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Small Business Digest


Special Report: Agents, Corporate Managers Have Changing Perspectives

Insurance agents may be getting a bad rap from corporate managers who are displeased about their efforts to keep healthcare costs down.

In Information Strategies, Inc.s (ISI) annual survey of business leaders, more than one in three said they were unhappy with their agents healthcare proposals.

In many cases, these respondents said they felt agents were not getting the best rates for them and not offering the best options for their companies and/or employees.
More than three of five (61%) said they asked for additional research and proposals with a majority of those respondents saying second round proposals were often 10-15% lower than the first proposals.

Agents respond by saying they are changing the coverage parameters but some corporate responders claim the rates are reduced for the same options.

At the same time, with many companies wanting to explore consumer directed healthcare options, primarily HSAs and HRAs, these corporate respondents said often times they were not included in the initial proposals.

With Bank of Americas entry into the TPA arena with a million-member takeover being the first of what could be many such actions, agents face a formidable competitor.

ISI has long-argued that banks would be the ultimate winners in the HSA arena and recent events are proving this prediction to be accurate.

Many smaller employers, as well as several large (10,000+ corporations) have started to question the value of their insurance agent in the healthcare arena.

While healthcare insurance has long been a step-child to the more lucrative life, liability, and property side of corporate marketing, it is proving to be an effective tool for gaining new clients.

In the same survey of more than 1,000 companies, respondents reported they had switched agents in 13% of the cases.  The primary reasons for these changes were the ability and/or willingness of other agents to provide attractive healthcare packages. 

This figure compares with the 7% who reported changes in the 2005 report.

A majority (59%) said they either reduced or maintained their dollar expenditures for healthcare in the new round of renewals beginning in January 2007.

To be sure, many (41%) said they had shifted more of the cost to employees in the latest healthcare offering.

Only 3% said they had dropped healthcare insurance entirely and just 2% said they had added healthcare insurance in 2006.

Of those who did add healthcare insurance for the first time, almost all had added HSA policies.

In almost all cases, (88%) said they had utilized new agents to obtain these policies.
While many healthcare insurance providers have talked a good game in terms of rates, they still dont reflect utilization rates of companies who offer CDH plans.

In response to requests from ISI, a majority of responding companies in 2006 indicated their employees were utilizing healthcare insurance at rates far lower than in prior PPO or PSO programs.

Although the numbers surveyed are not yet statistically significant at this time, utilization rates or reporting companies have fallen to as low as 65% versus rates of 99-110% in prior years.

Executives at these companies expressed displeasure that agents had not fought more aggressively for them when rates for the new plan year were being set.

On their behalf, agents argue that they are powerless to affect rates but seem reluctant to argue with insurance companies who pay their commissions.

Caught in this changing world, agents need to develop a strategy that clarifies in the minds of their clients that they are acting as honest brokers.

When asked if they thought their agents had done the best job possible for them in terms of healthcare insurance, a strong majority (63%) said no.

Again, comparing this result with the 2005 survey shows that dissatisfaction had almost doubled from 36%.

The survey is ongoing and final results should be available in February.

In the meantime, banks and other institutions are weighing heavily the option of offering insurance programs.

A little known facet of the last day changes made by the 109th Congress was rules liberalizing rules under which banks could offer insurance.  When these regulations are clarified, agents may find a formidable new group of contenders in the insurance field. 

Banks are the custodians of HSA accounts and with the IRA rollover provisions linking them to HSAs are well positioned to carve out a section of their marketplace.

Coupled with the growth of Internet based insurance services, agents face some daunting changes in 2007.

Only time will tell if they are capable of meeting and adjusting to them.

© 2018, Information Strategies, Inc.
P.O. Box 315, Ridgefield, NJ 07657