Boca Benefits Consulting Group Inc.

Please click here for VB proposal.  

Why Did BBCG Select AWD As Its Recommended Carrier As Opposed To Alterntives?

The Broad Issues

• As an employer are you getting the highest return on the investment you make offering voluntary, payroll deduction, benefits (i.e, “VB”) to your employees?
• Do you have a comprehensive VB strategy in place both for the present and for the post-healthcare reform environment?
• Do you have a mechanism in-place that allows your employees to purchase health-related voluntary products with pre-tax money while saving your company related payroll taxes?

New Dynamics Change the Paradigm

How many people don’t know who “the duck” is at AFLAC? One would think that name recognition alone would dictate  that employee benefits brokers lean towards that carrier in order to maximize the perceived satisfaction of clients’ employees pertaining to the benefits for which they pay 100% themselves. Employees who see, and hear, that advertising icon are likely to believe the carrier to be the industry leader, especially true absent any other significant carrier mass media advertising. In fact it is the undisputed leader. However, it earned that position before VB became such a critical part of an employer’s strategy and when many brokers really didn’t mind a little client erosion around the edges by non-competitive, captive, AFLAC agents.

In the last few years, this segment of the industry has evolved into an entirely new species:

• The carrier players have changed.
• The distribution chain has been altered.
• Corporate strategies are newly attuned to how this piece fits.
• Some group carriers have stuck their toe in the water only to find that they really don’t know how the game is played (n.b., mostly from a marketing expense perspective and less so from a product development perspective). Many of those carriers pulled back but the top group carriers are beginning to recognize that VB is a must in the post-healthcare reform environment.
• Projections of 2x and 3x multiples of individual healthcare policies being sold in 2014 and beyond makes product differentiation (i.e., preventing individual healthcare policies from being perceived as no more than a price-driven homogeneous commodity) a critical strategic consideration for the traditional group carriers.
• It is more than likely that the major group carriers known for their “buy” versus “build” decisions are in various forms of acquisition due diligence as this piece is being written. The histories of Wellpoint, Aetna, CIGNA and UnitedHealthcare are replete with those kind of transactions.
• As the VB business shifts more to brokers, a higher level of carrier evaluation will take place. It will not be sufficient for carriers to just dabble around the edges of this segment of the industry any longer. They will need to be at the state-of-the-art both in terms of product and in terms of distribution support.
• Being unusually candid here, carriers will be forced to eliminate unnecessary interim levels of compensation in the distribution chain (i.e., not pay percentages to non-productive carrier management not actually in the broker chain). Failure on this item will shift broker incentives to the group of  VB carriers which maximize their personal compensation. The lack of competition to date has allowed an odd, and significant, skewing of compensation arrangements. However, it is not a sustainable model as the strategic focus shifts and brokers become more VB knowledgeable.

BBCG’s Thinking

A fundamental question for BBCG as a broker has been “How many VB carriers do we want to represent?” There are dozens in the industry. The top 4 or 5 are well known names. Each has strengths and each has weaknesses. Some employers show an inclination to use their primary group carrier to minimize administrative requirements. Others consider the carrier choice in the same light they have for many years (i.e., the AFLAC model with little return on investment). However, BBCG strongly believes that, concurrent with the sea-change we perceive, VB expertise, both in terms of strategic placement of benefit types and in administration, will be the key determinants of the most forward thinking employers.

Clearly, price will be an issue as well. However, BBCG also believes that competition in the industry segment will draw pricing closer to a mean in apples-to-apples product comparisons.

As a broker, the carrier representation decision becomes one of “value added” for our clients. We recognize that we might lose business by not representing all the carrier players in the way group insurance has traditionally been sold. However, as we seek to deliver the “value added” solution, it is our intent to only use carriers which show the most depth in strategic product placement (i.e., the best mix of products to maximize a desired return on employee benefits investment) and in overall support. Strategic product placement requires not only the greatest number and most innovative mix of products. It also requires a sales staff highly trained to design a complementary offering of VB products as opposed to a wholesale portfolio offering with little profound thinking about the end result.

With the above objectives in mind, BBCG has spent significant time in analyzing the top stand-alone VB carriers in our markets. We will continue to avail ourselves of the group carrier offerings where appropriate. However, for the more discerning employers we have concluded that Allstate Workplace Division (“AWD”) allows us to deliver the greatest “value added” to our clients and we will use that carrier virtually exclusively for that purpose. Some of our thinking:

• The product offerings have the most depth.
• The sales staff has the greatest expertise in terms of strategic placement.
• The administrative support is state-of-the-art.
• Market results (i.e., year over year premium growth) point to their leadership position.
• Conversely, the erosion of market position of alternative carriers points to their weaknesses.
• As a specialty VB carrier AWD also shows staying power, investment, and continued future innovation as opposed to the “toe in the water” approach mentioned above.

The above being said, we recognize the unique strengths of some of the other VB carriers, especially in the area of Life and Disability products. BBCG intends to use such carriers where the scope of the assignment is relatively narrow to those objectives. However, for the broad strategic assignments we see AWD as the carrier which delivers the most value for employers.

We welcome all questions and inquiries.  Please click here to request a VB proposal or strategic placement meeting with BBCG and an AWD representative.


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