Category Archives: Agency Operations

Can Your Benefits Business Endure?

I spent the past few weeks traveling across the country meeting with different benefits brokers when I had a question asked of me that required some thought but produced what I think may be an interesting observation. The question was “What brokers are investing in changing their businesses the most to meet the changing demands of the benefits marketplace?” I speak to many brokers and work with many more and as I thought closely my answer came out as follows: “The brokers changing the most are those that plan on being around in 10 years. It is those that want to perpetuate their businesses independently rather than prepare their businesses for sale.” I could actually visualize the business owners of these firms that I was referring to as I was answering the question.

In my business I contract with brokers and one of the things I try to figure out is whether the broker I am speaking to is going to survive and thrive, sell, or fade away. I don’t know if one of the options is to exist as is in perpetuity. Can a broker survive but not thrive, sell, or fade away for a period of 5, 10, or 15 years? Will “as is” be an option?

The question also reminded me of a quote I saw in Peter Thiel’s book Zero to One that stated, “For a company to be valuable it must grow and endure”. The most important question you should be asking yourself is “will this business still be around a decade from now?” He is not asking whether the business will look different but will it even be around. Using this idea I thought about some of the questions one needs to ask oneself including:

  • Will health insurance still be purchased through an employer plan?
  • Will benefits brokers still be the main distribution source?
  • Will the carriers still be paying commissions? If so at what rate?
  • Will the current insurance companies still be around?
  • How will people (employees) be accessing their benefits information?
  • Will there still be claims analysis tools, underwriting, and where will wellness be?

–          What will health insurance plans look like? If they exist.

There are probably many other questions I could ask.

If you honestly answer these questions or at least make an educated guess then the future of the benefits world will be much different than it is today. If the industry is different how will your business be different?

What I am finding in the marketplace that the national firms are working hard to change. Obviously if they are publicly held companies then there are many people in the organization that want growth or at least compensated for growth. Other organizations that are changing include ones where the owner had brought in a son or daughter into the business. Organizations where the owner is less than 45 years old also see then need to be around 10 years from now. I don’t want to put everyone in the same box as we know there are exceptions to every rule but these are trends that I see.

The behavior of those that plan to be around is much different from those planning to sell or those wanting to hang on until retirement. Those planning to be around are investing in the future. They are making strategic decisions based on the long term and not just short term. They are building a culture that is not complacent but one that is dynamic where people can think different. They lead not follow.

Others have a plan of “Hope”. They hope the world doesn’t change. They hope that they can survive as is. They hope carriers don’t reduce commissions. They hope Zenefits goes away. They don’t invest in the future but actually reduce expenses to save money. They make minimal changes, usually following some other firm rather than think outside the box and plan for the long run.

So now I have written another article on change. I had one broker ask me what I would do if I were a broker. Good question. I don’t write these articles without taking my own advice. Or should I say take the advice of Peter Thiel. The answer to this question will be revealed in my upcoming webinar titled, “Upping the Benefits Game – Introducing Ideas Most Brokers Aren’t Thinking About”. Benefits brokers are welcome to attend this webinar by clicking on the following link to register.

I guess I will finish with a quote from Henry David Thoreau who said, “Never look back unless you are planning to go that way.” I think it is safe to say that the future of the benefits business will look nothing like the past. So ask yourself, can your benefits business endure? Will it be around in 10 years? If so what will it look like? It is time to ask and answer those questions. Then take action.

Turning the Benefits Service Business Upside Down

A few weeks ago I was speaking at the Silicon Valley Association of Health Underwriters Conference where Zenefits CEO Parker Conrad was also present and took questions from the audience. He had an interesting response to a question that reminded me of an article I had written back in 2009 titled “Xbox – The Future of Employee Benefits Customer Service”. (You can see the article here: ) He was asked if he provided any face-to-face service. He responded somewhat tongue in cheek by saying that he did as long as they could walk to the meeting. Of course that got a chuckle from the audience. I don’t remember his next comment word for word but he followed that by saying that most brokers assume that providing service via the phone and/or web conferencing does not yield the same result as an onsite visit. He totally disagrees with that premise. He believes that centralized services using the latest technology can actually provide a better result. To most brokers this is turning the benefits business on its head.

Many benefits brokers live by the idea that face-to-face onsite service is the only way to provide quality service. Certainly that is one of the advantages a local broker has, being local. But times change. Web conferencing and even high definition web conferencing is now readily available to even a small business. Consumer behavior has changed too. Some CEO’s and others find it acceptable to meet via the web. Some may even find the company that can do this to be more forward thinking or technologically advanced. Others will see web conferencing as being more cost conscious. Millennials have no problem speaking to others via the web, smart phone, text messaging or chat. It is becoming more commonplace.

Onsite service also has a capacity problem. Imagine I am a national brokerage firm that has a highly skilled actuary or underwriter on staff. If that actuary were to drive one hour out to meet a client, meet for an hour, and then drive back that one meeting would take 3 hours. During those same three hours that same actuary could attend 3 web meetings. In this example onsite service is 3 times more expensive than a web meeting. Imagine if the client were getting billed for that time. In my 2009 article I used selling voluntary benefits sales as another example. Insurance buying events such as getting married, having a baby, buying a house, happen every day. It is simply not possible to be face-to-face for everyone when they have a need. Setting up an automated sales/service center can result in more sales.

The benefits business is seeing commissions being cut in many markets. I have a feeling this trend is far from over. Imagine if you had to build a business for a future benefits world where revenues were lower or you had to compete with other brokers on a fee for service basis. You would need to build a business that leveraged the latest technologies to improve operational efficiency. You may want to help your clients leverage technology so they too could be efficient in managing their HR and Benefits reducing manual service demand. Employees in this new world would have ready access to such needed information via the web and mobile. They would be able to speak with a benefits broker face-to face via mobile or web. In this new world you would be able to deliver state of the art technology and high-quality services to more customers at a lower cost. If you were to do this you would be building a business model like, well I guess, Zenefits.

While onsite meetings may not go away it is naïve to think that another company could not deliver a similar level of service and advice via the web and mobile using technology. Brokers fixed on old beliefs will be surprised when they get a BOR where the other broker has no local representation. It is happening today and will become more common in the future.

XBOX – The Future of Employee Benefits Customer Service – Reposted from 2009

This article was first published in 2009. It is even more relevant today so I am reposting this along with a follow-up article on the same topic.

A few weeks ago my son asked me if he could use my laptop for his regular Tuesday night drum lesson. I could not imagine why he needed my laptop for a drum lesson. It turned out that his drum teacher was on the road and he was going to be giving his lesson via the internet using Google video chat. So, he took my laptop into our basement and set it on a chair in front of the drum set. Using the built in camera, speaker, and microphone, along with a wireless high-speed internet connection, my son played the drums while his teacher watched, listened, and instructed, from his hotel room 700 miles away.

A few days later I was talking to an insurance company sales representative about the use of web-based benefits enrollment technologies. He commented that one of the drawbacks of web-based, self-service enrollment systems was that participation in voluntary plans was significantly lower when compared to face-to-face enrollment meetings with a professional enroller.

It occurred to me that there were some interesting similarities between the two situations—and some profound differences. While my son’s drum teacher leveraged technology to create a “face-to-face” drum lesson and generate revenue, the sales rep considered the technology an obstacle which reduced revenue. It has been my experience that those in the benefits business, though not afraid to invest in technology, often struggle with applying the right technology to the right situation. Let’s address how brokers can leverage technology to improve customer service and generate more business.

For benefits brokers, leveraging technology is moving away from a “ nice-to-have” strategy and more towards a “have -to-have’. With insurance products becoming more commoditized, and some form of healthcare reform on the horizon, benefits advisors will have to adapt to a changing market. This new market is likely to result in both flat or reduced commissionable revenue and a shift towards fee for service revenue. If that is the case, brokers will need to become more efficient, managing more customers with the same or fewer employees, while improving and expanding customer service. One way to do this and remain competitive is by investing in technology.

So how does XBOX get into this discussion? Well, be patient, I will get there.

There are dozens of processes in a benefits brokerage operation that can become more efficient with technology, I will focus on just a few. Let’s start with a common process for most brokerage firms, the customer service call. When it comes to customer service most brokers are very responsive. In fact, when one asks brokers how they are different, the average broker’s response is that they provide superior service. This presents two problems to the brokerage firm that is truly trying to differentiate itself. First, I have yet to meet a broker that didn’t say they provide superior service. Second, most brokers are not able to quantify the service they provide. The typical service call is documented with paper notes or simply by typing notes into some database type system. Most cannot produce a report on the types of calls, response times by their staff, or which insurance companies are having the most versus least number of issues.

Not having reportable information may not be a problem with clients where a strong relationship exists. But, what happens when your contact leaves the firm and a new HR person takes over? It is at that time a brokers value may come into question. It is also a time at which the broker has a tremendous opportunity to demonstrate their true value.

For a new HR person the information you have can be leveraged to make that persons transition into a new job easier. However, according to John McKean in his book, “Information Masters: Secrets of the Customer Race”, only 5% of the body of knowledge about a client is available digitally and indeed only 20% of the knowledge is recorded at all.” For many brokers this is often the case. Therefore, though they may have provided great service, they can’t prove it to a new HR person. Thus they lose a competitive advantage over a broker who may be prospecting the same employer.

Another risk point for brokers is when a key employee leaves the firm. In organizations where information is not tracked all knowledge walks out the door with that person when they leave. This not only puts you at risk of losing your asset, but may result in a lapse of service to a customer. Information existing only in the minds of your staff is not a reliable service model.

A major problem for many firms is they don’t have an adequate system for simplifying the tracking of information. I once asked a service rep at a brokers office what her number one technology need was. Her response was very telling. She said her primary method of communication with clients on service issues was e-mail. She said it took her 11 mouse clicks to save an e-mail to her system, and she saved 60 e-mails a day. That’s 660 clicks! She spent an average of 45 minutes a day saving e-mails. While this person saved all her e-mails, another service person at the same firm said she didn’t save her e-mail correspondence because it took too long. The owner of this large regional firm thought they were all set with technology. The problem for his staff was the technology was the wrong technology. In a business environment with ever increasing demands for both greater productivity and quality, this may not be tolerable.

So, how does one make it easier to manage data and improve service? This brings us back to my son and his XBOX. , On most nights, XBOX is the primary tool my son uses to communicate with his friends. For those of you who aren’t familiar with XBOX, it is an internet based video game console that runs through a TV. It allows friends, each in their own home, to gather in chat rooms (up to 8 fiends at a time) and talk via a headset. If they want to play a video game they can play the same game. Two friends can also connect via video and see each other on each other’s TV screen.

Now move this technology into the business world. Imagine a broker’s client being on their “buddy” list. All clients should be on the buddy list. If a client needs to reach you they wouldn’t call and leave a message or send an e-mail. They could see if you are “present” simply by looking at your name in their Outlook. A green light by your name would signal you are available. Better yet, they could see the names of your service team and click on the name of any available person. Once clicked, a message would appear on the available service person’s screen asking to talk. If accepted, the service person would be instantly talking to your customer via the internet. This instant access eliminates any phone tag, saving substantial time. You could bring another person such as an insurance company claims office rep into the conversation if you would like. Viewing your client’s computer screen or even seeing the caller would be possible as well, further personalizing the experience. You could record the conversation and save it to a client file in your computer. Once the service issue is resolved, an e-mail could automatically be generated and sent by the system to the client thanking them for their business with no manual intervention.

Although this technology exists today, I have yet to run into a broker that provides this type of service. The combination of Microsoft Products called Office Communicator and Microsoft Office live is what I call XBOX for business. Other software firms have similar technologies.

Now let’s go back to the issue of voluntary benefits enrollment. You can be a broker in New York helping an employee in Texas through the open enrollment process. The employee can sit at a kiosk computer at work, put on a headset and click on the green dot on the screen to talk to and see a sales person in your office. If you want to show them where to click to enroll you can share their screen and even click for them. You can jointly go through their insurance needs calculator on the screen too. From 1200 miles away you can do a personal face-to-face voluntary enrollment, answer questions for the employee, and have the data transmitted into the insurance companies system automatically. This use of XBOX like technology will improve voluntary enrollment results while significantly reducing the costs associated with in person face-to-face enrollments.

It didn’t take long for a group of teenagers to leverage technology to conduct nightly conference calls without picking up a phone and paying an extra fee. In just a few years Microsoft has changed their behavior and created a new method of communication. It is not hard to imagine that businesses will adopt these same technologies in the next year or two. And for those that do, there are a whole bunch of college kids using these technologies in their dorms right now that will come well prepared to communicate in the new business world. What’s more, these same kids are also the insurance buyers of tomorrow.

An “Arms-Length” May Be the Distance Between Winning and Losing

The benefits world, much like many other industries, is constantly changing. You don’t have to look far to see other industries that have been impacted by new technologies (cell phone business) disruptive distribution models (Uber in the “taxi” business), or sometimes simply changes in buyer preferences (healthier food – Whole Foods). In the benefits brokerage business you have firms expanding services into HR and Wellness, payroll firms like Paychex entering the benefits business, and new entrants like Zenefits disrupting the market providing free technology and services in the HR and Benefits areas. The thing about competitive markets is that you don’t get to vote on what the market wants or what your competition may do. You have to recognize the market changes and make strategic business decisions on how to position your firm for this new environment.

Change is tough and not everyone wants to change. Some move forward with a strategy of “hope” that the changes are only temporary and the world will return to normal sometime soon. Others simply sell-out. Then there is the broker that reacts to the market by creating all kinds of partnerships. As one broker told me, “I really don’t want touch this HR and Payroll stuff. I prefer to stay an arms-length away.” To me arms-length sounded like he really did not want to “own it”. If things got messed up he can blame the other guy. Arms-length is a safe position.

The thing about arms-length is that clients and prospects recognize this lack of ownership. There is a difference between “we” and “they”. I was on a sales call with one broker who was talking technology to his client and he kept on saying “they” when referring to the vendor. You can tell the employer was thinking “why don’t I just do business directly with “they” and why do I need you”. Needless to say this broker did not get the business. This arms-length position resulted in a loss.

I had one of these new brokers call me one day soliciting my benefits business. She promised to provide free technology and offered to handle all my employee questions if I were to make her firm my broker. This made me recall a conversation I had with another broker about providing an employee benefits call center. He basically said he did not want to provide such a service because he did not want the liability. I thought to myself that as an employer I did not want the liability either. My employees come into me asking questions about their benefits and I wish they could just pick up a phone and call someone else, maybe a benefits professional.  I provide benefits but don’t ask me the details.

As your business world changes sometimes it may take you places that are out of your comfort zone. You can choose to go there or not. If you don’t want to go there then you can’t expect those companies that want such products or services to be your prospects. And while there may be some things you can bring to the market at an arms-length there may come the time when “they” needs to become a “we” simply to remain competitive. An arms-length may be the distance between winning and losing.

Can Benefits Brokers Afford to Play Not to Lose?

I always considered myself an athlete though one can certainly make the case that putting an ex in front of athlete may be a more appropriate description today. As an athlete I always believed that it was the competition that made me better and the game better. Now as a business owner I still believe that it is also the competition that yields better results. As Mark Cuban says “If there is someone out there who can kick your butt by doing it better than it is your job as the owner to stay ahead of them.” That’s good advice.

The benefits brokerage business to date has not been faced with same competitive market forces other industries have had to endure. Typically, as markets mature and competitors enter, competitive pressure forces prices and often profit margins down. But not in the benefits business. Most markets have more than enough “broker capacity” (supply) to serve the markets yet the excess supply has not driven down fees. This is primarily due to the fact that most of the revenue received is via commission paid on a product (medical insurance) that for years has been growing at a rate much higher than inflation. With recurring revenue growing at medical inflation rates it is easier to grow a business. And in many cases the buyer has no idea what they are paying for the service.

This atypical market environment may have contributed to building a broker culture where many brokers are “playing not to lose” because growth could come from simply protecting one’s block of business. Much like the Packers in the last 5 minutes of their playoff game. They played not to drop or fumble the ball. They wanted to run out the clock. Not to over-generalize but most brokers are also playing it safe. Of course that is not you or I. That is the other guy.

Can a broker continue to play not to lose in this new benefits environment? With Obamacare threatening small group business; new competition from payroll, HR, and technology vendors; reducing commissions due to a move to higher deductible and self-funded plans; and expanded fee for service business; many brokers (not all) including the national firms admit they are now struggling with organic growth. The world is different. It is not business as usual.

Not only has this environment created a play not to lose culture but I think it may have impeded creativity and innovation. Peter Thiel in his book Zero to One made a good point about capitalism and competition. To paraphrase him, he stated that “most people view capitalism to be somewhat synonymous with competition. He says competition is the opposite of capitalism. Capitalism is about having the ability for some period of time to have a monopoly. It is in times when you monopolize a market that businesses generate higher profits. Competition yields lower profit. It is the ability to have a monopoly for some period of time that drives innovation.”

In the benefits brokerage business increased competition did not drive down profit margins for most. I think this environment may actually have resulted in less innovation because there was no need to try and create a monopoly, at least for some period of time, to maintain profit margins.

The benefits business is certainly under attack. It is also just one law away from being turned on its head. If an individually purchased medical insurance plan were made to be tax deductible from dollar one the benefits world would change overnight. With a Republican Congress this could happen. Other industries were one law, one innovation, one stock market slide away from changing forever. We all know the casualties: Blockbuster, Kodak, Travel Agents, Merrill Lynch, and Motorola are just a few. Others are struggling like McDonald’s, Yahoo, Dell, and even Microsoft.

So I think it is time to get on offense and innovate. This may not be easy when there is no culture of innovation or your producers have had years of developing the habit of playing not to lose. And is the benefits brokerage business an industry where there can be significant innovation? Or should a broker look to partner with others that are innovating? There are opportunities out there. There are new technologies, ACO’s, mobile health, and the opportunity to directly engage the consumer via web and mobile. But one needs to be sharp. Be creative. Willing to take risks. Play to win!

It’s Time to Ban the Term “Value Added Service” from the Benefits Broker Business

I hear the term “value added service” used in the benefits world all the time. Brokers always tell me about their value added services. What does value added service mean anyway? For most it implies “free”. We all know that nothing is free. I think it is time to bury this term. In fact I think it actually has negative implications in many ways so let me tell you why.

I googled the term “value- added service” to see how firms would define it. One definition I found came from a website They defined the term as “options that complement a core service offering from a company but are not as vital, necessary or important.” I guess that sounds right. For most benefits firms “value-added service” means, “I am going to give you something for free that I generally don’t do.” And I agree with the above definition that says it is not as necessary or important. The problem with what I see many benefits brokers doing is putting this label on things employers feel are important. If I am an employer and have something important to me who would I get it from, a vendor that makes it a core service or one that labels it a “value-added service”? If it is important then I would hope whoever I buy such a product or service from is good at it.

Value-added services for most brokers are listed on the last pages of their proposals. It is the fifth tab from the left on their website. It is the final 5 minutes of a sales presentation. It is presented with a level of importance that is, well, not important. To me value added service is like buying a hamburger at a Chinese restaurant. They don’t really want to sell hamburgers but for those adults with kids that don’t like Chinese food they do have something for them. If I wanted a hamburger I would go to Five Guys and not a Chinese restaurant.

In the benefits world some things that many brokers have labeled as value-added services are really becoming core to what a benefits broker should be doing. I won’t get into what I think all these services are but if the employer feels the services are vital then they will dismiss the firm that labels the service as “value added”. It will appear as unimportant. If a broker can’t make it a core service then maybe they shouldn’t be providing such a service at all. And if another broker is offering such a service as a core service then your labeling it as “value-added” may be detrimental to making a sale.

So there you go. The term “value-added service” shall be forever banned in the benefits world. And I will add that as a consultant to brokers this advice is not a value added service. It is what I do all day.

There is a Ghost Lurking in the Benefits Broker World

There is a ghost lurking in the benefits broker world. Many brokers are chasing it. I hear about it all the time when speaking to brokers. Yet, nobody can find it. Many claim to have seen it. Others claim to be the ghost. But I have yet to find it.

Is there really a ghost or is it in everyone’s imagination? I have come to the conclusion that this ghost is not a ghost after all. It is an idea. It is how to be different. Brokers are looking for that one thing that when they go out to a prospect and say let me show you something, everyone will want it. Many, many brokers are looking for this “ghost”. And most are still searching. They are searching for this dream or hope to find that silver bullet – that one thing that will separate their firm from their competitors that few can find.

The vendors calling on brokers know they are looking for this ghost or silver bullet and they promise to have found it. “I got the silver bullet”‘ the vendors promise. “I have that one thing where if you partner with me your dreams will come true. Prospects will flock to you. Just sign here and give me $1500 per month.” I hear this claim all the time. And brokers call me up and say “What do you think of so and so?” I ask, what are you looking for? I get no answer. It’s like they are looking for some undetermined thing. They take the meeting with the vendor. They spend the hour and a half and see some demo. But they can’t tell me what they are looking for. It’s a ghost.

Some brokers think they found it. They show me some technology or claim to have some unique service. I look at the technology. I understand the service. But I don’t see the silver bullet. They have not found the ghost. They are paying the $1500 and have shut down their search because they have found it. Or at least they think so. They want me to say it is the silver bullet but it isn’t so I can’t. And the search goes on.

You see the ghost is not a Private Exchange, or some technology. It is not compliance alerts or wellness newsletters. It is not a HR Call Center or some web-based HR Library. The ghost is inside you. It is an idea yet to hatch because most are looking for someone else to deliver it. I personally believe there are many opportunities to be different. To rattle the market in a way where people will start talking. But it starts with the person in the mirror. So my message is stop chasing the ghost. The vendor that knocks on your door with that great idea is knocking on everyone’s door. There are big opportunities to make this benefits world better. But one must start on the inside and not out. As Mark Cuban once said, The best way to predict the future is to invent it.”