Every insurance agent selling in the group benefits marketplace knows that while the workload has increased, commissions have decreased. There are only three possible strategies to increase your revenue:
1) Sell more new groups;
2) Sell additional insurance products to clients;
3) Begin to generate fee income.
Every agent is providing a lot of additional services that have a cost to the agent/agency but that are not generating additional revenue. Online benefit management portals are an example. Some agents have hired wellness coaches or have an ERISA/health reform attorney on retainer. I know that to these agents these are "value-added" services, but the reality is that these agents are using these services to buy business.
The problem here is that agents promise these services as part of their presentation, as opposed to asking questions that identify the need for these services. I hear from a lot of agents who are frustrated because at renewal they discover that the client has never used the services. That said, these same services can be used to generate additional fee income when properly positioned.
A matter of positioning
It is tempting to ignore the potential income because you mistakenly believe that clients will not pay fees when other agents will give away these services. People will gladly pay for services that they perceive have value. Just look at the experience of some of the very successful Section 125 administrators. While many agents were giving away the services of a TPA to administer flex accounts, others were selling administrative services, as opposed to selling products, and companies willingly paid those fees. For those who think that your state will not allow fees for these services I can guarantee that they will - but it is a matter of positioning.
In many states agents can sell health insurance net of commission in groups of 50 or more employees. Other states require 100 or more employees before you can sell net of commission. Regardless of where this begins, selling fees is a great differentiator. More importantly, fee income can be significantly more profitable than commission income. One of the biggest obstacles to transitioning to fee income is the idea that it must be equal to or greater than current income - but that misses a very important point. The truth is that the level of service work might actually decrease once you begin to make the switch to fees.
The reason that the level of service work may decrease once you switch to fees is because much of what you currently promise to provide has very little real value to your clients.
Once you begin to engage employers in a meaningful conversation about what they really want and are willing to pay for versus simply promising stuff to get the case, you begin to identify what is important to your clients. To effectively negotiate fees you also have to get away from the "per member, per month" mentality. You also want to get away from "per hour" mentality. Learn how to build value for a flat monthly fee, regardless of how many employees there are or how many hours per month you work.
Now is the time to make the switch to a fee-based revenue stream. A lot will change in the next few years and the strategies that you use to adapt will determine your long-term survival.
Schlesinger is an independent consultant focused on helping benefit professionals double their income. Reach him at (336) 777- 3938 or through getmoregroupclients.com.
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