As if the twin threats posed by the advent of health care reform and the incursion into the benefits business by payroll administration vendors are not enough, producers should prepare for a third threat: the large HR consulting firms.
After struggling with declining revenues for several years, large national consulting firms like Aon Hewitt, Mercer, and Buck are setting their sights on the employee benefits marketplace, says Jim Christenson, Field Vice President, Northeast, at Allstate. Because of their deep resources, says Christenson, these firms “can offer nearly unlimited value” to their clients. Essentially they will seek to follow a path that has worked before in the industry – adapting services designed for large-employer clients and moving into the mid-market and small-employer markets.
Drawing upon their large scale, they will be able to undercut brokers with a persuasive pitch, along the lines of, “We can offer you the same benefits you now have for 20% less than you now pay. And in addition, we can provide a wide range of HR products, services and support.”
Christenson also warns brokers about the spread of insurance auctions. In these arrangements, a large employer shares with brokers detailed specifications about the core benefits it wants for the coming plan year. It then sets up a website where the proposed coverages – and prices – of interested bidders are posted for all to see. Over the course a a two-hour bidding period the proposed prices come down as the bidders compete on price.
Christenson’s remarks came in a presentation at last week’s Benefits Selling Expo in Nashville.
