by Leila Morris
In this article, executives from California’s leading general agencies give their take on critical trends in the health and employee benefit marketplace.
How Have GAs Changed Over the Past Few Years?
David L. Fear, Sr., president and CEO of Shepler & Fear General Agency: The GA market in California is different. In California, GAs have had a strong role in delivering competing health care products for many years. However, like other industries, there have been acquisitions and mergers, which will continue as you see fewer GAs in the California marketplace. Some larger GAs have expanded with a multi-state presence while others remain as strictly regional. The biggest changes I see are that GAs are not just product wholesalers anymore, but have taken on more of a consultative role with their clients being agents and brokers who no longer get the support from the carriers that was provided in the past. GAs have expanded their services into areas where carriers have retreated due to cost constraints. California is fortunate to have multiple, competing GAs in this market, which bodes well for their agent clients.
Dennis Fallon, senior vice president, Insurance Field Sales and Services for BenefitMall: To meet the changing needs of their brokers, general agencies have broadened their capabilities through diversified product and service offerings. These additional offerings are designed to increase agent revenue streams, compete in the marketplace, and address employee and employer benefit needs to protect health benefit books of business. Many general agencies are building proprietary tools and services for their brokers and employer groups while others are partnering to create best-in-class offerings to meet the needs of brokers and employers. As today’s business environment continues to evolve, general agencies are expanding their geographic footprint. The ability to provide not only a diversified product and service offering, but also multi-state support, is now a base requirement to provide the support that brokers and their clients expect.
Jessica Word, president of the Word & Brown General Agency: The Affordable Care Act (ACA) has undeniably shaped our service model, putting an increased emphasis on ACA compliance. The transition of 51- to 100-employee groups to the small-group market has increased demands for products and services that have been traditionally reserved for the mid-sized market: composite (tier) rating, rich coverage options, customized benefit solutions, integrated billing, and list enrollments. That has led to these becoming requirements across our customer base and, like our brokers, GAs have become part insurance sales and support and part technology developer.
Jim McCabe, vice president of Sales Strategy for Sterling Administration (McCabe is providing answers as they relate to a TPA, not a GA): Over the past few years, consumers across all types of businesses are doing business via mobile. We’ve seen a big increase in our mobile customers. We’ve seen an uptick in our Spanish-speaking customers. We are also increasingly being asked to provide more back-shop support in compliance, technology, and client communication to the brokerage community.
Ken Doyle, executive director Sales for LISI: Despite minor idiosyncrasies here and there, the value proposition of a GA basically remains the same. The bigger question is how will they be changing in the upcoming years, and what will they choose to implement?
Colleen M. Gimbel, vice president of Marketing/Recruitment/Compliance for Berwick Insurance Group: One of the biggest changes, over the past few years, is the amount of compliance information that agents are required to understand. Agents want to know what they can and cannot do, which increases the need for compliance staff and training programs.
Jennifer Lisanti, director of Sales with beere&purves: While general agents continue to be actively involved in marketing and sales of employee benefits, their role in providing ongoing, day-to-day service for existing business has increased considerably. Compliance has become more complex and burdensome for employers as a result of the ACA, along with the constant introduction of state and federal regulations. General agents are providing agents and agencies with the resources and contacts to ensure that they are informed on these matters. Employers are also looking for ways to simplify benefits and HR administration through technology. With the proliferation of online HRIS options, general agents have responded by researching these systems so agents can recommend viable solutions to their clients. General agents have introduced their own technology solutions on behalf of agents for online enrollment, census collection, and more, which improves data quality and expedites group enrollments.
Michael Wolff, president of Dickerson Employee Ben-efits: During the past few years, and particularly since the signing into law of the ACA, GAs have become centers of education for agents who pass the information along to their clients. This is particularly true with compliance and legislation. GAs, like their agent customers, are taking a more consultative approach to working with employers and individual clients. This often takes the form of a total-solution proposal that includes traditional and expanded product and service offerings.
Jeff Papenfus, senior vice president, Sales of Warner Pacific Insurance Services: Over the past several years, GAs have been doing more administrative tasks for carrier partners. With the implementation of healthcare reform, broker education has become critical. Vetting and partnering with outside vendors for online enrollment, HRIS, ACA, and ERISA compliance, COBRA, travel insurance, and so on, has taken that burden off the brokers and their clients.
What Are the Most Important Market Trends That Agents Need To be Aware of This Year?
Dennis Fallon of BenefitMall: We see three primary trends that are affecting agents most heavily in 2016. The benefit arena now reaches well beyond the traditional broker market with employee workforce services and technology companies vying for a piece of market. These competitors are luring clients away through the promise of free technology and other value-added services. ACA compliance is confusing consumers who are often not savvy enough to be aware when a broker-of-record is occurring. Many employers will seek various online workforce solutions and end up with a new broker-of-record without even being fully aware it. When this happens, employers lose the valuable expertise of their local broker. The consolidation of health benefit carriers has expanded and can be seen in banking, payroll services, and human-resource management. With these consolidations, we see diversification in product portfolios, larger marketing spending, and more growth in retail sales, which often competes directly with the broker channel. Finally, for group agents, there is a change in the small-group definition in California to two to 100. The continued creativity around multi-carrier and multi-product offerings will be a battle on the small-group front as brokers strive to provide a comprehensive solution at an affordable price with the service that clients are accustomed to receiving.
Jennifer Lisanti of beere&purves: Transitioning 51 to 100 groups into small group products will be an important focus in 2016. The small-group market presents entirely new rates, rules, and product offerings to agents who have not focused in the under-50 market. Working with a knowledgeable general agent will provide a considerable advantage in getting up to speed quickly. Employers want to minimize their management systems and points of contact through an online HR system. To remain competitive, agents are offering their own value-added services or at least, they are becoming knowledgeable enough to direct clients to the most viable options. Employers are turning to their insurance agents for help with HR-related issues that are outside their traditional scope of business. General agents provide much needed help with these client demands, but agents also need to stay up to date on their clients’ issues and challenges, including vendors and secondary resources to provide further guidance.
David L. Fear, Sr., of Shepler & Fear: The number one issue, this year, is the full implementation of the ACA’s Employer Shared Responsibility mandate. The government has not done a very good job of communicating things to employers, which will show up as large employers struggle to file their 1094/1095-C reports this spring. They’ll soon face the IRS and have to provide proof that they have been offering affordable coverage to their eligible employees that meets a minimum-value standard. Agents need to be at the front of this new and confusing process. The second issue is how agents will provide solutions to reduce the cost of their clients’ health insurance benefits. Obviously, the cost of insurance coverage has not come down. Many employers are getting closer to throwing in the towel and dropping their group health plan. It’s become unaffordable. Employees are not happy about their high out-of-pocket costs under the new ACA pricing and benefit requirements. Agents need to provide solutions now.
Jeff Papenfus of Warner Pacific: Since we just got through moving the one to 50 groups into ACA-compliant plans, the next focus should be on the 51 to 100 groups. Many of these groups took renewals in December to delay moving to ACA-compliant plans. Does that sound familiar? The biggest challenge is that most of these groups will have to go to an age-rated plan from a composite-rated plan. However, a fair percentage will actually save premium dollars by moving into the new plan designs and rating structure. While premiums may be significantly higher or lower under the new ACA rating, there will be employees in each group who are winners and losers in regards to their personal premiums. The other trend we are likely to see, this year, is that carriers and brokers are working together to move groups from the 12/1 renewal date. I think all of us would agree that renewing 80% of all business in a two-month period is not good for GAs, carriers, brokers, or their clients.
Jessica Word of Word & Brown: Brokers would do well to get very creative this year. The old standard of selling an out-of-the-box solution is gone, or will be soon. Multi-carrier packages with unique funding options are winning the marketplace as they offer the most diverse coverage, providers, and prescription benefits for a large organization to meet the needs of its many constituents. Offering combined solutions will keep insurance rates low for customers while quality and satisfaction remain high. Brokers can deliver customized solutions to meet each employee’s medical and financial needs by allowing them to choose their own options within a set of carriers, plans, and coverage. The demand for technology is growing, too. If brokers don’t have a solution and are speaking to clients about it, they need to find one (or more) to meet their clients’ needs. Or, they can partner with a GA that is offering support in implementing and running cases through an online solution.
Jim McCabe, Sterling: The changing legislative landscape is one of the most im-portant things to watch this year. The Cadillac tax was de-layed, and more changes are on the way. A majority of employees may have less disposable income to handle larger deductibles and out-of-pocket costs with narrow networks and less choice, and high deductible plans.
Ken Doyle of LISI: It will be another interesting year with the second half of the small-group market (51 to 100) having to move. Being a highly politicized year, more legislation will be introduced in hopes of easing some of the ACA pain. I also think that we will see a movement to get viable software technologies in place before the fourth quarter. With this shift in technology, it would behoove you to assess whether you have the aptitude, the resources, and the agility to keep up with all the trends. If you can’t respond with a vehement “yes” to these concerns, consider hiring someone or partnering with a resource to help you take it to the next level. Re-evaluate your workforce. Agents need a service team that can keep up with today’s pace with tomorrow’s forward thinking mentality. Agents should be looking at the concept of all-in-one-place platforms, such as concierge services.
Michael Wolff of Dickerson: Agents continue to look for ways to differentiate themselves. In 2016, it will be key to access integrated technology and compliance tools while keeping an eye on products and services beyond the traditional. For example, don’t overlook including voluntary benefits for small and large employers. Agents don’t have to know all the answers. They just need to know where to go for information and creative alternatives.
Do You See Any Specific Trends Related To the Small Group Versus the Big Group Market?
Michael Wolff of Dickerson: It will be important to be sensitive to the changes affecting mid-size groups that are becoming small groups. These changes include the move to small group rating and underwriting guidelines, as well as the employer shared responsibility requirements that are new to groups of 50 to 99. These groups will look to agents to educate them on the differences between large and small group plan designs. They will seek the account management-level service to which they have become accustomed.
Jessica Word of Word & Brown: With mid-sized employers (with 51 to 100 employees) moving into the small-group marketplace, we are witnessing a blending of requirements in our small group product portfolio. Benefit-administration systems have typically been reserved for larger clients who could afford higher-priced, integrated functionality involving payroll, benefits, and billing. But cost-effective solutions are emerging to simplify the administrative burden of tiny groups. We saw significant diversification of our broker-customers in 2015 into new products and additional marketplaces to make up for the recent cuts in carrier commissions. Brokers who have been the servicing agent on a single in-force policy are looking to increase their reach into a client’s coverage portfolio to enhance and further bind the relationship. We’ve seen brokers exit the marketplace – some leaving the industry and some selling their books of business to rivals and larger agencies. That consolidation has reduced our active broker population by roughly 5%, a trend we anticipate will continue.
Jim McCabe, Sterling: The need for education in all things benefit-related has to be more focused. All of the voluntary products, retirement, and tax efficient savings accounts require more information about individual risk tolerance as well as short- and long-term goals. Companies have to provide more insight, and address employees’ financial goals based on their life events.
David L. Fear, Sr. of Shepler & Fear: Smaller employers are looking into alternative funding, such as HRAs, HSAs, and FSAs to help curb the cost of health care and health insurance. Many large employers have done it successfully. Now it’s time for small employers to implement some of these ideas. Even though small employers are not subject to the ACA employer mandate, they still have to deal with other things out of their control. Small employers are struggling to deal with health insurance, which is one of the most regulated products in the United State. They are going to look to their trusted advisor for solutions on how to comply with the law and how to reduce costs while still attracting and retaining good workers. If the employer-based system remains, it’s up to agents to help clients work through these challenges.
Jennifer Lisanti of beere&purves: The biggest trend we see is the movement to private exchanges in the small-group market. The private exchange model allows small groups to implement cost controls through defined contribution and offer multiple carriers, which provides access to a significantly larger pool of providers. This simply does not exist in the mid-market segment (100+). Another trend is the onslaught of fourth-quarter renewals. This year, it will affect an even larger number of renewals due to the 51 to 100 groups taking advantage of early renewal opportunities in 2015. This trend will continue to create quoting, enrollment, and approval challenges for agents and agencies servicing these groups.
Dennis Fallon of BenefitMall: Small groups are weighing the value of continuing to offer benefits versus the cost and compliance burden. Large groups face the heavy costs of having to offer benefits to everyone when they may have only covered a portion of their population. The compliance burden may be heavier on the small group sector since they don’t often have HR departments to take on the burden. It falls on owners and managers who can become overwhelmed by the task.
What Things Have You Noticed That Set Apart Successful Agents?
Jeff Papenfus of Warner Pacific: Our broker partners have a passion for what they do. They are adapting to a new marketplace and becoming more knowledgeable. They are evaluating what they offer and looking to technology tools with personalized service to grow their business.
Michael Wolff of Dickerson: Agents need sensitivity to the changes affecting mid-size groups that become small groups. These include the move to small group rating and underwriting guidelines, as well as the employer shared responsibility requirements that are new to groups of 50 to 99. These groups also will look to agents to educate them on the differences between large and small group plans designs and will seek the account management-level service to which they have become accustomed.
Dennis Fallon of BenefitMall: Agents who are evolving with the trends are the most successful. To compete in our changing industry, agents must be confident, committed, and passionate about providing the best benefit coverage possible, and stay relevant to employers and the management of health benefits. Agents also need to provide a complete human capital management offering that ensures that competitors do not compromise their health benefit book of business. No matter how valuable the benefit consultation may be, an employer group can be easily stolen in 80% of scenarios when another provider offers a comprehensive workforce solution. Successful agents are constantly bringing new solutions to their clients, educating themselves on market trends and new products, embracing technology solutions, and maintaining a level of service to be responsive to the needs of new and existing clients.
Jennifer Lisanti of beere&purves: Agents who are open to change in our increasingly complex industry will have an advantage over those who do business as usual. Agents who avoid technology trends and compliance issues expose themselves to competition and their clients to unnecessary risk. Successful agents stay informed of carrier product offerings and rules, as well as state and federal legislative issues. They are prepared to inform their clients of any positive or negative issues. Successful agents continually prospect for sales opportunities, add new lines of coverage to existing clients, introduce product lines, and demonstrate the value they bring to the agent-client relationship to ensure client retention.
Jessica Word, Word & Brown: The best brokers – like the best and most successful businesses in any maturing industry – are adaptable and flexible. They meet new strains on their resources, client requirements, and government regulation without resistance, always looking for and vetting solutions that deliver meaningful results. They are innovative, looking for gaps in the solutions their competitors provide, and delivering meaningful ways that attract customers and generate referrals. Finally, successful brokers form deep partnerships with organizations that fulfill these needs, adapt to changes, and are responsive to requests for support. They pass the labor onto service partnerships while maintaining their focus on their own business and on the growth of their sales opportunities.
Ken Doyle of LISI: How do you become scalable? Utilize partners through this transformation and build your sales/service model to meet the new consumers’ needs through technology, and create an experience that provides value. Cutting-edge agencies understand analytics and how the information can help provide financial solutions. These agencies are moving from descriptive (what happened) to diagnostic analysis (why it happened), to predictive (what is likely to happen), and to prescriptive (determining the right outcome). This is where you will see movement in the types of products offered in the market. A sharper customer targeting approach and a variety of wellness strategies will shift the discussion for the agent in becoming a preventative risk advisor.
Jim McCabe, Sterling: Successful agents have a personal touch and attention to detail. They also understand where our client brokers are in their life-cycle. Not every firm wants the same things.
Colleen M. Gimbel of Berwick Insurance Group: It’s knowledge, training and confidence. An agent who is confident with the material they represent will be much more successful. It goes without saying that an agent needs to know the material in order to sell a plan. Many agents have the knowledge, but they don’t feel confident with the information. Every agent needs a different amount or type of training to feel comfortable enough to sell a Medicare plan.
David L. Fear, Sr., of Shepler & Fear: We see a group of younger agents who approach this business in a very smart way – using tools that make them more efficient with their time. We see a lot of younger agents going out and sharing ideas that employers have not heard before. They are demanding that our industry respond better to the needs of their clients through online capability, simplification of processes, and ease of communication. Successful agents think out-of-the-box and communicate more effectively with their clients. Many GAs can assist in providing these value-added services.
What kinds of GA Services Are Most Vital To Today’s Agents?
Jessica Word, Word & Brown: Two key areas affect our brokers today: compliance and technology. ACA compliance is a maze. Each scenario creates a different compliance requirement. Mandates are repeatedly revised, shuffled, and updated. Brokers have to align themselves, very quickly, with emerging technology, find the solutions that meet their clients’ diverse needs, and learn to operate and implement these solutions for their groups.
Ken Doyle of LISI: To understand what is vital to the agent, you need to look at the end-user (consumer). What are they demanding in the way of customer experience and medium of information? You are now hearing that we are experiencing disruption in our industry. This is true, but most people think that disruption is in the software being introduced that provides benefit administration or HRIS linked to payroll, time and attendance, and/or compliance, etc. Well, it’s much more than that. Think about customer experience. How do they interact with technology and the information they can get at their fingertips? You will see the adoption of the “Internet of things” and other new technologies. But this follow-the-leader paradigm of the industry will mean that any edge that a GA has will disappear quickly. Sure these technologies are impressive, even evolutionary, and long over-due in our industry. Still, they are not disruptive, nor are they revolutionary. Revolution comes from products and services that do something with technology to create a better experience through personalization. We have a whole new generation of consumers moving into the workforce who will not accept how we have always done things. This generation was immersed in technology, and embraced it — seemingly before they were even wheeled out of the maternity ward. So it will be vital to help the agent comprehend and deliver to this new and rising population of consumers while keeping in touch and relevant to existing clientele.
Jim McCabe, Sterling: Agents want personal customer service for their clients, as well as easy online access to check balances and plan renewals. Knowledge-based support, original content to share, sales education, and channel support are among the top requests.
Colleen M. Gimbel, Berwick Insurance Group: Agents want compliance information that is digestible and implementable in their day-to-day activities. They also need access to sales support staff. It is vital for an agent to be able to contact the FMO whenever they have questions.
Jeff Papenfus, Warner Pacific: The most common need is probably quick access to information. Because of frequent changes to carriers’ products, plan designs, networks, and compliance requirements, agents need to find the most up-to-date information quickly and preferably in one place to be efficient. With new technology-centered brokers, agencies and brokers are asking us how they can compete. When it comes to online enrollment and HR systems, one size definitely does not fit all.
Michael Wolff of Dickerson: Next to product and price consultation, ACA-related education and resources top the list of GA services most often requested by our agents. And in a blending of areas, agents are looking for the most cost-effective employee benefit solutions to help ensure ACA compliance for their clients. In addition to core medical and ancillary plans, products that were once considered to be voluntary are increasingly offered as employer-sponsored coverages. Technology tools are critical to the extent that they can integrate enrollment, payroll, benefit, and HR data. A GA that can provide these tools and the technical support to use them will help the agent enhance retention as well as create employer efficiencies and mandated reporting capabilities.
Dennis Fallon of BenefitMall: Brokers need solid general agency, back-office support more than ever. The basics of being accessible, providing a timely response, providing insight and guidance are still important. But offering access to tools being requested by employer groups is probably the most significant area of GA services. General agencies should provide a wide array of services beyond health and ancillary including benefit administration tools, ACA compliance, payroll services, tax compliance, and supplemental products, such as workers’ comp and 401K. A combined product offering is where the marketplace has moved. A strong GA partner will provide safe access to these tools and services through a channel that will not compete with or steal your business. If a general agency is not helping agents compete with product and technology companies that are calling on their employer groups, the agent should move to a general agency that is committed to their success.
Jennifer Lisanti of beere&purves: One would not necessarily consider knowledge a service, but ensuring that your general agent trains and educates their staff so they know their products and resources inside and out is critical to an agent’s success. General agents offer a wide variety of services and technology tools, but they are only as good as the expertise of the people filling the service roles. As employers face extensive compliance requirements, they are asking their agent to help simplify these daunting obligations with the aid of educational resources, access to online HR and compliance systems, and/or vendor relationships with preferred pricing. Working with a general agent that understands an employer’s compliance and technology needs not only provides tremendous relief to an employer, but it also helps to strengthen the agent/client relationship.
What Is the Most Important Thing To Keep In Mind When Choosing a GA?
Jessica Word, Word & Brown: It is definitely the people; I encourage brokers to vet a general agency by engaging its people because service depends a great deal on those who deliver it.
Each GA offers what appears to be the same or similar services, at least on paper. They all have products for their marketplaces. They all have a solution for quoting, whether it’s proprietary or purchased. They all have a sales team. Longevity of service is important. Is the general agency staffed by experts who have worked in our industry for a long time? That can be a differentiator. And offering guaranteed accuracy of quotes is critical for brokers and clients. Being adaptive to what’s happened in our industry in the past five years is also important.
Jim McCabe of Sterling: When you are choosing GA or administrator, know what is most important to your employer population. Do they need bilingual access, mobile access, or educational materials? Can the general agency or administrator enhance your client relationships? Can this relationship assist in growing and retaining profitable revenue? Can the GA reduce your cost of business by supplying support so that you don’t have to invest in it on your own?
David L. Fear, Sr., of Shepler & Fear: Who owns and operates the GA? Are they aligned with agents and their role in delivering insurance benefits? Does the GA have a track record of supporting agents and brokers? Are they focused on meeting the needs of agents or are they focused on profits? What do they do differently than their competitors and why are they different? Are they a supporter of the industry? Will the GA provide personal service and attention to the agent and their clients? Will they go out with the agent and meet with their clients personally and act in a consultative role or are they just trying to push products?
Colleen M. Gimbel of Berwick Insurance Group: Work with people you like and who are easily accessible. Many times we hear about agents who are contracted with an FMO/GA that never returns their calls. That’s a huge problem because the whole purpose of the FMO/GA is to support its down line. Too many times agents just look for an FMO/GA who will give them leads; they don’t think about any of the other services they might need. In my experience, agents who choose an FMO/GA based solely on the amount of leads the FMO/GA said they would provide is often disappointed and disgruntled. This is a crazy industry, and no company is perfect. But if you have a good working relationship with your FMO/GA it makes everything go much more smoothly, and it’s more enjoyable.
Ken Doyle of LISI: Work with a thought leader who understands insurance 2020. The central message or strategy needs to be looking at how they will keep pace with social media, technology, economic, and political developments. Digitization will be key for the GA, carrier, agent, and group client. Previously everyone talked about big data. Well, we have more data in our industry than we know what to do with, and therein lies the issue. As we move toward digitization of information, it will depend on algorithms and analytical techniques that will reshape customer targeting, financial advice, and individual customization. With that said, choose a GA whose approach to the new market will complement you, your agency, and your business philosophies through transformation. Not everyone is created equal, so it cannot be a one-size-fits-all approach.
Jennifer Lisanti of beere&purves: Agents should consider the total value the general agent will deliver through the entire sales cycle. General agents provide value beyond quoting and enrollment form collection. Don’t just fall for the sales pitch. Make sure that you work with a general agent who actually services your business so you have more time to focus on sales. Ask to see samples of their agent communications. Find out if they provide deductible credit services or if they get involved in claim and billing issues. Find out if they offer online enrollment and who does the setup. Ask to see their average group approval turnaround times. Ask enough questions to make sure they will deliver value to your agency and your clients. Also make sure the general agent is knowledgeable and exhibits expertise about the products they sell and the rules that must be followed in order to sell those products. When a general agent has educated and informed employees, miscommunications and oversights are minimized, allowing everyone to work more effectively and efficiently.
Jeff Papenfus of Warner Pacific: When evaluating a GA relationship, brokers and agencies should ask what are the most important aspects of that relationship, the technology, the accessibility, the responsiveness, and the personal touch. The answers will point them to the right GA for their needs.
Dennis Fallon of BenefitMall: When selecting a general agency, you want to select a partner whom you can see yourself working with on a daily basis. You need a partner who is not only able to meet your needs today, but also anticipate your needs. Most importantly, you need a long-term partner who is invested in your business and is a mutually beneficial partner. As you build a successful brokerage, you need a partner who can provide a local view of what is occurring in the employee benefit industry. More importantly, this partner needs to be able to help identify the carriers, partners, trends, and services on a national scope, when your business needs demand it.
Michael Wolff of Dickerson: Because one solution does not fit all employers, it is important to work with a GA that offers in-depth consultative services and provides access to unique employee benefit solutions. Whether you have a 10-life group of high wage earners or a 125-life group with a wide range of budgets and family needs, a GA needs to respond with a strategy that includes a few well-thought-out options from which agents and their clients can choose. H
Leila Morris is senior editor of California Broker Magazine.