiating rates and providing services. Although this approach can have an initial savings of 5 percent to 10 percent based on no commissions, the reality is that working without an agent is more expensive.
That sounds self-serving, but look at the facts. An agent who has just 10 group clients has more negotiating power than you do with your one group.
Insurance carriers want you to use an agent. Without an agent, your calls and questions go to the carrier rep, who becomes your agent, costing the insurance carrier more money. This is why some carriers refuse to reduce your rates if you don’t use an agent.
The bottom line is that you don’t need to stop using an agent. You need to start using a better agent.
Bruce Bishop ([email protected]) is director of marketing and managing partner of KYBA Benefits. KYBA Benefits provides consulting and administrative services to more than 400 corporate accounts, ranging in size from 20 employees to more than 7,000. Reach Bishop at (770) 425-6700 or (800) 874-2244, ext. 205.
