Can Employee Benefit Sales Save Agencies In A Plummeting Market?

With the soft market taking its toll on insurance producers, property-casualty agencies facing flat or even negative growth are turning to employee benefits as a new way to compete, expand their product options and retain clients in today's volatile marketplace.

A growing number of p-c agencies are initiating a new employee benefits department, or looking to better leverage their existing benefits capabilities.

The norm for many strong, cross-selling agencies used to be a 70/30 revenue ratio, with p-c coverages generating the majority of earnings. But today, fast-growing firms are reaching a 50/50 split.

Successful p-c agencies will form a cohesive team comprised of counterparts within the agency to serve clients in their totality. An agency team that harnesses all lines of business can analyze client needs and determine which accounts to target for cross-sales. This is where the employee benefits side of the house can really bring additional value to the table.

Benefits producers on the team can also introduce voluntary or supplemental market products to clients already on the p-c books, both personal and commercial. Supplemental benefits can help fill gaps in coverage that may exist for an agency's clients and/or prospects. Some examples include:

o Group or individual health insurance.

o Coverage for lost income that may not be covered by employer-provided disability policies.

o Additional amounts of life insurance needed by a family.

o Additional expenses as the result of injuries or a critical illness.

These needs are very real. The supplemental market between 1997 and 2006 increased from $2.0 billion to $4.7 billion in premium written. All indications show this growth will continue in the future.

The p-c producer should bring the benefits producer into the agency-customer relationship to introduce benefits products. Together the benefits and p-c producers can improve retention and box-out the competition.

In an optimal commercial lines relationship, the benefits producer will gain entry into the client's firm for employee-focused products, while the client will begin purchasing all segments of risk-relief coverage from the agency.

Property-casualty agency owners who may be reluctant to bring in life or benefits producers for fear of how they will affect existing commercial accounts should begin by working the cross-sale with smaller clients initially.

To get started, the p-c producer can approach the treasurer or CFO in smaller accounts and explain that the agency is expanding to help clients with life, health and benefits coverages.

The producer can offer to do a free benefits audit, and explain, “If what you have is good, great, we'll leave it alone. But we can show you some ideas on how to sponsor some additional quality benefits your people may need as well. They can pay for it with payroll deduction at no cost to you, and we can reinforce the quality of your present programs.”

The p-c and benefits producers can go together on the visits, and the p-c producer can watch the benefits producer perform to evaluate and assess their approach. Then the team can move to larger accounts.

Property-casualty agencies can also benefit from reverse-cross-selling. When an agency has a strong presence in the employee benefits market, the benefits producer can bring his p-c counterpart into a whole new marketplace and create a vibrant center of profit for the agency.

If the benefits producer is looked upon as a partner in business development for his p-c associate, the relationship will grow and blossom.

Agents should look to shift from a strict p-c mentality to the broader role of risk management. Indeed, the singular-focused p-c agency will be a thing of the past, if it isn't already. Personal and commercial clients' risk includes the life, health and benefits side of the profile.

For example, some employers and employees may have a false sense of security that the traditional group long-term disability policy sponsored by the employer will take care of all their income protection needs.

What they do not realize is that benefit maximums, “earnings” that might not be included (bonuses, etc.) and the taxability of the benefits at claim time could lead to serious shortfalls and/or gaps in protection. This is particularly significant for the high-wage earners in the LTD plan.

Producers need to ask “high-yield questions” that disturb clients' thinking about their income and health protection. By providing their p-c counterparts with some simple high-yield questions, benefit producers can open up the opportunity for an integrated individual disability sale that in the past would probably have been left on the table.

When speaking on the phone with a customer seeking homeowners insurance, a p-c producer or CSR can say, “We can protect you against fire, flood, burglary and liability, but how are you protecting your income so you can pay the mortgage?”

Often that gets clients thinking, and the producer or CSR can then ask what disability protection, if any, is provided via the client's employer, who that employer is, what kind of plan the employer offers (voluntary?), and if the plan is adequate. That can set the stage for conversation with the client's employer that in the past could have been overlooked.

To complete the sales cycle and solidify the team relationship, many agencies have adopted formalized cross-sell incentives with regard to producer compensation and recognition programs. This approach serves as a tremendous catalyst for future referrals and reinforces the agency's goal of total needs selling.

Every business wants lifelines to grow revenue at a healthy pace. Some p-c agencies have done extremely well in this tough time by focusing on additional revenue streams.

The fastest-growing firms are strong in cross-selling commercial accounts on both voluntary and traditional employee benefits.