Long gone are the days when an employee benefit broker’s sole job was to sell and renew health insurance. Today, clients expect a wide array of services from their broker — including compliance, benefits administration, wellness and new technologies.
Those brokerages that have evolved with the industry’s changing landscape to become full-service advisers are being rewarded — with substantial year-over-year growth.
“Ten, 15 years ago, our job is unrecognizable,” says Mike Schneider, Chicago-based managing director of NFP. “It was transactional then. It’s advisory now.”
Remaining flexible despite its large size helped NFP record nearly 15% year-over-year growth, according to a recent ranking of the fastest growing large-group (100+ lives) brokerages produced by business intelligence data analytics firm miEdge.
The only other large-group brokerage with more than $50 million in revenue that grew more than NFP was Aon — which saw almost 21% growth — according to the miEdge listing, which is based on Form 5500 Schedule A data submitted to the Department of Labor as of April 1.
Serving as consultants rather than traditional “spreadsheet brokers” enables NFP to offer services in addition to benefits, Schneider says, which is essential to retain and attract new clients.
A team approach, where property and casualty brokers work with employee benefit brokers, spurred major growth at Bolton & Company, which doubled from $8 million to $16 million in revenue over the last five years, says Mike Morey, chief operating officer of the Pasadena, Calif.-based firm.
“They network and they sell together,” he says. “That just opened up a lot of different doors for us within clients and prospects.”
Not only does operating as a full-service adviser help brokerages grow, it’s become essential in today’s industry.
“Now it seems that we’re consulting more and more on other issues that have nothing to do with employee benefits,” Morey says.
Technology and compliance are two areas that clients continually ask about, as well as HR support, he says.
Even within those subsets, brokerages need to be able to address all of a client’s needs, Morey says.
“Compliance doesn’t stop with the Affordable Care Act,” he says.
A new job description
As the role of a broker has changed, so too must the entire firm, says Adam Bruckman, president and CEO of Digital Insurance, which saw 31% growth in the large-group market, according to miEdge.
Only Buck Consultants and Sequoia Benefits experienced bigger gains among brokerages with $10 million to $50 million in large- group revenue, with 58.25% and 67.11%, respectively.
“In past years, a broker’s primary role was to provide financial support, secure coverage and provide the best value in benefit programs year over year,” Bruckman says. “While this is still a crucial role for brokers, the need to make sure clients are compliant with new regulations, in addition to addressing new service demands, is a major difference over the past decade.
“In particular, clients expect support in the areas of compliance, wellness, benefits administration and new HR technologies that all impact the costs and administration of benefit plans,” he adds. “It is not practical for one individual within a firm to provide all these services, so the need for a team of professionals with a variety of skill sets and knowledge is a significant difference for brokers and a necessary investment on behalf of their clients.”
Consolidation on the carrier side is also impacting a broker’s job description, says Morey. That’s especially true in southern California, where a limited number of carriers serve the HMO-dominated market, he says. “You can’t spreadsheet that every year,” Morey says.
Now when brokers meet with clients, they are discussing what the financial goals are for the benefit program over the next three to five years, he says. “It’s a different conversation.”
And it’s keeping his advisers busy. “Our teams are out of the office more today than they were even three years ago,” Morey says. “Face to face with clients.”
The recession is another factor that altered the role of the adviser, Morey adds. “[Businesses] cut back on their employee count,” he says. “Now that they’ve grown again, they’re being more strategic. They’re always trying to find ways to do more with less.”
That has resulted in less robust HR departments, which puts more demand on advisers, he says. “They are looking for brokers that can make their jobs easier,” Morey says.
Supporting clients’ HR departments in areas such as talent management and onboarding is becoming more commonplace, Bruckman says.
“The role of the broker will continue to evolve beyond benefits and increasingly will be expected to help employers with several of the services that HR teams need to manage their employee base,” he says.
“The winners in the brokerage arena will be those who can successfully integrate a robust [human capital management] technology platform in tandem with industry-leading employee benefit advisement services.”
Technology surge
Along with carrier consolidation, technology is penetrating the middle and small markets, Schneider says. More employers are utilizing online enrollment, health reimbursement accounts and automated payroll systems, he says.
“Technology is a clear disruptor in the industry,” says Vanessa Longnecker, senior vice president, national strategy at Hays Group, one of five firms that saw double-digit growth among brokerages with $10 million to $50 million in large-group revenue, according to miEdge.
The demographics they serve have also changed over the years, says Longnecker, who’s based in Minneapolis. “Overall business and organizational complexity is very different today,” she says.
The surge of technology entering in the benefits space can be a big opportunity for brokers — or it can mean their demise — says J. Marshall Dye, president and CEO of Insurance Applications Group. IAG, which is headquartered in Greenville, S.C., grew nearly 45% in the large-group space — second only to ABD Insurance and Financial Services at 57.33% among brokerages earning less than $10 million in large-group revenue, according to miEdge.
“Don’t underestimate the onslaught of technology that is about to be unleashed on the world,” Dye says. “It’s happening in real time.”
Those brokerages lacking tech-savvy employees need to fill that void immediately, he says, or risk being replaced by another firm or tech startup.
“If you want to succeed, you have to understand where things are going,” he says. “You have to adapt.”
“Don’t underestimate the onslaught of technology that is about to be unleashed on the world. It’s happening in real time.”
That doesn’t mean brokers will become irrelevant, Dye says. “There can be all the technology in the world, but it still has to involve fundamental concepts of insurance,” he says. “They have to merge together. If you are the person who is facilitating that merge, you are going to succeed.”
ABD Co-Chairman Kurt de Grosz echoed those sentiments — the human element is essential.
“The one constant we see is the immensely valued role of the adviser,” he says. “People still want to work with people. The confusion in the market arises today where technology by itself is promised to be the panacea. Technology can be a powerful enabler, cutting costs and lowering friction. But it will always be about people.”
Understanding technology and searching for tech solutions is essential, Dye says. Brokers must innovate — they can’t rely on carriers to stay ahead of the technology curve, he says.
“It’s not a cliché — innovation is critical,” Longnecker says. “You have to stay ahead of changing business cycles and trends.”
ABD’s de Grosz agrees: “Today’s answers won’t solve tomorrow’s challenges,” he says. “Complacency breeds ordinariness, and if you want to be extraordinary, you have to dig deep, connect dots and challenge the norm. That’s when innovation starts to happen. It means taking risks and managing those risks to yield rewards.
“Today, the pace of change is so rapid that you need to be able to craft new solutions to new challenges almost daily,” de Grosz adds.
It’s important for brokers to remember the role technology plays in our society — where a person can check their bank statements in a nanosecond on a smartphone, says Perry Braun, executive director of Benefit Advisors Network.
There is an expectation of how quickly and easily information should flow, and while that might be unrealistic in the execution of employee benefits, that isn’t the client’s concern, he says.
“Clients are defining the outcome, but leaving the execution up to the adviser,” Braun says. The delivery of those outcomes impacts a client’s evaluation of their adviser, he adds.
“At the end of the day, it’s really how things are measured — outcomes and execution,” he says.
The bottom line is that the industry has changed, and brokerages that want to continue expand must embrace that change.
“To grow, brokers cannot rely on the same activities and approach to business that made them successful in past years,” Bruckman says. “Brokers need to invest in new talent and new services to meet the increasing needs and demands of the business.
“Other than new services … the most important catalyst for growth is the realization that professionals in the firm need to become students of the business and invest in ongoing learning and development,” he adds. “Relationships are important, as always, but not enough to keep a client satisfied during these changing times. A clear understanding of new laws, regulations and available services is paramount.”
