When it comes to dealing with HR technology firms, insurance brokers often give up the fight. According to Mark Stelzner, founder and managing principal of San Francisco-based consultancy IA, many brokers “unfortunately, may throw up their hands to the influence they can have” on carriers, HR tech providers and other partners.
After speaking at a conference sponsored by PlanSource, Stelzner sat down with EBA to discuss what brokers can achieve by advocating of behalf of clients in new ways. “Brokers and consultants absolutely have strengths that any individual employer would struggle to gain on their own,” he explains.
EBA: What are brokers doing wrong? What are brokers doing right?
Stelzner: What brokers are doing right is they are attempting to rationalize their own internal ecosystem to either a series of services, products or third-party offerings. The central governing leadership of these organizations are recognizing a missed opportunity to unleash their size, scale, distribution and the multitude of employer relationships they support to find out how far they should go in co-offering additional products and services, or how far they should go in looking at the external ecosystem of products and services across benefits and other subdomains for the benefit of all parties.
Brokers have ceded that to their local relationships, perhaps disproportionately so. [This] means at the end of the day, they miss opportunities for economies of scale or more structured and strategic applications.
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There is a lot of good movement. There is a lot of good thought leadership. There are still a lot of challenges. But I am seeing more and better strategic thought leadership and the beginning of execution across that thought leadership.
Some, if you were more cynical, could attribute it to the Zenefits effect, that it is a more defensive move and out of necessity brokers need to be more thoughtful about the value proposition that they create. Or as a more offensive move, which says we as brokers have a tremendous opportunity to add value, that is not trigged by any other external factor, then we recognize that our employers could and should receive more value from the services that we offer.
EBA: What are the economies of scale?
Stelzner: There are a couple separate models such as United Benefit Advisors and Assurex Global. There are a couple of these consortiums where the Mom and Pop [or] really small brokerages lack the size and scale and veracity to try significant influence in the third-party relationships that they govern across carriers or administration platforms or ACA vendors.
There are collections and consortiums that are starting to form to No. 1, create better purchasing power but also to allow these aggregated entities to use their collective power and organizational body to try to move to the market in a way that is more broker friendly, and perhaps therefore is more employer-friendly. For some of these small and midsize employers that simply lack the scale themselves to change the space.
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But the way the economies of scale are leveraged, even in the larger brokers, such as Lockton, they themselves are often still managed in a decentralized fashion. Even within the four walls of these larger brokerages, there is still a lot of decentralized decision making, relationship management and governance. Even these larger entities have not fully deployed an economy of scale strategy.
EBA: What do you mean for broker-friendly? Employer-friendly?
Stelzner: I’m doing a panel at an upcoming event, which is bringing together Lockton, Pacific Resources and Wells Fargo to talk to HR technology vendors, about how to work with a broker. There isn’t a one size fits all model. Some, like Pacific Resources are agonistic, where they don’t establish strategic relationships but technology vendors, be it benefit administration players or private benefit exchanges players, see them as a potential influencer or channel to facilitate sales, where they are going to advise their employers on the best platforms, technology and services, and those vendors want to win that model.
There is the next step, which are you want to get on the broker’s preferred provider list. Some brokers will establish a short-list of preferred providers, that says, ‘We vetted you to the ends of the green, and you are an approved vendor. We can’t say which of you win is going to win each opportunity.’ The vendor has preferred status and ... if distribution is done well, I should see more preferred throughput.
The third tier is a white-label solution where the broker says, ‘This is so critical to us a broker, so we want OEM or full resale through a solution and these technology vendors need to know and understand what it is to structure a reseller relationships and what functions they need to support and build to support a one-to-many market.’
At the end of day, selling through a broker means you are selling to a multitude of employers, where many of these technology providers are used to selling to employers directly, such as PlanSource. Many of their competitors have channel conflict, where they sell a lot of different ways. There is not one model.
The whole idea is to easily demystify all the ways to work with brokers and say, ‘Listen, for this need, for this employer supported through this broker, this is the structure that we need.’
I think brokers a bit of a black hole to a lot of these HR technology companies, where they really don’t get what it takes to be successful through a broker channel.
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