Years ago when I approached a crusty old broker from down south about enrolling his voluntary benefits cases, he told me he didn't sell voluntary because, "Boy, the juice ain't worth the squeeze."
Every carrier that sells voluntary benefits has been assaulting benefit brokers with the claim that cross-selling worksite voluntary benefits (WVB) will replace lost medical commissions. But brokers, on the whole, aren't buying what the carriers are selling because they don't believe them.
Their disbelief is based on not understanding just how valuable a WVB revenue stream can be. That's why every Broker Boot Camp on cross-selling WVB that I conduct for carriers and agencies across the country starts by tuning each broker's radio to their favorite station: WII-FM ... "What's In It For Me?"
Show me the money!
Most brokers have no idea just how lucrative worksite voluntary benefits can be. Based on my experience enrolling WVB cases large and small, I developed the following simple formulae to calculate the voluntary benefits revenue potential of a single case or your entire book. These assume an offering of two or three WVB products with one being permanent life (the totals shouldn't change whether it's two or three products).
Note: Since WVB commission usually is front-loaded or heaped - paid in the first year with a small residual for another 5-10 years - each formula reflects heaped comp. Some carriers, however, will pay level WVB commissions.
Small group: For cases under 100 lives, the broker may want to enroll the case himself or with a colleague or friend. (Caveat: For most brokers, I don't advise this. The one-on-one retail sale of WVB to an employee is a different sale altogether than selling group benefits to an employer. Plus, you have to factor in the opportunity cost when you could be out opening new accounts.)
But in those instances where the broker does enroll the case and she has a good script to sell the VB effectively to the employees, here's the formula for calculating net commission (not premium) to the broker: $160 x number of eligible employees. On just a 25-life group the broker nets $4,000.
Large group: For cases over 100 lives, the broker should partner with an enrollment firm (unless his agency has created an internal enrollment capability). The right enrollment firm will do almost all of the heavy lifting, from case set-up to wrap-up, leaving the broker free to open new accounts - and protecting the broker's BOR. The broker pays the enrollment firm with a split of the VB commission.
The large case commission formula reflects a standard 65/35 split of the commission, with the 35% to the broker.
Here's the formula for calculating net commission to the broker when an enrollment firm is involved: $56 x number of eligible employees. That's $8,400 net to the broker for a 150-life group, with no extra work.
These numbers assume effective pre-enrollment communications and good enrollment working conditions with full access to employees for benefits counselors in one-on-one enrollment meetings.
But it's my money!
One of the top broker objections to WVB I hear in our Boot Camps is that they don't want to give up to an enrollment firm such a large portion of what they see as "their" commission. So let me briefly address the commission split.
Since experience has proven that successful voluntary enrollments require the specialized expertise of these enrollment firms, it's important for brokers to understand the commission splits. Once I explain this, not one broker has ever questioned the fairness of the arrangement.
Enrollment firms specialize in the project management and benefit communications that are essential to a successful WVB enrollment that both satisfies the employer and puts premium on the books.
The broker pays the enrollment firm for managing and enrolling the case and putting the premium on the books, splitting the WVB commission with the enrollment partner, with the enrollment firm's share ranging from 60%-75%. The actual split depends on the complexity of the case.
The enrollment firm doesn't just bring essential expertise that very few brokers possess. The enrollment partner will do 95% of the heavy lifting on a case, freeing you to focus on bringing in new business and helping you avoid the opportunity costs of having to enroll the voluntary.
Enrollments are expensive, labor-intensive projects because of the need for enrollers to meet individually with every employee. Voluntary benefits do not sell themselves; these products must be presented to employees by trained benefit counselors to get good participation and write meaningful premium.
The best enrollment firms do not use commissioned benefit counselors; they pay a daily fee plus expenses.
The enrollment firm accepts responsibility for all costs of enrollment. So for the broker, the enrollment is all upside, with no chance of losing money. If the enrollment does go south and little premium is written, the enrollment firm can lose tens of thousands of dollars.
Enrollment costs are typically 15%-20% of gross commissions. These direct enrollment costs (fees and travel expenses for case managers and benefit counselors) are factored into the split percentage.
The net result of the commission split between the broker and the enrollment firm should be, after expenses, a 50-50 split of the commission (e.g., 65% - 15% expenses = 50%).
In other words, the broker splits the profits with the enrollment partner in exchange for the enrollment firm managing the case and putting the premium on the books. The broker gets half the profit for bringing the case, the enrollment firm gets half for doing all the work. Explained this way, every broker I know has seen the fairness in that deal.
But wait ... there's more!
So the carriers are spot on when they tout the meaningful revenue potential of workplace voluntary benefits. Cross-selling them is the most effective means to replace lost commissions.
But while this value proposition for workplace voluntary benefits is correct, it's grossly insufficient.
One of the least-understood aspects of voluntary benefits is just how valuable a WVB enrollment can be to employers. Most brokers don't realize that the associated services, not the benefits themselves, are the key to selling the employer on a WVB offering.
As I mentioned, in order to sell these benefits to employees, a trained benefit counselor who understands their value proposition must present the benefits to employees in one-on-one enrollment meetings.
This necessary process of a WVB enrollment can itself solve a number of important HR-related problems, which sells the client on workplace voluntary benefits and strengthens the broker/client relationship.
Here's a look at the top six results that workplace voluntary benefits and the enrollment process can deliver for employers:
1) Enhanced employee benefits at no cost to the employer. The employer can offer valuable new benefits that don't add to the benefits budget.
2) Improved open enrollment process. This can include the total elimination of paper apps, improved benefit communication, and electronic transfer of all enrollment data to carriers.
3) Increased plan participation. A WVB enrollment can boost participation in high-deductible medical plans/HSAs, flex spending and 401(k) plans.
4) Benefit education and communication. Benefit counselors can communicate the benefit plan to employees far better than a benefit booklet or website.
5) Improved employee morale and retention. When employees understand their benefit plan, their appreciation for their benefits improves employee morale, reducing turnover.
6) Reduced open enrollment burden on HR. The benefit enrollment firm will free up the HR staff by handling most of the logistics and organization of OE.
So if you want to replace lost commissions, cross-selling WVB is your solution. You also can use WVB to open new accounts and help build a wall around your clients. More about that next month.
Griswold, a former senior executive with a national enrollment firm, is a leading authority on cross-selling voluntary benefits. He helps agencies and carriers explode their voluntary benefits revenues. He can be reached at (615) 656-5974, email@example.com or insurancebottomline.com.
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