For the last several months we have been discussing the actions of forward-thinking benefits advisers in response to the rapidly changing market conditions and regulatory requirements. We all realize that too many agencies do not have an answer for these industry trends. The typical adviser is in denial that carriers are starting to limit the number of agency contracts and that the current trend for compensation agreements is reduced and reducing.

We have already seen an increase in the sale of benefits operations, and merger activity has increased as well. It is safe to say that the remaining competition will be much stronger and better managed.

As if that is not enough, the ACA and the resulting exchanges will drive many smaller businesses out of the group medical insurance business. What percentage of your clients and revenues are in the small employer market? What are you doing to pursue accounts in the 50-500 market? You better have some viable action plans to address these issues. And while the commission reductions are currently focused in the group health arena, it would be very short-sighted to think other lines of insurance are immune to commission reductions.



Not that kind of sales

For far too many firms, selling is synonymous with spread-sheeting. As a result, their value proposition looks just like every other broker's. The notion that the placement of an insurance product is the primary value delivered to clients, and therefore, the only opportunity to get paid by those clients, is erroneous and out of alignment with client expectations. And the carriers control the product differentiation and the compensation anyway. So what are your key differentiators? "We give good service" does not differentiate your business.

Most benefits agencies do not have a sales management function. The lack of sales management results in the vast majority of the sales revenues being generated by the owner(s), while producers often do not "produce" and are not managed appropriately.

And producer compensation is now clearly misaligned given that the agency's compensation is being systemically reduced, while many producers are still compensated with level commission splits instead of being incentivized to sell new accounts. When is the last time you had a candid conversation with your producers about the need to adjust how they are compensated, just as you as an owner have had to adjust to the new financial reality?

And when is the last time you terminated a poor sales performer? Retaining poor performers negatively impacts all your high performing talent and causes morale problems. Not exactly the energetic, motivated, client-centric culture that you likely say that you want to create, right?

I am not trying to dwell on the negatives. It is however, a time for serious self-reflection. The absence of hands-on management, standardized procedures and systemic controls threaten to cause a significant percentage of today's firms to become irrelevant, particularly with the advent of exchanges, both public and private. If your sole value is to be an access point for product purchases, you have now defined an exchange as your primary future competitor. I can't imagine that is a comforting thought. It's not too late for you to take corrective action. However, you cannot delay and you must be boldly decisive. The stakes are simply too high, and failure is not an option.

Kwicien is managing partner at Baltimore-based consulting and advisory services firm Daymark Advisors. Reach him at

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