Benefits brokers must forge strategic ties to HR departments
I am going to say right up front, the opportunities on the benefits side of the insurance business have never been greater. Unfortunately, not every agency will survive to take advantage of those opportunities.
Every week, I speak with many agencies. Not surprisingly, I get asked a lot of questions about the future of health care.
- What exactly does it mean now that health care reform is a reality?
- What does it mean for the country, the industry, our clients, and, of course, for us?
- Is it going to put us out of the benefits business?
My answer is, “It depends.” It depends on many different factors. Just because the legislation has been passed, the true impact cannot yet be predicted. However, health care reform isn’t the only issue impacting our future on the benefits side of our industry.
The other—what HR will look like after the recession—is also going to have a significant impact on our future. Regardless of which of these issues you see as most pressing, the key is to take control and start preparing to play a new role with your clients.
Let’s start with health care reform. While there are many provisions of the bill that I don’t agree with, and a few—such as health exchanges in 2014—that cause some anxiety, I don’t see anything in this bill that is cause for us to panic. Much can happen within the timelines and the certain maneuvering that will take place before key features become active. The “experts” don’t seem to expect many companies to drop health coverage entirely, even if they are squeezed by rising costs. Additionally, some surveys point to employers preferring to maintain control if it is something they have to be paying for.
However, not panicking doesn’t mean it isn’t a time to be prudent. This is a wake-up call and one that should be heeded. Forecasters have advised brokers: “What you get paid for today you will give away tomorrow, and what you give away today you will get paid for tomorrow.” If you have struggled to believe this, then rethink your position. This is the first step to that reality.
If you have any doubt, go back to the health care reform bill and read the provision about the Minimum Loss Ratio. If you didn’t think about it the first time you read it, this is a limit on insurance carrier profits. If you don’t think they will share that burden across all of their expenses (including your commissions), you’re fooling yourself.
If you try to continue to compete by focusing on getting paid on the placement of a product (medical, dental, life, disability, etc.), your days are numbered or, at the very least, you will need to get used to a new standard of living. Our future has to be built on getting paid for the value we create for our clients. The future benefits agent will create value by addressing much larger HR issues rather than just benefits issues.
This brings us to my second issue—what HR will look like after the recession. However, before looking forward, it is always prudent to reflect on our past.
Prior to the recession, employers were emphasizing the importance of attracting and retaining employees. Employee “free agency” was seen as imminent as there was projected to be a surplus of 10 million jobs by 2010. While the recession may have delayed that surplus, employers have unknowingly placed themselves in the eye of a perfect storm by complicating the matter further. As the recession took root, there was a quick and almost sudden pressure on bottom lines. Companies enacted layoffs and cut expenses such as training and education initiatives; they reduced benefits; and they stopped communicating with their employees.
Although these measures were necessary in many cases, employers have inadvertently created a situation that will make emerging from the recession incredibly difficult. Employee morale is at an all-time low, and employees are more disconnected from their employers than ever before. While employees may be happy to have a job, they’re not happy with the job, and employers are staring down the tunnel of unprecedented turnover and employee disengagement. That light coming towards them isn’t just the light of the economic recovery; it’s the runaway train of employee frustration.
While this may be a challenge for employers, for those brokers who are prepared, it may also be one of our greatest opportunities. The answer to both the employer challenge and to our opportunity lies in the HR department. For a long time, employers have wanted their HR departments to be more strategic, to be more of a driver of the business. This is no longer going to be a “nice to have”; it is going to be a “have to have.” The reality is that, as good as they are at what they do, HR professionals tend to be more administratively focused than strategically focused.
As we emerge from the recession, employers must once again start investing in their business. They are going to have to make sure they are in position to attract/retain the highest level of talent. They are going to have to re-build a culture (through training, education, communication and engagement) that will allow them to execute on growth strategies. They will have to lower their cost structure by being leaner than ever before, lowering turnover, and increasing employee productivity. They will have to determine what they are doing today internally that they should outsource tomorrow.
In all of these areas, they are going to need their HR departments to be a driver of the strategies. Unfortunately, the typical HR department is less prepared now than ever before to be that strategic driver. This is largely because as employers cut expenses that wouldn’t take revenue with it, the HR department was quite often at the front of that line.
However, this doesn’t change the fact that businesses need a more strategic approach to HR; they are just going to have to look outside of their own business for the right partner. This is where we/you come in, and it is here where we find our greatest opportunity. Let the internal HR department perform the administrative functions of HR; your opportunity is to fill the strategic void.
Taking advantage of this opportunity is going to depend on your recognizing that it is no longer sufficient to focus on the benefits offerings of your clients. Yes, this will still be a part of your offering, but it will be only a part of your offering. The future role you need to be playing will have much more to do with helping your clients maximize the value they get out of their human capital than it will with quoting insurance. Your future role needs be grounded in the following:
- Create the vision of what it will take for businesses to thrive once again. Most businesses are still in survival mode. You have to show them, in terms of HR and benefits, what it will take to get beyond simply surviving and start thriving once again.
- Identify the obstacles that your client faces. Before we can offer the right solution, we have to identify the real problem.
- Show them how you can be integral to their achieving their post-recession vision. Some of your future solutions are going to have to go well beyond the traditional solutions provided by brokers. They will have to include:
- Training programs
- Employee education
- Leadership development
- Cohesive management strategies
- Strategically designed communication plans
- Employee engagement resources
- Effective hiring/firing procedures
- (The list can go on from here.)
While we will certainly face many challenges, this will also prove to be a time of great opportunities. Now, more than ever before, it is time to abandon the “traditional role” and focus on your ability to control costs and make your clients more attractive to the marketplace. When your efforts and involvement allow your clients to be more profitable and to be a better-run business, you are going to get paid. Getting paid for the value you deliver, rather than the product you deliver, will be an infinitely more profitable model for you and your agency.
As a benefits producer/department/agency, you are at a fork in the road. It was Yogi Berra who said, “When you come to a fork in the road, take it.” You can’t afford to make such a cavalier decision; your very survival may depend on the path you choose. While it may feel easier to stay on the path with which you are familiar, it is the more difficult path—the one with which you will assume a new role with your clients—that will lead you to unprecedented opportunities.
No, it won’t necessarily be easy, but the rewards will make the effort worthwhile.
Reprinted from Rough Notes Magazine, June 2010 © Copyright 2010
Photo by versionz.