In a crowded world of insurance brokers, it’s difficult for anyone to distinguish between a knowledgeable and innovative mind and a broker that wants to maintain the status quo. It’s sometimes hard to know whether your broker has your best interests in mind, or theirs.
Does your broker recommend that you spend your money like it’s their own? At renewal, do they just shop the BUCAs (Blue Cross, United, Cigna, Aetna) of the world and/or recommend you increase deductibles, co-pays, etc. or increase employee contributions?
I’ve worked in the benefits marketplace for 40 years and I know how brokers operate. Many are motivated to maintaining and building their ‘book of business’ with certain insurance companies that compensate them handsomely. They may appear to be objective by shopping a few insurance companies, but they’re simply shuffling the chairs on the deck because they’re always the same insurance companies.
I started my own consulting business – Strategic Healthplan Consulting – because I got tired of the status quo. Think about this – unlike other professionals that are paid by businesses, i.e. attorneys and accountants, brokers are paid by a 3rd party – an insurance company, to sell their product to an employer. They’re not paid by the employer, they’re paid by an insurance company to sell their product. Do you think they are motivated to make meaningful change because of the excessive revenue they receive? Of course not. The reality is that the relationship is very much misaligned.
When a broker receives commissions from insurance company, it’s a percentage of the premiums paid by the employer. When the premiums go up at renewal the broker gets a raise. Is the broker worthy of a raise when the raise is a function of the claims experience of the employer? I don’t think so.
Brokers should be paid on a fee basis and whether they bring value to the employer and the members. Incentivizing brokers by paying them as a percentage of savings is even a better idea. Removing commissions from the premiums and compensating a broker on a fee basis can reduce overall cost by as much as 7 to 10%.
So it goes back to my original question: Do they have your best interests in mind or theirs?
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