Tag Archives: Employee Benefits

False Perception of Private Exchanges Causing Problems for Brokers

Posted on October 1, 2015 | Leave a comment

Private Exchanges are still in the news with firms like Time and Walgreens  moving some employees or retirees to Private Exchanges. Some polls still claim that Private Exchanges will dominate the market in a few years. Yet I would contend that most people still don’t know what a Private Exchange is. I have written my perspective on this in previous articles on this blog. Regardless of what one would define as a Private Exchange what really matters is what employers think it is. While brokers may not believe Private Exchanges may take hold or they do need to compete with the idea or a Private Exchange and more important the employers’ perception of what a Private Exchange is./

I have given speeches about Private Exchanges at many employer conferences. One of the first slides I show is a study that claims that 70% of employers would be interested in a Private Exchange. Yet when I ask the audience what they think a Private Exchange is few know. What is more interesting is that when I sat with a group of employers they spoke about what they hoped it was. The most common answer was that they thought a Private Exchange would get them out of the health insurance risk business. Those employers with over 100 employees that are experience rated simply wanted out. They were hoping this is what a Private Exchange was. Some were disappointed when they found out that Private Exchanges did not deliver this.

These employers are more than willing to give employees money for health insurance. What they would prefer though is that they can just give them money and let them worry about things. They don’t want to worry about whether they just hired a person with a spouse or child that has some major medical condition. They don’t want to worry about helping manage catastrophic claims or running wellness programs. They don’t want to deliver the bad news once a year to employees that their costs are going up or their plan is changing.

So while brokers may or may not believe in the value of a Private Exchange, they do need to worry about other brokers who aggressively market Private Exchanges because employers who think they can get out of the medical insurance “risk” business will take the call and schedule a meeting. It is the employers’ perception that is the key.

Brokers need to engage their clients in a conversation and educate them as to what a Private Exchange is and isn’t. You don’t need to spend money with any vendor to be able to engage your clients in a conversation about Private Exchanges. In fact you don’t need to spend any money at all to offer one. What you should keep in mind though is what these employers may be looking for. I believe that the brokers or carriers that can deliver a solution for larger employers that can get employers out of the risk business will capture a market opportunity that few have yet to recognize. The opportunity is there. Who will act first?

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Zenefits Has Crossed the Line

Posted on September 3, 2015 | 1 comment

For those of you who have not seen it Zenefits, an emerging benefits broker offering free technology, has posted a comparison of their services to many of their competitors across the country. You can see the link here. https://www.zenefits.com/broker/ In my opinion this tactic goes below the line of ethical standards. Not only does it misrepresent what many of their competitors are offering but they seem to be excusing themselves if they are wrong by putting asterisks at the bottom of the comparison that reads as follows.

** Zenefits cannot be sure what services are offered by (Broker Name). Contact them directly to find out.

This one line does not excuse them from being wrong. It is disingenuous. And I am quite sure they did not go out of their way and call all their competitors to validate their information. I ask anyone who reads this blog to call me if they did in fact call you and ask about your services.

I know for a fact that much of this information is wrong as many of my clients are on this list and I supply some of the products or services that Zenefits says they don’t provide. Zenefits says, for just about every broker on their list, that the competing broker does not provide Benefits Administration Software or ACA Software Compliance and Administration. Many brokers on the Zenefits list provide these products or services. Whether they provide them FREE or not is another check box on their list but that can be represented fairly.

I was once given some good advice by a broker in Michigan when I was a young sales guy for UNUM. He told me to never say bad things about your competitors because 50% of buyers out there will think less of you and not buy. Why would you want to eliminate 50% of your prospects? I have taken that advice. That does not mean you can’t sell against other companies models. In this case Zenefits is not necessarily saying bad things about their competitors. However, I do believe they are knowingly misrepresenting the competition. If they are knowingly doing this then in my opinion it sinks to the level below of someone that bad mouths a competitor. At least a person that verbally bad mouths a competitor is not trying to deceive. I would rather have someone tell me what they really think even if I don’t like what they say.

Zenefits is a benefits brokers and wants to disrupt the benefits distribution market. Why they want to create enemies with firms like ADP ( See USA Today: http://www.usatoday.com/story/tech/2015/06/10/zenefits-vs-adp/71019080/ ) and now benefits brokers across America I don’t know. As a young athlete I learned to respect your competition but also play fair. My father used to use terms like “take the high road”. These lessons that we have all learned at a young age have been lost on Zenefits. I can only blame their leader. They should immediately take down these web pages and apologize to all those firms that they misrepresented. If they want to show a comparison then at least get the information right and don’t hide behind a ** at the bottom of the page.

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

Posted on July 23, 2015 | 1 comment

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.

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

Posted on July 12, 2015 | 3 comments

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 jmarkland@hrtadvisors.com.

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Posted in Agency Operations, Employee Benefits Distribution, HR and Benefits Technology

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

Posted on July 2, 2015 | Leave a comment

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:

http://www.hrtadvisors.com/AboutUs/HRTWebinars.aspx

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

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Sometimes You Just Have to Start

Posted on May 25, 2015 | 1 comment

I was having breakfast this morning with a good friend of mine, Myles, who I meet with regularly to discuss my business. He is my business sounding board and a great advisor. Myles is a very successful business person who ran an investment fund and is very active in high-end finance. For the past year we have talked about the changing benefits business and discussed firms like Zenefits and the money being invested in various technology solutions in the benefits business. When Zenefits announced that they had raised $500 million at a $4.5 billion valuation this became even a bigger topic. What he found interesting is that he and I had been talking about the Zenefits business model before he or I ever heard of Zenefits. Our breakfast this morning ended when he gave me some “between the eyes” advice which was “Joe, sometimes you just need to start”.

In today’s business world being first or at least a fast follower is important. Successful firms don’t have to solve 10 problems. They can solve just one as long as that one is important or different. And on day one of a business things may not be perfect. Firms like Amazon started by selling books. Now they are a storefront. Zappos started by selling shoes. And they had distribution issues before they got it right. Apple sold computers.

Now here we are in 2015 and Zenefits is disrupting the benefits business with a model that really has been around for some time. The difference is they are actually doing it. While others are talking they are acting. And they aren’t perfect but they started. They promised to do just one thing well and that was employee onboarding. Based on what I have heard they do that pretty well. I will guarantee next year they will be better and three years from now they will be doing much more than onboarding. In fact they are already doing more things.

Over the past few weeks I have conducted some webinars about Zenefits and what to expect from them now that they raised $500 million. (You can see the webinar by clicking here:   http://www.hrtadvisors.com/AboutUs/HRTWebinars.aspx ) The last slide of the presentation quotes Steven Covey and his first habit of highly effective people which says, “Act, or Be Acted Upon”. I use this because Zenefits has been “acting upon” other benefits brokers by having written $20 million in new business over the past few years. They took that business from someone.

While I understand the apprehension some people have with trying something new, sometimes you just need to start. You don’t have to do everything. You don’t have to be perfect. And there are risks. But there are risks from not taking action too. Zenefits has had bumps, so did Zappos, and Apple, and Amazon. However, even if you aren’t prefect people will be thankful for your product or service if you are solving a big problem. I know when I need to solve a problem I often don’t need perfection. Sometimes I need “Now” and other times I may need “Cheap” and I don’t expect perfection when I need fast and/or cheap.

I think there is a way to significantly change the benefits business. Zenefits thinks so too and they are moving forward, fast. I have shared some of my ideas in other articles on this blog. But writing about it and doing it are two different things. So you know what, I am starting. I am hitting the GO button. The GO will include taking action as I said in my article “What Would Steve Jobs Do if He Were a Benefits Broker Today”. So as my friend Myles said, “START”. And for those brokers wanting to compete with Zenefits, you may need to start too. There may be bumps and it won’t be perfect, but I am willing to bet it will be a lot of fun and probably very rewarding.

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Benefits Brokers – Part of the Problem or Part of the Solution?

Posted on May 10, 2015 | 1 comment

If you read some of my articles and look at the tag line of my blog, “Challenging Everyday Thought”, you will realize that I like to “think outside the box”. I like the idea of challenging everyday thought. I have always done that even when I was in the insurance business. As one who writes such articles I am always getting those that challenge my ideas. I really don’t mind that because I believe in healthy debate, but what happens most often is that I have people arguing for the status quo. In my opinion it is the defenders of the status quo that are fighting innovation and change in an industry, healthcare and health insurance, that is in dire need of new ideas.

Such a discussion took place this past Friday afternoon with a benefits broker after I gave my webinar titled “Zenefits raises $500 Million – What is means for benefits brokers.” You can still see this by registering here ( http://www.hrtadvisors.com/AboutUs/HRTWebinars.aspx). This broker was giving me all the reasons why employers won’t want a broker that does not provide local service. Keep in mind this is after I talked about how Zenefits sold $20 million in new business with no local service. This broker wanted to believe that the current broker model was too valuable and would never change. I was just reporting the facts and the facts were saying otherwise.

I always believed that the industry protecting the status quo invited the government in. Since Hillary threatened the industry in the early 90’s up until Obama came into power the industry had 18 years to make changes. Yet there was very little change. Brokers, carriers, and the providers, had it pretty good. This reminds me of a quote I read just this morning that said,

“Institutions will try to preserve the problem to which they are the solution.”  – Clay Shirky

Is this what we have going on in the health insurance industry? Will benefits brokers contribute to the solution or is the desire to protect the status quo too strong? I think there are some “fake” changes going on. Private Exchanges don’t save anyone ten cents in real health care dollars yet the some sell this as a big change. Private Exchanges are a reincarnation of Cafeteria Plans from 1988. Did Zenefits create anything real new? No. They have a nice little technology that many other vendors have but there really is nothing new. Corporate Synergies was doing what Zenefits is doing in 2002. Corporate wellness programs are failing and won’t solve the problem. Disease management programs, claims analysis tools, it seems like everyone is still squeezing the balloon of health care costs with no real answers.

I believe that the health care industry is about to go through some big changes. I wrote about this in another article titled “The Coming End to the Health Insurance Business as We Know It – And What Brokers Can Do About It” (see it here: https://joemarkland.wordpress.com/2014/12/02/the-coming-end-to-the-health-insurance-business-as-we-know-it-and-what-brokers-can-do-about-it/) Boy did I get ripped by the status quo people on that one. The way I see it is that the industry is going to change but most brokers and insurance companies will either stand on the sidelines or fight the change. The people or companies that are going to change the industry don’t have an interest in keeping it as is. And with the amount of money spent on health care there are a real lot of them trying to capitalize on changing health care delivery. Brokers and insurance companies may be casualties of this change if they don’t become part of the solution.

I use a quote in my presentations from Mark Cuban that says, “Every day some stranger somewhere in the world is trying to come up with a way to put you out of business.” In this environment with Zenefits raising $500 million; more and more hospitals getting into the health insurance business; new technologies; more and more government intervention; it is not the time to fight to protect the status quo. There are many people here trying to put insurance companies and brokers out of business. When Hillary was asked what the insurance people should do if she succeeded with her health care plan she said they could get another job.

One needs to ask one-self ‘What will the benefits business look like in 10 years?” I guess if you are 55 and plan to retire it may not matter. Fighting for the status quo for a few years may be the plan. However if you plan to have a thriving business in ten years then it is time to change your mindset. It is time to be part of the solution and I am talking real solutions, not fake solutions that protect the status quo. It is time to join me in challenging everyday thought. OK status quo guardians, start tossing your darts. I am ready.

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Turning the Benefits Service Business Upside Down

Posted on May 4, 2015 | Leave a comment

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: https://joemarkland.wordpress.com/2015/05/04/xbox-the-future-of-employee-benefits-customer-service-reposted-from-2009/ ) 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.

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

Posted on May 4, 2015 | 1 comment

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.

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Can Benefits Brokers Afford to Play Not to Lose?

Posted on February 1, 2015 | Leave a comment

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!

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