Insurance broker Jon Rauser says he remembers the November day perfectly a day when a simple idea would change the course of his career forever.
It was 2012 and President Barack Obama had just won reelection. Rauser was spending time at his condo in Scottsdale, Ariz., which he visits several times a year to get away from winter in his hometown of Milwaukee. The owner of The Rauser Agency, specializing in small-group employee benefits, was standing in a shopping center parking lot that afternoon after leaving a Safeway store when he saw a for-lease sign at a small retail space in between that grocery store and a CVS Pharmacy. As he watched the enormous amount of traffic of people walking between each store, and past that little location up for rent, he thought, Wouldnt it be fun to have my name up above here and see what happens?
In the months following that day, when many brokers thought their careers might be over altogether with the Affordable Care Act sealed by Obamas win, Rauser had an idea to call and see how much it would be to lease a place like that Scottsdale storefront at a shopping center in suburban Milwaukee. I called the Realtor and realized I can have two offices like this for the price of the one fancy-schmancy office [I already have] in downtown Milwaukee, he says. The location Rauser found which he says is key is also between a grocery store and another popular pharmacy, Walgreens.
From there, his retail concept was born. He envisioned having a sign above the store advertising insurance sales so that people doing errands throughout their day who might need to comply with the ACAs individual mandate, or who might be employees of his small-group clients could stop in for a consultation. Over the summer of 2013 he let the lease on his so-called fancy office in the city expire and signed two shopping center leases one still in downtown Milwaukee and the other at the northern suburban spot. One store opened on Sept. 30 and the other on Oct. 8. His goal: If I can have two offices for the price of one and if my group business stays on the books and pays the rent, anything that happens in those two retail locations is basically gravy on top.
The gravy, of course, would be individuals either qualifying for subsidies on the federal marketplace that opened Oct. 1, 2013 or those who dont qualify for subsidies but might need to buy a plan directly from a carrier.
While Rauser is optimistic and confident about his idea, the critics to his plan are mostly doubtful about the possibility of a return on investment. As Andy Torelli, president of e3 Financial and EBA advisory board member, points out, There has been significant commission compression in the individual and small-group market and, in my opinion, a more diversified portfolio of insurance and/or investment products and services would be required for this concept to have an improved probability of success.
However, Rauser is already out in front of that idea, having prepped with his three additional producers on nearly every voluntary product imaginable. The modeling Im using presumes we write 20 individual lives in each location a week, week after week, he says, adding that so far those numbers seem to be attainable since opening both the stores in the last few months. Weve then been able to cross-sell about 20% of those people on something else like life insurance, long-term care, homeowner, auto, pet insurance. So presuming that we do $20 per person and the cross-selling, after two years each store should be generating close to $1 million in revenue.
In fact, hes so confident that he can make money on this concept that he hopes to open two additional stores in 2014 to circle Milwaukee. He has his eyes on storefronts in the western and southern suburb,s and says the only reason he cant be on the eastern side of the city is due to Lake Michigan. Hes also hoping to expand out to Scottsdale, where his second home is, by 2015.
Rauser doesnt have many plans for advertising, and says so far word-of-mouth and being in the high-traffic locations he selected has generated significant business. The first dozen or so people who came to the north-suburban store were asking, Do you mind if we pass your card on? he says. Its precisely the experience we hoped people would have.
Is there anybody else?
Rauser collaborates with Nelson Griswold, a consultant to brokers and EBA columnist, who was inspired by this retail concept and shared it with some of his other broker contacts at an August 2013 roundtable event when Rauser was also present. As luck would have it, another broker in attendance, named Will Heavin, had already been thinking about something similar himself and he and Rauser began exchanging ideas and concepts.
Heavin, a small- and large-group employee benefit adviser at Heavin & Associates in Corpus Christi, Texas, had just returned from the July 2013 opening of a Highmark Direct, a carrier store for Highmark Blue Shield products, location in Allentown, Penn.
Heavin was inspired in Allentown with what he saw because, I felt it was something I could do. As soon as he returned to his hometown he began searching for the perfect retail spot for his new store. What he found was a freestanding store on the corner of two high-traffic thoroughfares and near a CVS Pharmacy and Super Walmart. But the place needed significant remodeling. He wasnt able to move his business fully into the space until December.
Meantime, Heavin made the best of it, printing signs to sit in front of his more traditional office location advertising the launch of the exchange on Oct. 1. Even without a retail space, Heavin was accepting about five to six inquiries a week between calls from the signs and walk-ins, securing his staff significant experience on Healthcare.gov.
Heavins new space is getting about two walk-ins a day and hes anticipating more success when the large $32,000 sign that he purchased as the main advertising investment for the store goes up in a few weeks. He talks to Rauser on occasion about how things are going in their separate operations. Both men are confident, as Rauser said, that were on to something.
No new real estate
Meanwhile, across the country in Studio City, Calif., another broker had a similar idea on her own. Naama O. Pozniak, owner of A+ Insurance Services, was preparing for enrolling people on the exchanges and realized she didnt have the budget to consistently advertise her services on television or radio. She thought about how her office, which shes been in for the last seven years, happens to be on a high-traffic thoroughfare in her town.
In September, I hung a huge sign on the building at the corner of this amazing intersection. It had the Covered California logo on it and now I have people walking in without appointments and calling me its amazing, Pozniak says. By mid-January, shes averaging about six or seven calls a day from the sign and about four to five walk-ins, though shes quick to point out that on Dec. 23, the last day to enroll for coverage effective Jan. 1, she had 10-15 walk-ins.
As the only producer in her office, assisted by two other staff members, Pozniak has been incredibly busy, but says this is a time in the business that shes been waiting for. I was one of the first agents to get certified by Covered California, she says. Im in love with this business right now to insure people who have never been insured before. Yeah, we have obstacles, and we will go through that and we will adjust. She adds: Life is not just about how much money you have or make or how much you can make, its about servicing the community and thats what a broker needs to be doing.
Wayne Sakamoto, an independent broker in Naples, Fla., says that a retail model takes a lot of rent money and human capital that the many brokers like him who work from home arent used to factoring in. Many years ago, I thought about the retail model, says the owner and president of Health Insurance Interactive, Inc. But, I was apprehensive about setting up a bunch of computers in a retail location, with consumers thinking that they were walking into a computer store. He adds that the lifestyle component of working from home is also something that he loves and isnt willing to give up easily.
The competitors, both Rauser and Heavin point out, are also in a whole different playing field. The retail option has of course been in play for years for many agents working at places like State Farm and Allstate, but health insurance carriers have also taken to this model recently in several states. In fact, AccessHealth CT Connecticuts state-run public exchange also set up two storefronts that feature navigators and brokers providing in-person enrollment capability to consumers.
Rauser isnt worried. He has a State Farm agency in the exact same shopping mall as one of his locations and he doesnt lose much sleep over it. They dont sell the variety of things that I do, he says. I think there are going to be a great many more people [buying on the exchanges and off] who want the affirmation of a professional. Again, buying health insurance online isnt the same as buying an airline ticket. So yes, Im going to counter to the online trend of the Amazons of the world and moving into in-person when everyone else is moving away, but its exactly where I want to be.
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