154 / 191
2010 Best
Practices Study
Agencies
with Revenues
Over $25,000,000
154
Analysis of Agencies with Revenues Over $25,000,000
Mgmt. Perspectives
Profile
Revenues
Expenses
Profitability
Employee Overview
Producer Info
Staff Service Info
Technology
Insurance Carriers
Appendix
Adjusting to Health Care Reform
If there is a general consensus, it is that Health Care
Reform (HCR) is not going to mean the end of the
group, employer-based health insurance business, but
it is going to change it dramatically. Most of these Best
Practices agencies feel the small group business (under
100 lives) will be most affected. On the larger group
business, the employers will need agents and brokers
more than ever which will result in more demands for
services with simultaneous pressure from carriers (and
perhaps insureds) to push agent and broker
compensation down. Agents will need to be more
adept at selling the value of their services and getting
compensated through fees instead of commissions.
To meet the needs of customers, the services provided
will need to be expanded and producers will need to
become more adept at consulting rather than simply
marketing and closing the sale to the customer.
There is a sense as well that the relationships between
carriers and their agents are going to change. As has
been the case on the P&C side, carriers will tend to
favor their larger and more successful producers. This
may affect access and compensation. We are also
hearing that carrier compensation will more often be
based on a per life/per month basis as opposed to a
percentage of the premium.
There will be challenges but all agree that there will be
new opportunities as well. This is clearly not the time to
"circle your employee benefits wagons". The best are
going to stay on the forefront as HCR unfolds and
position themselves to respond for the benefit of their
clients and take advantage of the many opportunities
as they present themselves.
Facing Challenges
Soft P&C pricing and a bad economy are creating real
challenges for the largest firms in the country. As
evidenced by their results, commission revenue growth
is tough to achieve. If you add to that a decline of 9.2%
in contingent income, it is easy to see why profits are
tough to come by.
In spite of these challenges, this group of agents saw as
their biggest problem their ability to attract talent,
which supports their belief in the future of the industry
and their need to properly position themselves for the
future.
With over 20% of their revenues coming from group
health insurance, it is also no surprise that their ability
to respond to health care reform is something that they
are all dealing with. There is a general sense that health
care reform will create more work for agents (and their
insureds) and there will be pressure to reduce
commissions paid to agents. In the world we are
heading into, agents see fees in lieu of commissions as
a necessity.
With depressed operating results and the difficulty of
attracting talent, it is really not surprising to have these
firms identify succession planning and perpetuation as
one of the biggest challenges they are facing.
Foundational keys to perpetuation are growth, profits
and the next generation of producers, managers, and
leaders.
Top Challenges
(Top 5 Listed in Order of Frequency Mentioned
)
1. Attracting top talent
2. Dealing with soft P&C market and bad
economy
3. Negative organic growth and lower profits
4. Dealing with Health Care Reform
5. Succession panning and perpetuation
Top Adjustments
(Top 5 Listed in Order of Frequency Mentioned)
1. Expand capabilities:
> compliance
> communications
> wellness
> actuarial / tax / plan administration
2. Train producers to consult, not sell
3. Leverage size, scale and clout
4. Shift to fee based compensation
5. Be prepared to do more for less
“To be effective in the new health care world, our producers are going to have to
elevate their game. They are going to have to learn to be health care consultants
and advocates for the clients.”