Monthly Archives: July 2015

It’s Not About the Technology – Brokers are Getting Out-Sold

I have written several articles on “how to be different” and how benefits brokers are “stocking their shelves” with technology solutions (to be different). A more recent article was about how to build an enduring business which does require having a relevant value proposition that would be valuable even in 5 or 10 years into the future. In spite of all the new tools and resources that brokers are stocking their shelves with and their efforts to be different many are still losing business to other firms that often have inferior solutions, at least on paper. What has really astounded me is that many benefits brokers are simply being out-marketed and out-sold. I am surprised because most brokers believe themselves to be pretty good sales people. For the most part, I agree with them. However, I believe the problem is much deeper in most organizations, but this is a solvable problem.

The reason I am writing this article is because I have seen this too often. I have seen benefits firms with superior capabilities and even technology lose to companies like Zenefits because the sales person did not have the training to deliver the right message. Or in many cases the benefits firm did not deliver any message to their clients at all about some of their capabilities. How often does this happen? It is not the sales persons fault. Their firm loaded their company up with tools and resources but these became somewhat “trinkets” thrown on top of a fairly weak foundation. The success of many firms to date often has been the result of strong sales people but the world has changed. Old messages with little marketing and no clear vision will not win against focused organizations with a unique value proposition, a strong brand promise, and well trained sales people.

Whenever I meet a new broker I often ask the question about how they are unique. It is amazing how often I either don’t get an answer or the answer is “we provide great service”. I remind everyone that great service is rarely a measurable differentiator. And I guess if everyone says that great service is their differentiator then how can one be different when everyone says the same thing. It reminds me of the Yogi Berra quote where he said, “nobody goes there anymore because it’s too crowded.” Everyone provides great service and that’s how their different? Sounds like Yogi to me.

The problem I am seeing is not with sales. It is in marketing which includes brand building. It even starts with a lack of vision. And all this is combined with a lack a planning. How can one plan when there is no clear vision and brand promise. Even when there is a brand or vision that vision is rarely “lived” throughout an organization.

My best evidence of this was seen when I was working with a producer from a national benefits firm who showed me a brochure she was using. I asked her who wrote the brochure and she said she did. She said she had no marketing in her office and nothing came from corporate so marketing was left up to her. Imagine a national firm where all the producers had to create their own materials? What I am finding is that this is common.

When I got into the benefits technology business in 1998 I was the CEO of a dotcom company that raised significant capital. One of the best exercises I went through was with my marketing firm. Our whole campaign started with one simple question which lead to one simple word. That question was “If you were to give a sales presentation or drop off some brochure to a prospect what one word would you want them to use to describe your company two weeks after the presentation? That word or it could be a few words needs to “live” within your organization. It needs to emanate through your organization and everything you do.

OK, so what is the answer? As I mentioned in my recent webinar most brokers are looking on the outside for answers when the answers are the inside. It starts with a re-evaluation of your vision. As Simon Sinek would say it starts with “Why”. It really requires that one understands their purpose for doing what they are doing. Does everyone in your organization agree with your Why? Then one must build from there. The building of the brand and then the marketing pieces, website, and whatever it is that you may bring to a prospect. It will then require educating your team and training the sales people on how to deliver your vision. Your Why!

I believe most firms have not done this. At least I have seen little evidence of this. Most have been looking to the outside for their differences; for their competitive advantage. They attend every sales presentation from some technology vendor or other vendor that promises to deliver the answer to success. But the competitive advantage people are looking for is often sitting under their own roof. Yet, most can’t find it, because they are looking in the wrong place. As a result clients and sales are lost. And they spend more money, on more trinkets, wondering whether or not they have found the answer.

This change requires hard work. It takes an honest look at one’s business to see if there is an understanding of one’s Why. It does no good to lie to one-self on this one. Or maybe over time firms have wandered far away from their Why. So the whole organization does not act as one unit but as a bunch of individuals trying to figure things out themselves. So I ask you a few questions. How is your firm unique? What is your vision? Your Why? And does everyone in your organization live this? Good answers to these questions deliver great results. Bad answers are the reason most companies are out-marketed and out-sold.

Fee for Service for Benefits Brokers – It Changes Everything – And It’s Coming

Every now and then I see an article about the benefits brokerage business moving to a fee for service model. There are always a few comments from brokers who say they have done so and everyone should go fee for service. They make it sound easy. I would contend that moving to a fee for service business model is not nearly as easy as anyone may make it sound. I would also claim that those brokers operating in a fee for service model today may have somewhat of a false perception of the market. My theory, if I can call it that, is that while there may be some fee for service business in the market there still is no real price competition for benefits broker services. When price competition enters the market then we will have an industry that will then need to undergo dramatic changes.

Let me first address my theory about the lack of price competition. The benefits business, for the most part, pays brokers a commission. Regardless of the quality of the service two competing brokers will get the same compensation. It is an unusual business environment. Now some brokers have gone to a fee for service model. The false reality for those brokers, in some cases (I don’t want to over-generalize) is that those fees are often compared to what a broker is making on a commission basis. So one broker’s fees are not compared to another broker’s fees. The fees are compared to commission. Therefore price competition isn’t really in play.

There are markets (large group in some states) where fee for service is becoming more common. Even in those markets things are not mature. What I am basically saying is that employers are still comparing what the brokers are charging on a fee basis to what they were paying in a commission world. That commission world is still a recent memory and the fee they are now paying is often less than the commission they were previously paying. So things aren’t that bad as the fees are at least going in the right direction, from their perspective. This will change in time.

There are examples where fee for service have played out in a true competitive way. In NC the market went fee for service for large group a few years ago and in one quote to a municipality the incumbent broker quoted $25 PEPM and competitive prices came in at $9, $5, $2.50, and $2 for what was being presented as the exact same service. The incumbent was not even asked to be a finalist. This was true price competition and the market drove down prices significantly.

The reason I am writing this is because I think with Aetna moving to a fee for service model for their small group, and now purchasing Humana (if approved), we may see a much faster move to a fee for service model for all medical insurance sales. Another catalyst may be the upcoming rate battles between the insurance carriers and the Exchanges for the 2016 rates. What I am reading is that the carriers in many states are requesting rate increases from 15% – 35%. The federal and state exchanges are going to fight these rate increase requests and one casualty in this battle may be broker commissions. Carriers, to get their prices down, may move to the Aetna model of having the employers sign-off on how much they want to pay their broker. If this happens then you will have rapid price competition, something the benefits business has really never seen in the past.

In the comment section of one of the recent articles about the Aetna move to fee for service on the Employee Benefit Advisors website one writer said the following:

“Personally I believe that good agents who deliver real value should be cheering from the rafters. It is easy to talk about how much you are worth as an agent when the client has no idea what you are getting paid and no choice. Personally I hope that all medical carriers make this move. If they do I will get back into the group medical business.”

While this may sound noble the reality is that even in markets where people do deliver valuable services the difference in quality is hard to measure. Even those that provide good service will see margins go down and would not be cheering from the rafters. Price competition will impact all, both good and bad.

Most brokers have not had to operate their businesses with price competition. Price competition, in most instances, results in lower margins and thus lower profits. If margins are lower then the whole way benefits brokers operate their businesses may have to change. It will impact their staffing, the services they provide, internal operational practices and even incomes. The sales and marketing process will also change dramatically. Having to battle price competition is not a skill most benefit firms have developed.

I think there is a high probability that price competition will enter the benefits business and it will happen so fast most brokers will not be prepared or equipped to respond. It is best to anticipate this potential major business shift now. I have written a lengthy white paper titled, “A Path to the Future of the Benefits Business” that outlines the plan to compete in this new benefits environment. Benefits brokers may request this by sending me an email at

Webinar Invite – Upping the Benefits Game – Introducing Ideas Most Brokers Aren’t Thinking About

I am conducting a webinar for benefits brokers that you may be interested in. This addresses many of the recent events in the benefits business and incorporates some of the content previously published on this blog. Between what Willis has done and Aetna there is a lot to discuss.

The webinars are on July 8, 13, and 21st from 12-1 est. to register click on this link to my website.

Here is some of the text from the invite.

How would brokers react if the entire small group benefits market went fee for service like Aetna is doing? What would the market look like if an individual health insurance plan became tax deductible? HR Technology Advisors would like to invite you to a webinar that will introduce what we think are strategic business decisions that brokers can make today that will position their firms for a much different benefits world. We can assure you these ideas are things most brokers are not close to thinking about that can give you a competitive advantage today while preparing your business for the future.

Feel free to call me if you have any questions at 508-530-5043.

Willis Acquires Towers Watson – Is there more to this story?

When a company makes a big financial move I assume that they have a good reason to do so. Sometimes to the outside world it may not make sense, often because the outsider’s view of the world is different. These large companies have analysts that are studying markets and making projections well into the future. I assume they know something I don’t. So to me these financial moves can be quite interesting and if you study them they may actually tell a story of where these firms think the market is going.

Yesterday it was announced that Willis is buying Towers Watson. They say it is a merger but the Willis shareholders will own 50.1% of the stock. I read through numerous articles and interviews with their Executives to try and see if there is a story that is being told by this acquisition. More specifically I was looking to see if there are implications as it relates to the employee benefits business. There are a few quotes that hinted as to what these firms are thinking. In a Business Wire article Towers Watson Chairman and CEO John Haley said their reasons included, “accelerating penetration of our Exchange Solutions platform into the fast-growing middle market.” He added that they want a “significant presence with mid-market and smaller employers around the world”.

Willis CEO Dominic Casserly stated that Towers Watson’s market leading private exchange platform is particularly attractive.” And of course they both reference the efficiencies they will generate through a merged organization.

Keeping in mind that employee benefits is simply one part of these multi-national multi-dimensional companies this deal is more than likely about much more than just employee benefits in the U.S. However we can still speculate because that’s what others in the industry do. This happens in sports as we share our opinions as to why teams draft a certain player or trade another and it happens in business when key employees leave or companies make acquisitions. I guess it is human nature.

When I look at this acquisition on its own its hard to speculate as to the reasons, but when you look at other moves in the industry there may be a story developing about the future of the benefits business or more specifically the healthcare business. It was only a few years ago that Towers Watson bought Liazon and their private exchange solution for $215 million. Just last year Aetna purchased bswift for $400 million. I wrote about this acquisition last November in this forum. Now Willis buys Towers Watson. Are the events all tied together?

Back in 2011 Aetna CEO Mark Bertolini made the comment, “Not too far away from now – in the next 6-7 years – 75 million Americans will be retail buyers of healthcare. And they’ll come to the marketplace with their own money and either a subsidy from their employer or a subsidy from their government. And it doesn’t much matter – they’ll be spending their money.” Since then Aetna has been acquiring technology companies including bswift that has built “exchange” capabilities. Bertolini thinks healthcare will be individually purchased. Aetna buys exchange technology. Towers Watson buys exchange technology. Willis buys Towers Watson. Are these events part of the same story?

Maybe this is a stretch but if Mark Bertolini is right and in the near future Americans will be retail buyers then what would I need to do if I am a benefits broker and consultant? A 10,000 employee client could no longer be viewed as a single 10,000 person firm. It becomes a firm with 10,000 retail buyers that I may need to consult and support. The structure of my company. The technology I use. How I staff my business. The revenue/expense model that I would need to operate under in this type of business would need to be much different than that of the average benefits firm today.

Do these larger firms like Willis, Towers Watson, and Aetna see something most don’t see yet? Are they preparing for a different future where a consumer-centric “retail” model is the way health insurance will be purchased? Will the Cleveland Cavaliers resign Lebron James? Is this Peyton Manning’s last year? Who knows what they are thinking? What I do know is there is usually a story being written and many of us on the outside can only speculate as to what an acquisition like this means for the rest of the industry. And I am pretty sure that somewhere in the benefits world the next chapter of where the market is headed is being written.

Stay tuned.

To see a webinar on this topic click on this link:

The webinar is titled “Upping The Benefits Game – Introducing Ideas Most Brokers Aren’t Thinking About”.