The headlines are right in front of us. Commissions decreasing, consolidation, exchanges taking business away. There has been more effort in recent history to disintermediate the insurance broker than the industry has ever seen. Congress has turned a blind eye, insurance carriers are staffing up to directly service and public exchanges are being hailed as the new way to buy insurance. The role of the broker is underestimated and in many articles, quickly glossed over while self-proclaimed experts predict massive change.
While many are predicting the demise of the broker and tout examples such as travel agents and stock brokers, the interesting thing is employers depend on brokers more than ever. In fact, it has been a steady trend over the last five years. In a recent Zywave survey, employers are looking for even more frequent touches from their broker with information and services to help them navigate the complex and changing world of employee benefits. So what is going on?
The market tells the story
One can conclude from increased M&A activity that many brokers have predicted a gloomy future. There were 165 transactions in the first half of 2014, which is the highest since 2008. Decreasing commissions coupled with change in the industry have forced many to decide to get out of the game. Interestingly enough, there has been chatter that consolidation is the canary in the coal mine and represents a beginning of a downward trend for insurance brokers. If the outlook is so bleak, then isn’t it strange that private equity has been rapidly moving in to purchase agencies? Private equity firms have incredibly smart analysts who study the market to make sure they are making good investments for their investors. They like what they see and success like Apax’s investment with Hub only fuels the excitement. If you were to follow the money, it appears that the insurance agency future appears to be a rosy one.
Capitalizing on opportunity
The role of the broker is changing and change can be hard. Yet, change can also be very easy and ignite a broker’s bottom line along the way. The key is to be looking for ways to help clients. A perfect example of this is that the Department of Labor has come out swinging and has unequivocally stated that they will audit all plans by 2018. They have already started and announced millions in fines so far. Powered by this success and revenue, they are just getting started. At the recent SHRM conference, HR managers shared concern that the DOL would show up at their door.
Before that does happen, who is going to help the employer with making sure their SPD is in compliance? A lawyer will gladly help for over a thousand dollar fee, and many brokers refer their clients to lawyers. The issue is the broker is letting a potential value proposition slip right through their fingers. The great news is that with today’s technology, a broker can buy software, input their client’s information and provide a compliant SPD ready to go. One such software firm, Plan Doc Builder, is endorsed by NAHU and makes it incredibly easy for a broker to offer these services, easily build plans and raise the value that they provide. We were so impressed with the technology and brokers’ rave reviews, that Zywave purchased the company. This software allows a broker to easily charge a client a fee, or waive it and make it part of their commission service. More importantly, it solidifies the broker’s reputation in the community as a trusted advisor.
I spoke to a broker recently about how he uses the tool and he said it was a tremendous door opener. He said, “Every HR manager knows this is coming and all I do is ask, is your SPD compliant and ready for an audit? Within a few minutes I can establish that it isn’t and that alone gets me a broker of record letter. Too many brokers are doing business the same old way and that is great for my bottom line.”
The reality of it is that it is time to put away these industry articles and recognize this is a great time to be a broker. There is tremendous potential for explosive growth with the right mindset. Brokers need to stand tall and react to change while having eyes wide open looking for opportunity. You never know, sometimes it will be right in front of you.
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Great Blog/article! when will Zywave be offering PlanDoc Builder? what will the cost be? will PlanDoc Builder be part of Zywave. Anxious to get started with our clients at Security insurance.
thanks!