Fall 2010, No. 85

Obamacare and the Micro Market

The under 25-life market has been the subject of many articles by Eastbridge staff and the object of much attention by certain carriers over the last five years. Regular readers know that the micro-case Employee Benefit Broker (EBB) typically has a book of a few dozen such cases, offering predominantly medical insurance. Both these EBBs and the commercial lines property and casualty agents are among the few brokers who have survived in the micro arena. And both have been reluctant to embrace voluntary products, unwilling to risk disruptions to their clients who have their core lines of business. The medical/individual health companies have been eyeing this market during this period, especially during the last eighteen months. Many believe that the EBBs will have no choice but to jump on the voluntary bandwagon. And who better to give them a hand up. . .the company that supplies their main line products, of course.

But there is another, darker, possibility. What if the EBBs continue to resist the transition, forcing some out of business, but allowing others to grab up market share in a survival lunge? Or what if the micro-case EBB becomes an endangered species altogether? Is anyone able to serve this market en masse?

It’s fashionable to predict the demise of voluntary career field forces, but who is better equipped to penetrate and serve this market, either full or part-time? While many of these companies are focused on the ever-larger case market, the real gold might be at the other end of the marketplace. So is the answer career agents? Medical companies? Commercial lines P&C brokers? Let the games begin!

Prospective Information Partners: The Time is Now

This program has become the most common way for serious voluntary/worksite companies to access our research. Members receive all new reports (approximately 15) automatically plus can request any of the 45 reports currently available on our website. You can see the list by clicking here.

These reports have become the standard starting point for company product development efforts, marketing plans, distribution strategies, administrative benchmarking, and much more.

This is the beginning of the season for signing up as an Information Partner for 2011. New members sign up on a calendar-year basis (and can pay in 2010 or 2011). The rest is automatic and you’ll have all the data you need, as soon as you need it.

If you’re ready to move ahead in voluntary, call us and we’ll send you complete details.

Plan to Participate in the Industry’s Most Complete Voluntary Sales Survey!

Eastbridge Consulting has been conducting an annual voluntary sales survey since 1999. Our survey has become the “gold standard” for the voluntary industry because we have more companies participating and track more data. In our 2009 report, 60 companies were included and we expect more in the 2010 report. In fact, just in the last few weeks, we’ve been contacted by several companies that have not previously participated but want to do so in 2010.

As in past years, we will look at voluntary sales overall, by product line, by filing platform, and by distribution/broker segment. We also monitor takeover rates and sales by case size. What’s more, the report is free if you participate! In fact, the only way you can get the report is by participating.

So, don’t be left out. If you didn’t participate in 2009 but want to be in the 2010 study, let us know now so that we can add you to our distribution list.  Surveys will be distributed at the end of January 2011.

For more information on the annual study, give us a call at 860-676-9633 or email us at info@eastbridge.com.

Remove Your Blinders!

Those who are long-term readers of Outside Input know that, at Eastbridge, we don’t segregate the market into “worksite” and “voluntary.”  We believe these are the same market—and there is plenty of evidence to support that view. Every possible distinction (other than the actual filing platform itself) has been eliminated.

“Voluntary” companies offer heaped commissions, one-on-one laptop enrollments, and products like accident, critical illness, and even cancer. “Worksite” companies offer guaranteed issue, Internet enrollment, and group platform products.

With the realities of the market today, we are still amazed by the number of companies who confuse the two. They still see two different markets and continue to define their competitors as other companies that “look like” them.  These companies continue to benchmark themselves only against those selected companies. The problem is especially acute with group companies. Too often, the group company benchmarks companies that are almost irrelevant (because of the small amount of voluntary they sell) while ignoring the elephant in their own yard (i.e., the “worksite” company that is selling through the group company’s brokers).

Any company that ignores competitors simply because they are different is destined to become irrelevant themselves (at least as far as voluntary). It’s not whether another company sells the same products on the same platform that makes for a competitor. Competitors are those companies that go after the same brokers/producers as yours and have products that the ultimate buyer (the employee) feels satisfies the same need as your products satisfy.

For information about how to benchmark in a more holistic manner, give one of our consultants a call.

Morphing Brokers: First Evidence

Our 2010 Evolution of the Worksite Broker Spotlight Report has some interesting news. We have seen, in this and other reports and studies, movement among several broker channels (Specialists cases got larger, Employee Benefit Brokers increased dominance, and Career Worksite Agents lost share). But the big news was about the Classics. In 2002, we predicted that eventually we’d see the various channels beginning to blend together, and while the mass migration of EBBs to voluntary was the first clear indicator of the trend, our latest distribution report dispels any doubts.

While the vast majority of EBBs now sell voluntary (over 90%), and 33% also offer pension services, the Classic Worksite Brokers have been busy, too. Today, 68% sell employer-paid products and 25% have added retirement services. Both groups sell the same product lines, although, on average for the channel, the percentage of income derived from each line still tends to differ. There is now a significant overlap between the two groups.

You can’t tell the difference between them based on products sold, and the difference in the size of their agencies has narrowed. Even more to the point, there is now a group of these brokers who, based on their sources of revenue by product, cannot be pegged to one group or the other. Some came from a traditional group, employer-paid background and others from a voluntary/worksite background. This overlap between EBBs and Classic Worksite Brokers is the beginning of the trend. The morphing has begun in earnest.

For more information on this important report, click here. To order the report, call us at 860-676-9633.

The Virtues Required to (re)Build Distribution

New carriers enter the voluntary market and many others seek to redesign their existing distribution systems. Forecasting revenue is a mandatory part of either exercise. We can supply the average revenue per sales rep/regional, compensation data and other key metrics, but how they are used often amazes us.

The first step is to use data to peg average, 25th percentile and 75th percentile production expectations. If we then begin on January 1 and spend, say, eighteen months recruiting and launching a completely revamped core of reps, when does the system reach “average” production levels?

While the answer differs, depending on markets, portfolio, the distribution structure, and the type of recruits, a few comments are typically in order. First, the new reps need to be segmented by class, often into three-month cadres. Each cadre should be expected to produce zero in its first six months. The second six months varies, but using 25% of average is safe. For the entire second twelve-month period, between 50-75% of average usually works. Only in the third year does a cadre perform to the average.

And worse, the cadre will have some wash outs and some winners to produce that average. The washouts are replaced and begin the maturation cycle all over again. So, it’s the third program year for that first cadre to reach average, and it’ll be the fifth program year for the cadre hired towards the end of the eighteenth month start-up period. In total, the new or revised system will not produce at forecast average levels until at least the fifth year.

The key virtues are now obvious. For planners, realism and good data are paramount. But for everyone, especially senior executives, patience is the number one virtue.

New Report on Voluntary Rep Compensation Now Available

We have just released our latest edition of the Voluntary Rep Compensation report. We have conducted this study every two or three years since 2003.  Some of the findings of the new report include:

• Sales reps’ base salaries seem to have come down since the 2007 survey.
• Sales reps who market only voluntary tend to earn higher base salaries than do other company reps.
• A surprising percentage of companies in the survey have no specific voluntary sales goals for their reps.
• “Top” reps make significantly more than “average” reps with over one-quarter of companies saying their top reps make $400,000 or more.

With competition for quality sales reps continuing to be strong, carriers have to stay on top of the trends. For more details on the above and other findings, order a copy of the report today. Or for more information about the report, click here.

The cost of the report is $1,000. To order today, call us.

It’s 4th Quarter – Do You Have the Enrollers You Need?

Getting enroller resources is often a challenge for companies in the voluntary market. The crunch is felt especially during the 4th quarter when there is more need for enrollers but less “quality” enrollers available. Earlier this year, Eastbridge teamed up with Enroller Resource Center (www.enrollerresoucecenter.com) for a landmark new study.  The objective of the study was to help carriers better understand the needs of independent enrollers involved in the voluntary market. We were thrilled when we had over 430 enrollers respond to our online survey. In addition, we conducted in-depth interviews with over 30 enrollers. These enrollers were excited to share their thoughts. In doing so, they provided some valuable feedback that can help carriers in the future.

Some of the key findings of the study were:

• Most enrollers would like to work more often than they are currently working.
• Most do not get any type of bonus compensation from the carrier or enrollment company.
• Enrollers would like to be recognized for the quality of the job they do; they feel that those who hire enrollers don’t always distinguish between the high quality enroller and the less than quality one.
• Many feel they are not always appreciated and say they would welcome more communications from carriers.

The report explores all of these findings and more. In addition, we offer some recommendations on how to improve relationships with enrollers.

For more information on the report, click here.

Account-Level Lapsation

In our last newsletter, we talked about individual lapsation and the importance of conservation. Two easy steps demonstrate the importance of having a modern, vigorous program.

First, simply look at the amount you write in a year and the amount you lapse in a year. Both are premium (and the lapsed premium has already absorbed commissions, etc.), but consider the efforts you put into the first as compared to the effort you put into the latter. Does that make sense?

Second, have your finance officer compute the value to your bottom line of saving 10 percent of those lapses. Try twenty percent. The defense rests.

Accounts also lapse. The decision-maker decides to end deductions for your company, either dropping your types of products or moving to a different carrier. In either case, your relationship is over.

Maybe you call. Or you have a rep drop in to see them. You always contact the broker. But the reality is the decision has been made and it’s the first you’ve heard of it—and only rarely can you do anything about it.

The key is that the decision to drop deductions should not be your call-to-action. By then, you should have exhausted all remedies available, not just starting them. The decision to drop you should not be a surprise.

The answer is to identify the markers that predict account lapsation, collect that data, and build a proactive program of responses.

The most obvious marker is participation. A low number of participants in many cases and a low percentage in large cases are well-established markers. What is the danger point for you?

And what other markers are indicative for you? Reenrollment frequency? Broker relationships? Total premium? New product additions? What else?

The good news is that the data are at hand. These are your clients and you can talk to them. The bad news is that few companies pay any attention to markers, meaning that few companies collect the data that might avert account lapsation.

Conservation is good business.