David Contorno’s benefits business took off when he began apologizing to his prospects.
“When I start off with a prospect, usually I say, ‘Let me apologize on behalf of my entire industry on the way we handled your renewal for the last 20 years,’” Contorno said, adding that his prospects look a bit perplexed. “And I say, ‘I’ll be willing to bet that every year for the last 20 years, your broker comes in and says your rates went up 22 percent.’”
Now that he has their attention, Contorno explains that previous brokers were not looking at the right issues for them.
“I tell the employer, ‘Your health care costs are not driven by your insurance rates,’” Contorno said, setting up a discussion about a self-insurance plan. “‘But your insurance rates are directly driven by your health care costs. So the apology I give to you is for not focusing on that up to this point.’”
As the president of Lake Norman Benefits in Mooresville, N.C., Contorno said that this approach was part of his strategy to find success by doing the opposite of what he had been doing previously.
Although he has seen a lot of ups and downs in the business that he entered at the young age of 17, Contorno said the biggest change was when he decided to stop “selling” altogether and turn to consulting instead. The main reason for this switch? He was tired of being the bearer of bad news to his clients.
“I never came in to my client with good news,” he said. “I never said, ‘Hey, guess what! Your rates are going down; your plans are getting better.’ It was always ‘your rates are going up and your plans are getting worse.’”
Contorno said he no longer wanted to obtain business by convincing employers that he offered “the least bad option of everything else that was out there.”
And he doesn’t stop there. His company has a full human resources consulting division and an on-staff ERISA attorney.
Contorno’s full-feature shop is an example of what many health insurance agents are aspiring to after the Affordable Care Act left them in the cold.
The Advisor of the Future
The role of the broker will increase in the future, according to Scott Beck, vice president in MetLife’s group benefits business.
“I think you’ll see that the complexity of the market, the complexity of the regulatory environment and the multigenerational workforce will continue to support the need for brokers to provide advice and consultation,” he said.
MetLife marks 100 years in the employee benefits business this year. The company’s 14th annual Employee Benefit Trends Study showed that no matter what benefits are offered in the workplace, employees find the greatest benefit in one-on-one consultation with a professional to help them select the best option for their needs. Millennials led those of other generations in valuing one-on-one consultations, with 60 percent saying they wanted to meet with a professional.
The MetLife study also showed that an increasing number of brokers say they are optimistic about the benefits industry — 77 percent in 2015 versus 66 percent in 2012.
The oldest members of the youngest generation — dubbed Generation Z —are entering the workforce now, and that means an employer may have members of five different generations working within their company.
These changing workforce demographics also provide opportunities for brokers who can serve the varied needs of the generations, Beck said.
“This is probably the most important overarching benefits strategy that needs to be addressed,” he said. “Before you can offer products, before you can figure out what kind of enrollment techniques you want to employ, you need to understand the employee population. Think about it: Five generations in the workforce all look at benefits very, very differently.”
The uncertainty of the regulatory and political climates, combined with health care reform and the demands that employers have placed on their HR departments, also will contribute to the importance of a benefits broker, he said. “We saw that as a result of the 2008 recession, many HR departments reduced their staffs. But their workload was not reduced. They are looking for folks to help fill in those gaps, and that provides an opportunity for brokers.”
‘An Extension of HR’
Susan Combs is one benefits advisor who sees her role as an extension of her client’s HR department. Combs is president of Combs & Company in New York City and a partner in Capacity, the 42nd- largest brokerage in the U.S.
“In the benefits part of our business, we interface with all the employees,” she said. “We specialize in employee groups of 50 and under, so many times we end up being an extension of HR.”
Combs said her goal is not to take the place of her client’s HR department, but to be their partner.
“We saw that after the 2008 recession a lot of HR departments were downsized, where before you would have a number of people and each one had their specialty, such as corporate training. Now you see HR departments that have fewer people and they’re mostly generalists. So we tell them that we don’t want to take their job from them — we want to take the benefits part of HR off their plate and serve as more of a partner.”
Combs said that her clients’ employees can call her company anytime to ask questions about their benefits. In addition, her clients will hand off their new employees to her for personalized benefits orientation.
Combs hasn’t abandoned the individual health insurance market, but she said her company charges clients an hourly consulting fee, plus it offers an ongoing servicing contract for people who have questions after they enroll.
Sales on the Rise
LIMRA figures show that sales of workplace benefits such as group life and accident insurance are on the rise. As of the end of 2015, new sales premium of critical illness insurance increased by 19 percent, or $496.2 million, over the prior year. Also during that period, group disability and accident insurance new sales premium rose by 11 percent, or $2.8 billion and $991.1 million, respectively. Group life increased by 7 percent, or $2.9 billion, and new premium for cancer insurance rose by 5 percent, or $387.9 million.
In addition to increasing sales premium, more carriers are getting into the benefits market, said Kimberly Landry, LIMRA senior research analyst.
“We are seeing more companies that weren’t selling those products five or six years ago rolling out products now, so there’s a lot more competition there now,” she said.
“A decade ago, what you saw were worksite-focused carriers who were selling individual products in the worksite, fully funded by the employee. And that was their niche market. But a lot of bigger players weren’t competing there and now they are. It’s kind of seen as an area where carriers can look for growth. And there is a growing role for workplace benefits given the rise of consumer- driven health plans.”
As employees continue to be squeezed by rising deductibles and other out-of-pocket expenses, supplemental products such as accident insurance and critical illness insurance are seen as ways for workers to mitigate their risk, Landry said.
Advising Both Sides
Benefits Advisory Service in Forest Hills, N.Y., has been around for 24 years and recently became a division of One Group in order to provide the full range of benefits from property/casualty insurance to pension plans.
Sher Sparano, president and founder, said she believes her company’s success comes from consulting both the group clients and their employees.
One of the changes in the benefits marketplace, she said, is the array of new and complex products offered. Health savings accounts, health reimbursement arrangements and flexible spending accounts are among the products that didn’t exist when she started in the business, and are confusing for both employers and workers.
“You need to know all the ways to help both the employer and the employee save money and get good benefits,” she said. “And because it’s more complex now, you must be able to relate that to the employee. It’s very important to get to the bottom line of educating the worker what their benefits are and how to use them.”
“Employees are confused by the complexity of health benefits today and how to use them. On the other side of that, you have to help the employer. Some of our small groups don’t have an HR department, so you have to consult on HR.”
As benefits become more complex and more regulated, advisors must assist HR to make sure all the requirements are followed and that information is communicated legally and properly, she said.
Knowing about HR in addition to benefits will serve the advisor well in the future, Sparano said. “HR is everything from payroll, wage and hiring, benefits, corporate rules and regulations to pensions and 401(k)s. There’s a lot to know. I think the person who is able to offer the full package is in a better position. And the human element is utmost.”
The benefits marketplace will continue to evolve but that “human element” will still be there, she predicted.
“Someone said to me, ‘Benefits has about 15 years, and then it will all change. It will all be online.’ And I said, ‘But so will we be online. We will be doing it a different way, but we will still be delivering service.’”
Rising health care costs and an improving job market have made employee benefit programs more important than ever, especially for large, self-funded employers. That was among the findings of a report, “The State of Employee Benefits 2017,” by Benefitfocus.
In particular, the popularity of voluntary benefits skyrocketed between 2016 and 2017, the report said. In 2016, only 36 percent of large employers surveyed by Benefitfocus offered at least one of the three major voluntary income protection benefits — accident, critical illness and hospital indemnity insurance. But that number shot up to 47 percent for 2017. In addition, the share of employers offering all three products nearly doubled (up from 9 percent to 17 percent), showing that employers want to provide workers with more choice in their benefits.
But along with choice comes confusion — and opportunity.
“For voluntary benefits, convincing workers to sign up is becoming more of a challenge,” LIMRA’s Landry said. “Employees don’t spend a whole lot of time thinking about their benefits. Employers are giving more attention to how they can improve employee communication — how they can get employees to pay more attention and understand their benefits better. They really need someone who can provide guidance and provide that communication.”
Landry said LIMRA’s research shows that even in this age when consumers conduct more of their business transactions online, “people really want to talk to someone face-to-face about these products. We’re seeing the importance of having meetings in the workplace and the value of agents who are willing to do this.”
Employers, Workers Need Help,Survey Says
Benefits programs are becoming more complex, and more employers say they need help. That was one of the findings in Guardian Life’s report “The Benefits Balancing Act.” Companies that find it more challenging to manage their benefits are more likely to use a broker to help them, the report found. That opens an opportunity for brokers who are able to solve their clients’ challenges, said Gene Lanzoni, assistant vice president at Guardian.
“We need to change the paradigm of how benefits are sold and what that job is and what’s the mission,” Lanzoni said. “I think it’s in the broker’s best interest to be more consultative.”
“A majority of brokers have been more product-oriented, more like salespeople, and not necessarily that strategic consultant to their employer clients, to really help them get their arms around all of their benefits challenges.”
The Guardian report identified three main areas where employers need help from brokers.
1. Improving workplace well-being. Enhancing and promoting wellness and prevention programs. Providing resources to support workforce mental and emotional health. Offering more effective benefits communication and employee financial education.
2. Increasing benefits administration efficiency. Using exchange platforms to strengthen employee enrollment.
3. Maintaining benefits plan compliance. Assisting employers on current Affordable Care Act requirements as well as making sure they are in accord with the Family and Medical Leave Act and the Americans with Disabilities Act.
“Small companies will rely more and more on their brokers to help them,” Lanzoni said, “and that’s a great role for brokers to play.”