Unless you've been living under a rock, you are already aware that at least one major carrier has announced that premiums for groups of 51 employees or more will no longer include commissions. The agent can specify the commission level desired and it will be billed by the carrier, but it will be a line item visible to the client.
With implementation of the minimum loss ratio rules of the Patient Protection and Affordable Care Act it is likely that other carriers will follow suit. More importantly, it is possible that this approach may shift to groups of fewer than 51 employees as well.
But the question is, is this a bad thing for agents?
If I were selling group health insurance today, I would have already made the shift to commission transparency as a point of differentiation. There is no question that is more unsettling to an incumbent agent than having the competition ask, "If you had to pay your agent a fee for the services that you are receiving, how much would he be worth to you?"
Several of my coaching clients have begun asking this question during the sales process, and all of them are hearing the same response: "I have no idea."
This response allows them to begin asking questions based on their knowledge of commissions in their markets. One of my clients in California, for example, shared that he averages $30 per employee, per month, on groups of 30 employees. This means that he gets paid $900 per month on a group of 30 employees.
The conversation would then go as follows:
Agent: Would your agent be worth $900 per month?
Employer: Not really - I could hire a part-time employee for that and get a lot more out of him.
Agent: OK, what about $500 per month?
Employer: Is that what he actually gets?
These questions allow the benefit professional to have an entirely new discussion about client expectations for the commissions being earned. In the current environment, this makes obtaining an Agent of Record letter relatively easy. It's not that group health agents don't have value, but rather that the client has no idea of how to assess that value since the agent's compensation is hidden. The client cannot value what he doesn't understand. A discussion of compensation can change that dynamic.
As we move into the new reality for the group health agent it is very likely that commission transparency will become the norm. While this may cause a certain amount of discomfort for many agents, it is really a huge opportunity that should be welcomed. Agents who do more than shopping the health plan at the annual renewal and resolving problems when they arise will have no problem justifying their compensation with a client. Agents who offer no value-added services and are reactive rather than proactive will find the future a bit of a challenge.
Equally important, agents who tend to promise every service that they can offer without identifying which of them actually have value to the prospect will also struggle in the new world order.
Once you have opened the conversation about commissions, the transition to a discussion of value is simple. Immediately following the interaction above, the conversation should follow this template:
Agent: The reality is that on average an agent earns roughly $25 per employee, per month. Since you have 20 employees, your agent is getting paid $500 per month. The question that I have to ask is this: Do his services justify that remuneration?
Employer: No, but is there anything that I can do about that?
Agent: Well, you cannot negotiate commissions but you can negotiate the services that you expect from your agent. Here is what I know for sure: The only services that are important are the services that are important to you. With that in mind, may I ask a few questions to help identify which of my services would have value to you?
Agent: Let me begin by asking you this: In your mind should there be a connection between the benefits that you provide and employee pressure for increased wages?
Agent: Can you elaborate a bit on that?
Employer: Well, I would think that my employees would understand that the benefits I provide have a cost, and that impacts my ability to increase their pay.
Agent: And how is that working out for you?
Employer: It's not working very well, to be honest.
Agent: And has your current agent ever discussed this issue with you or offered any strategies to help you?
Employer: Not that I can recall.
Agent: So if I could come up with a strategy that would increase employee appreciation for the benefits that you provide and decrease employee pressure for increased wages, would that have value to you?
Employer: It sure would!
Of course the conversation would cover more than one simple (or not so simple) service. The ultimate goal is to identify exactly what the employer wants from you and then give the employer a chance to connect those services with commission generated. This approach to a sales conversation will completely differentiate you from your competition and position you for any changes in the way agents are compensated in the future. If the current system remains unchanged you will still be better off than any of your competitors because you will have a competitor-proof account.
As a Registered Health Underwriter and a Registered Employee Benefits Consultant, Schlesinger understands what it takes for benefit professionals to grow their businesses. He is the founder of the Objection Free Selling Academy and serves as president of NAHU for 2011-2012.
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