Recently, many readers have been asking what the most forward-thinking benefit advisers are doing to morph their business models and to increase their revenues. The short answer is a wide range of strategies are being employed, and there certainly is not one universal strategy that is appropriate for all firms. However, there are some very creative management solutions that are both strategic and tactical in nature which have evolved, and that are meeting with considerable success.
Over the last four to five years we have advocated that advisers need to become more strategic and consultative in their approach to client engagement and in their business development activities. And many forward-thinking advisers are doing just that. They are creating benefits strategic plans for their clients. It enables the adviser to move up-market and to pursue larger size accounts. It also enables the adviser to: sell more products per client; generate more revenue per client; improve their client retention; increase profitability; and enhance the business asset value. The approach being described is a homerun on so many levels that it should be high on your priority list of business strategies.
In the meantime, others have embarked on the development of private exchanges that will target downstream brokers, employers, and consumers with their messaging and technology capabilities. In one instance, the private exchange will be the first in that state. It will act as the platform for brokers to electronically market a wide range of products, including employer-paid benefits, voluntary benefits and executive benefits without having to incur the time and expense of creating an Internet marketplace. Another thought leader is creating a private exchange that will focus on small-group self-funded plans. Through a series of survey questions, the exchange will query both the employer and employees about underwriting considerations and suggest a number of self-funded and fully insured options for consideration. The site will also provide access to individual health insurance options and voluntary benefits.
We expect to see an increase in the number of benefit firms appointed as general agents, largely driven by carrier economic considerations. This trend has already started in a number of states, and benefit advisers that have the resources and capabilities will be awarded master contracts. Smaller, less-productive, undercapitalized firms will be relegated to placing risks through the general agents for multiple group products, and potentially individual health and voluntary benefits as well. We have witnessed that some general agents are in the vanguard of private exchanges as well, and will be leveraging their investment in technology to gain more lucrative compensation contracts as well as local market share.
For some, merging with a friendly competitor or a local P & C firm will be the strategy of choice. Such a move will provide revenue diversification, strengthen the management team, and increase enterprise capabilities in the short term. New strategic merger/acquisition partners have been emerging as well. Some have a very specific market focus. Imagine a 403(b) retirement plan firm cross-selling employer paid and voluntary benefits to school districts nationally. Its already happening, and you can expect to see more of this.
Kwicien is managing partner at Baltimore-based consulting and advisory services firm Daymark Advisors. Reach him at firstname.lastname@example.org.
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