Dear friends & colleagues:
This issue keys on the challenges of the upcoming 2008 benefits renewal season. We emphasize four key points:
- The critical importance of broker/consultant experience in renewal negotiations when an economy slows down.
- The end of the pea and the shell game associated with "free" ERISA compliance and similar services as employers get back to benefit plan management fundamentals.
- The need for employers to consider benefit alternatives as the employee share of costs continues to rise faster than incomes.
- Protecting key employees through voluntary employee paid offerings. Don't give it away. Make sure there is a return on that investment. The enrollment and communications alternatives.efit alternatives
|
| The 2008 Renewal Season Will Be A Tough One For Many Employers
Five Action Steps To Consider |
 1. Don't leave any money on the table with your carrier at renewal time.
2. Recognize that all insurance brokers are not created equal and leverage the depth of experience of those who can most effectively negotiate on your behalf via their honed underwriting expertise.
3. Be ready to be proactive with changes and alternative benefit offsets to your present plans, especially new employee paid options.
4. Keep your eye on the ball - the admin services you feel you are receiving for free from that newly established broker may actually come at a very tangible cost if your renewal is not aggressively and knowledgeably handled.
5. Be cautious when being offered reduced or free pricing on "hard cost" items - your soft claims costs can be a quantum factor more important. |
| Reconsidering "Free" Services
Conducting a Cost to Benefit Analysis |
 In recent years it has been fairly common practice for certain insurance brokerage companies to offer incremental "free" administrative services to employers. There are also hybrid staffing/brokerage companies that have made similar offerings. However, rarely in life is anything truly free and that is certainly the case with benefits work.
The tactic usually goes something like this, "We can give you more services for the same commissions that are now built into your products. All you have to do is give us a broker of record letter to transfer the commissions to us." It often leverages a latent fear that employers have about the more esoteric Department of Labor reporting and the possibility that things may not have been 100% in compliance in the past. Getting an "expert" for free often sounds like a pretty good deal.
The ethics of the above type of approach notwithstanding (n.b., virtually the only time in the insurance industry where the commissions on existing policies can be moved to someone who did not actually place the business), BBCG feels strongly that employers may be mislead by the value trade-off.
What does the employer give up?
What does the employer receive?
Consider:
- The compliance process has likely not been a great expense when handled in-house by the employer in the past.
- The reporting is often at the margin in terms of what is actually on the DOL's radar. Censure, if any, may be remote and financially absorbable.
- The employer may perceive a multi-thousand dollar "free" incremental service but gives up the time tested services of the incumbent broker.
- Side by side, can the new broker stand up to the expertise of the incumbent when underwriting and negotiating skills can mean the difference of hundreds of thousands of dollars in a renewal?
- As an employer, have you calculated: (1) how much may have been left on the table at renewals, (2) the value of the forward looking ideas may have gone unconsidered with a less experienced broker, and (3) the value of relationships when you know it is time for an experienced broker to intervene with your carrier to fix something that is just not operating as advertised and the carrier rep is being just a little less than forthcoming.
When the intangibles are stacked up against the value and cost of the actual "free" services received, it may become apparent that BBCG's proposition that nothing is truly free is indeed the case. |
