Recently I had the pleasure of speaking at the third annualWorkComp AdvisoryGroup's “Knowledge and Networking” event. (The organizationworks with independent agencies to develop sales strategies,centered on but not exclusively targeted to Workers' Comp.)

I spoke on the challenges faced by both the publishing industryand independent agents. But while my presentation was no doubtscintillating to the attendees, they were probably more interestedin what WorkComp co-founders Frank Pennachio and Susan Toussainthad to say about upcoming industry trends and strategies. Theyfocused on three: the producer-performance gap, the influence ofbig data and health-care reform.

From the attendees' perspective, perhaps the most disturbing ofthose trends is the last.

Most WorkComp Advisory clients are midsize agencies that servesmall to midsize customers. Pennachio is concerned about thegradual creep of multinational brokers into the Employee Benefitsand Health Care arena, starting with the largest corporate buyersof benefits. But technology, buyer need and economy of scale couldsoon enable big brokers to target the 50-employees-and-underbusinesses—the independent agent's bread and butter.

Using private Health Insurance exchanges as the enticement, thebiggest brokers could soon be “buying their way into your clients'offices,” Pennacchio said.

He noted that both Aon Hewitt and Arthur J. Gallagher are getting into the Health Insurance exchangebusiness. Aon Hewitt announced it will assist individuals with questions they have about the plansoffered and will be compensated with fees and commissions paid byinsurers that participate in its program. According to MikeChristie, senior vice president of exchanges for Aon Hewitt, “Thereis a lot of work employers no longer will have to do.”

This is great for companies, especially because under thecurrent model of an employer-sponsored defined-contribution plan,tax law still allows deductibility if the company works with aprivate exchange, such as those run by Aon Hewitt and Gallagher. Ifan employee goes to a state exchange for an individual policy, theemployer loses this deductibility. Additionally, by working with abig broker's private Health Insurance exchange, employees can justgo to a website and have the broker administer their coverage, andthey can call a 1-800 number if there's ever an issue.

It's not so great for independent agents, whose businessrelationships might be compromised if big brokers get into smallerbusiness.

“Some midmarket agencies think that health-care reform won'taffect them, but this trend will,” Pennacchio said. “Instead ofwringing their hands about health-care reform, the big brokers areleveraging it as a business strategy. With technology, health-carereform and their power, they'll be able to engage with employers ofall sizes—and you'll have them in your shops.”

Big brokers are also acquiring Employee Benefits-only agencies.According to MarshBerry, which provides consulting services toagencies, Employee Benefit deals so far this year have accountedfor 50 percent of the transactions completed by the Top 3 brokers.This means they're buying access to accounts they would have nevergone after in the past, Pennacchio noted.

The situation could develop along the lines of ADP and Paychex's entry into the Workers'Comp insurance business. Fifteen years ago, when these payrollcompanies began referring customers to a 1-800 number for Workers'Comp quotes, agents considered them “ankle biters.” Today, they'reopening agencies of their own and getting contracts with the samecarriers as independent agents.

So what can independent agents do to respond to this wake-upcall? “Get out of the transactional approach to business and proveyour value to your clients,” Pennacchio said. “Transactionalbusiness is threatened by technology. It's happened to travelagents; insurance agents are no different. If you've played thetransactional game and it's worked, it was only because the bigbrand-name brokers didn't want your business. Now they can be inthe door electronically.”