The business of benefits continued to shift this year, with industry mergers and acquisitions filling news feeds. Meanwhile, brokerages remain committed to meeting clients’ needs through innovative ideas that also stole headlines in 2015.

Just this month, Towers Watson & Co. won shareholder approval for an $8.9 billion merger with Willis Group Holdings. Willis investors also supported the combination with the Arlington, Va.-based consulting firm.

Also see: “‘The Devil is in the details’ on revised Willis-Towers Watson deal.”

Willis agreed in June to merge with Towers Watson to better compete with brokers, including Marsh & McLennan Cos. and Aon, which also have substantial consulting operations.

The merger of Willis Group Holdings and Towers Watson is indicative of the industry’s focus on offering a more comprehensive suite of insurance, benefit advising and professional services to a wider customer base, and experts agree it probably won’t be the last merger announced in the near future.

“This is all about accelerating the growth opportunities of the two companies,” Willis Chief Executive Officer Dominic Casserley said on a conference call when the deal was announced. “We both felt we could succeed by ourselves, but when we saw the two of us together we saw the upside being significant.”

For brokers, the Willis and Towers Watson merger may represent an opportunity as a new entrant in the acquisition space, says Perry Braun, an EBA Advisory Board member and executive director of Benefit Advisors Network. It may also represent a threat, however, due to the new company’s strong middle-market and up-market presence.

Braun says industry mergers “will continue to be focused on bringing a wider and deeper set of services to clients of the middle employer market and larger.”

The goal, he says, “is to increase market share due to the expansion of services, and in so doing the strategy is to scale the costs of the infrastructure needed to meet the wider and deeper set of services.”

Carrier mergers

Carriers also stole headlines with merger news this year, including an early July announcement that Aetna will purchase Humana. Later in the month, Anthem announced it would purchase Cigna.

Also see: “Why the Aetna, Humana merger is a lesson for brokers.”

Aetna agreed to buy Humana, the second-largest provider of private Medicare insurance, for $37 billion in cash and stock to broaden its health care coverage, the companies said in a statement at the time. Analysts had predicted an Aetna acquisition was ‘imminent’ as carriers continue to grapple with the implementation of the Affordable Care Act and its impact on carrier costs and risk.

Anthem on July 24 struck a deal to buy Cigna for $48.4 billion, wrapping up almost a year of contentious negotiations and potentially creating the largest health insurer in the U.S.

Also see: “Anthem-Cigna deal creates opportunity, risk for brokers.

The mergers confirm analyst predictions of continued consolidation as carriers vie for market share, a trend industry experts fear will limit choice and force brokers to reinvent their business approach.

“It's an arms race for market share,” says Braun.  “For brokers, this will represent fewer options in the market,” he says.

Brokerage business tactics

Wendy Keneipp, a partner and coach at Q4intelligence, said at the time that fewer options after the mergers and regulatory requirements for plan design mandated under the ACA don’t rule brokers out of the equation, but instead offer a call to action for a new approach to client relationships.

“I think this should be a lesson for brokers to watch,” she says. “Requirements for plan designs reduce alternatives and the need for competitive creativity. Couple that with the need to streamline expenses for MLR and we have a recipe for an increasingly commoditized and consolidated industry. Brokers can follow suit and narrow their own options along with the consolidations, or they can use the consolidations as a way to further disrupt their own playing field by shifting their focus to non-commoditized ways of working with clients.”

As the industry consolidates, so, too, will the brokers, Keneipp adds.

“To remain independent it takes a strong vision, a strong leader, and a team excited about making a difference,” she says. “Product consolidation just provides further incentive for those motivated to be the difference-making independents in their area. And the right clients will seek out those committed to that model because it will be an incredibly powerful partnership focused on strategic advice, rather than just product choice.”

Brokerages continue to find innovative ways to meet client needs and remain relevant in the industry. This year we saw brokerages increasingly adopting technology solutions and a consultative approach.

As technology solutions continue to shake up the benefit industry, employee benefit firm Digital Insurance says it has decided to throw in a little market disruption of its own by investing in Houston-based tech company GoCo.io. Integrating an all-in-one HR and benefit solution with its brokerage base that spans the nation will not only change the way the firm does business, according to its CEO, but will also “change what small and mid-size employers can expect from their employee benefit advisers.”

The GoCo.io partnership, announced in November, will allow Digital Insurance, through its Digital Benefit Advisors division, to offer small- and mid-size employer clients a human capital management software solution coupled with broker advice and consultation.

“Lots of people are bringing software solutions to small businesses. Lots of people are trying to be a broker for small businesses. We think the real key is to be able to do this and bring it to tens of thousands of groups and actually make money doing it,” says Mike Sullivan, chief growth officer for Digital and a GoCo.io board member. “To do that, we felt the software had to be integrated into everything that we’ve built. We had to have it integrated into the way that we do business.”

Meanwhile, Walnut Creek, Calif.–based firm Heffernan Insurance said earlier this year it would partner with the Zenefits-alternative startup Flock as it firm “strives to be a ‘modern technology broker,’” according to Steve Williams, president of financial services and employee benefits at Heffernan.

Also see: How Heffernan became a tech-focused brokerage.”

Adviser advocacy

Brokerages are not alone in responding to the rapidly-changing benefits industry, the National Association for Insurance and Financial Advisors late this year launched a new initiative aimed at reinventing its role as an advocate for advisers. Its five-year strategic plan, dubbed NAIFA 20/20, aims to make the association a more effective resource for an increasingly diverse membership facing some challenging regulatory burdens.

Also see: “NAIFA reinventing its role in the industry with 20/20 vision initiative.”

In October, NAIFA elected as its new president, Jules Gaudreau, Jr., of the Gaudreau Group, Inc., in Wilbraham, Mass. As the association’s new head, he says he will spearhead the initial efforts of NAIFA 20/20 and help shape the new face of NAIFA.

“We will look at not only where advisers will be in 2020, or where firms will be in 2020, but where does NAIFA fit in 2020 to serve the needs of our members. That means we have a great diversity and inclusion initiative and an awareness initiative. Those are all parts of NAIFA 20/20,” he says.

“We’re also going to reach out to all stakeholders in the industry to whom NAIFA is an important component of their business model: insurance companies, brokerage firms, independent advisers, non-members of NAIFA, members of the broker community and regulatory community. We’ll be reaching out to all those people to get their opinion about what NAIFA should look like in 2020 and beyond.”

This process will continue through February 2016.

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