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Employee Benefits Brokers Forced to Comply with P&C Brethren

It is very typical today to see an Employee Benefits operation employ between 15% - 30% of the staff and generate upwards of 50% of the agency revenue. And while Property and Casualty (P&C) revenues have had modest growth or are flat, Employee Benefits revenue is growing at a double-digit clip. In spite of this, too often the Employee Benefits operation continues to use technology designed specifically for their P&C colleagues. As you would expect, this technology doesn’t match the Employee Benefits business needs forcing paper-based processes and work-arounds to ensure the job gets done.

We believe it’s time to reevaluate your priorities and take a hard look at changing the status quo. The good news is that there are a myriad of options to consider that can significantly improve the efficiency and effectiveness of the Employee Benefits operation while satisfying those within the agency interested in a consolidated database.

Client Management
Despite what some may believe, significant differences exist between the Employee Benefits operation and the P&C operation. The most significant being that the Employee Benefits operation acts as a broker while P&C firms have agent relationships with a broader set of responsibility to those they serve. For example, P&C firms perform numerous financial functions on behalf of their customers including billing administration and special financing arrangements. P&C firms may also have underwriting and policy binding authority and often handle a wide-range and complex product offering. Consequently, the P&C firm must track a broader set of customer data than the Employee Benefits operation.

Several technology vendors have evolved to manage the complex Client Management needs of the P&C organization. These include Applied Systems, AMS, Delphi and a hand-full of others. Between the three leaders, they control more than 80% of the P&C market. Conversely, the Employee Benefits business has seen no such market evolution. In fact, according to a StarNex Inc. survey of Employee Benefits brokers, the dominant Client Management system is ACT, a non-industry specific system, with a 40% share of the market. Most of the Employee Benefits industry specific systems evolved out of the Personal Lines market and none has more than a 7% market share.

Take Action
It is highly likely today that most Employee Benefits operations are using a Client Management system designed either for personal lines or for the P&C business. While you know these systems don’t meet your needs, do you really know what your specific needs are? Before considering an alternative to your existing system, you must conduct a thorough needs analysis within your operation. The “right” system must satisfy your priorities.

Based on our discussions with Employee Benefits employees, we have found four consistent themes:

Correspondence Tracking – Storing all notes, letters, outgoing and incoming e-mail, and appointment activities
Data Management – Storing all information relative to clients and prospects in an easy-to-find place
Document Management – More and more documents are received electronically. SPD’s, Renewal Letters, Policy Acceptance letters, all need to be stored and accessible
Reporting – Whether it is renewal reports, prospect tracking, or production, everyone always needs reports.

Once you have determined the specific needs of the Benefits Department, you must next consider how these requirements must be aligned with the needs of the agency. It is very likely that you’ll hear the owners of the agency say they must have a single system for the entire operation. We’ve found the principle concerns for a single system include:

It’s the best way to integrate commission tracking. While a single system makes it easier to report on consolidated data, there are ways to pass data back and forth among multiple systems to achieve the same objective.
You can more easily cross-sell with a single system. If cross-selling is one objective, then one must focus on the problem and find a solution that enables cross-selling while fulfilling the basic everyday needs of the Employee Benefits business unit. For most people knowing the client name, existing lines of business, and who the appropriate internal Sales and or Account Manager is sufficient. It is rare that one would try to cross-sell without engaging the individual within the organization who has a relationship with and knowledge of the client.
Why manage duplicate systems? Many P&C firms are large enough to have a Systems Administrator on staff and are already networked to house another system. These expenses are already built into the organization.
Why lay out more money for an additional system? While a new system will cost more money, it will more than pay for itself by ridding the operation of inefficiencies and equipping the Employee Benefits operation with the tools to more efficiently grow its top line. Also, in the past many agencies have wasted money attempting to modify their existing system to work in the Employee Benefits environment. Unfortunately, the net of this investment has been a realization that you can’t put a square peg in a round hole.

Truthfully, most Agencies want consolidated accounting and only about 10 pieces of data about an account so that both business units are properly aware of each other’s business. There are solutions to these challenges that can satisfy the objectives of both parties. However, one size does not fit all.

Solutions
Buy an existing system built for the business. There are benefits and costs to all. Systems built specifically for the Employee Benefits business already include data fields that make sense and include updates that are suggested by others within the industry. However, such applications are typically not modifiable by each user. So if you have a requirement that does not match up with the system, you will probably either have to wait for a system-wide change or not get the change made at all. Also, most of these systems have evolved form the personal lines business and unless you sell personal lines there are a lot of unnecessary fields that get in the way. These “off-the-shelf” systems tend to be the most cost effective way to go.

Building your own system from scratch. Building your own system gives the greatest flexibility but typically is the most expensive. You’ll get what you want; however you won’t get the benefits of being part of a larger user group. Also, someone within your organization needs to be skilled enough to tell the developer how to build the system. This sounds easier than it actually is. Many brokers have wasted a lot of time and money because they aren’t software designers.

Modify a Generic customer relationship management or contact management system. Systems such as ACT, Goldmine, SalesLogix, Pivotal, Clientelle, etc…fit in this category. These systems are designed to be easily modified for your business. They are flexible and usually have large install bases and can more easily integrate with other systems. The drawback is that one still needs to tell a developer specifically what to include in the system. These systems also can range widely in price and the development costs often exceed the actual cost of the software. However, in most cases this solution is affordable, costs a lot less than building it from scratch and achieves all your objectives.

Modifying the P&C System to Accommodate the Employee Benefits. If you are unable to convince anyone that you need another system, you should at the least lobby to modify the existing system. While you will be satisfying some within your firm for a single system, your enhanced systems will likely fall short of satisfying all your objectives and will undoubtedly cost more than an off-the-shelf solution. Even if the existing system were easy to modify, which is highly unlikely, it takes experience and skill to define your requirements and integrate them into the existing system.

Conclusion
With fewer medical insurers in each market, commission schedules heading lower, and clients demanding more service, it will become even more important for an Employee Benefits business to operate as efficiently as possible. In order to do so, one must be equipped with the proper tools and technology to manage their business. This does not have to be at the expense of consolidated reporting, accounting, or cross-sell activities. Identify and prioritize the needs and then seek the solution that best fits the organization. These solutions are out there. Regardless of what path you choose, we are confident that you will move substantially closer to satisfying the Employee Benefits business unit needs while satisfying the one-system proponents.