You don’t have the time or expertise to shop for
But some brokers do little more each year than quote the same insurers with higher costs, deductibles and co-pays. Some don’t help you evaluate vendors and benchmark costs.
Those issues are bigger concerns than ever to CEOs, who are becoming more involved in the final stages of choosing benefits plans.
Benefits brokers usually charge commissions of anywhere from 3% to 5%. But it’s not wise to choose a broker based on commission rates alone; good and bad service comes at all points in that range.
Here are some issues to consider when selecting the right broker:
- Think of benefits brokers as consultants, and choose one with that same care you would put into selecting an accounting or law firm. Tip: Ask for references from companies within and outside your industry.
- Require benchmark data. Brokers should provide regular benchmark reports that compare the cost of your organization’s benefits with those offered by other companies in the same industry and region by size, category and other characteristics. Some brokers provide benchmark data that compare only their clients to each other. Ask whether benchmark data include companies that aren’t clients.
- Realize that big isn’t always better. Large brokers often claim they can get the best rates, but be skeptical. All brokers have access to the same rate information. Larger brokers may have more staff that spends more time accessing underwriting information and research from various departments within insurance companies. However, such brokers may charge a higher commission.
5 questions to ask brokers …
This year, ask these questions of your broker or of brokers you’re considering using:
1. Do you have special deals with insurers? Some brokers have exclusive arrangements to represent certain insurers for some types of coverage. The deals often involve financial incentives or compensation for reaching certain sales goals or quotas.
But be aware that they may not be the best deals for you.
2. What’s the ratio of account service staff to client organizations? There is no standard industry ratio, but you’re likely to get better service from firms that don’t have the highest number of clients per individual broker. You also may pay a higher commission.
3. What’s the turnover rate among clients? Do clients move to other firms after a year or two to seek more options at lower costs?
4. Do you already have clients in our industry? How much do you know about our line of business?
5. Do you update clients on the latest trends in benefits and changes in federal and state laws and regulations?
… And 3 questions to ask yourself
1. Does the broker ask questions to understand the relationship between your organization’s benefits and its strategic goals?
2. Is the broker trying to sell you specific services, or is he or she selling the role of advocate or consultant for your organization?
3. Will the broker work for your organization to get the best deal possible, or work for the insurance company to earn a commission?
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