Fall 2006 / No. 69
Many years
ago, producers who were either agents for a worksite company
or a broker that specialized in worksite sales made most of
the voluntary/worksite sales in the market. In 2000, Eastbridge
conducted a study that identified a definite evolution among
worksite producers. That study identified five broker segments
selling voluntary (in addition to the career agent). Earlier
this year, we conducted another study to see what has changed
and found that many facets are both the same and different!
What is
the same is there are still many types of brokers in the voluntary
market, each type with different needs and expectations. But
the segments themselves have changed from the 2000 results.
Our latest study identified seven different broker segments
that sell voluntary products (at least some of the time). With
the addition of the career agent (which is not included in
the study), there are now eight different producer segments
in the worksite market. Interestingly, while there are eight
distinct segments, we found that, in many ways, the segments
are coalescing. That is, the number of differences between
the segments is fewer than in the past. So what are the 2006
segments?
Three of
these segments specialize in voluntary product sales and include:
- Specialists
Brokers
- Classic
Brokers
- Career
Agents
As noted
earlier, many years ago, the vast majority of voluntary/worksite
sales came from these three segments. But in today’s
market, these segments together accounted for about 47 percent
of the sales in 2005. And, their share of the market is decreasing—not
rapidly but still decreasing. Clearly, the voluntary market
is becoming “main stream,” with more and more producers
introducing voluntary products to their accounts.
The next
broad grouping is the benefits broker. This group separates
into four different segments, which are the fastest growing
segments. Previously considered just one segment, the employee
benefit broker segment has splintered into two different segments
(Large Benefit brokers and Small Benefit brokers), and we found
two related segments (Large Commercial Lines and Small Commercial
Lines brokers). These latter two segments are the benefits
departments of commercial P&C agencies. The “Multi-Line
Agency” segment from 2000 has also been absorbed by these
segments (primarily the Large Commercial Lines).
While all
of these producers are all “benefits-oriented,” the
current study revealed some important differences between them.
In addition to the size difference, Large Benefit brokers have
been selling voluntary longer and like to experiment more with
various products, enrollment methods, and platforms. This segment
also “actively” sells voluntary as an add-on to
core coverages. Small Benefit brokers, on the other hand, tend
to offer voluntary much less often and usually only on a defensive
basis. They are much less experienced and more conservative
in their approach. The segment also requires more carrier support.
The Large
Commercial Lines brokers most often offer voluntary term and
dental, but also offer STD, LTD, and prescription drug coverage.
These brokers frequently use only one or two different carriers
in an account. They are most concerned about a carrier’s
ratings and responsiveness.
The Small
Commercial Lines brokers are the “new comers” to
voluntary. When they sell voluntary, they are most likely to
offer term, STD, LTD, cancer, vision, drug, or long-term care.
While some of these are simply variations on their true group
(employer-paid) products, others reflect that they are teaming
up with worksite/voluntary specialists to bring products to
their cases.
The remaining
segment is a “carryover” from 2000 and is the Occasional
Producer. This is the catch-all category for brokers who bring
carriers voluntary cases but who are not in the benefits business.
These brokers may be life insurance agents, pension representatives,
or any other professional who has relationships with the HR
or executive staff in an account. These people have little
understanding of the voluntary business and rely heavily on
carriers or other brokers to handle the case details. As a
result, the case dynamics for these brokers mimic the other
brokers with which they team. Occasional Producers have little
in their profile that is unique.
In summary,
the landscape is changing quickly. As more and more producers
enter the voluntary market and gain experience, we believe
the landscape will continue to change. To be successful, carriers
will need to stay close to their producers in order to keep
up with these changes and their needs. And, strategies will
need to change to stay competitive—both with existing
segments as well as new segments. Carriers should not expect
that just because a strategy has worked in the past, it will
work forever. Distributor research is a critical tool that
helps keep carriers informed about what's happening in the
industry and, more specifically, the distributors' satisfaction
(or dissatisfaction) with the company’s services and
offering. Having this information and knowledge allows carriers
to make more informed business decisions and to act proactively
(rather than reactively) when things change.
The
Evolving Voluntary Broker: A Look at Who is Selling Voluntary
in 2006 is a recent Eastbridge Spotlight report. The
research was conducted in 2006 with over 500 brokers known
to sell at least some voluntary products.
For
more information about the report or how Eastbridge can help
your company, call us at (806) 676-9633. |
