We are not the first segment of the insurance business to experience divergent markets. P&C firms moved into this realm long ago. Today, many agencies build specialty practices around industry verticals. For example, a broker might specialize in working with contractors or trucking firms. Interestingly, the most profitable property and casualty clients are often the least profitable for benefits.

Mature risk management solutions are often found in the P&C arena, but are more than likely a harbinger of things to come in the benefits arena. Yet the starting point for most employers may, in fact, come back to a simple construct: Are my employees assets or expenses? From there they will need to address the foundational elements of a benefits program and consider group-based or individual coverage.

At the same time client approaches to benefits are likely to divide, several other elements impacting our profession will converge: Health insurance products will become standardized, underwriting for smaller employers will vanish and all forms of pricing will become transparent. Simultaneously, carriers will become more selective about which agencies they work with and to what degree services and compensation will support the partnership.

In the past, most health insurance carriers made their products available to any agent. Already, some are starting to limit access to products or exchange solutions to only those growing firms with existing scale. It is expensive and cumbersome to deal with hundreds or thousands of distribution points. Carriers are seeking more efficient forms of distribution. 

Against this backdrop, how can we distinguish ourselves and provide value to employers? By providing products and services that are needed and expanding our definition of client to include not just employers, but also to employees and their family members. We have to evolve our strategy, aggregate our efforts, expand our capabilities and solution set, and invest for the future.

Many pundits speculate that groups of less than 50 lives will get out of the benefits business. I fundamentally disagree. Every employer will more than likely need to manage a benefits program that may or may not include group-based products. Moving forward, I predict organizations that view employees as assets will still require traditional advisory services and group-based products, as well as advancements such as private exchanges that position them on the leading edge of talent recruitment and management. This breadth of services will be important whether a company has 20 employees, 2,000 or more.

Advisors interested in competing in this territory need health and ancillary expertise, and superior resources to demonstrate their value. In this new environment, they will have to charge fees for these services to maintain profitability and readily be able to support both group and individual product placement, plus ongoing support services. 

Serving businesses that view employees as expenses will require significant innovation. If a business decides to drop health benefits, it may not only have to pay a penalty, but also deal with ill will from employees who will be angry about the loss and confronted with decisions they are unprepared to make without advice.

What if you could convince the decision-makers to continue spending the same amount of money with your firm and you will help each individual navigate the system? In addition, you could provide access to a variety of ancillary products. Your firm would make money through the employer, as well as commissions through placement of insurance products.

This option provides a solution for those who will migrate to individual purchasing experiences. Employers would provide the framework — through your firm — without financing and controlling all or a portion of key product decisions. To do this efficiently, an advisory agency will need additional resources including a web portal, a call center and technology that enables direct communication with each customer.

There is no question that advisory services will remain necessary in the employee benefits arena. The real question is what we will be asked to do — and at what compensation level? Our industry will survive through this change.

The greatest challenge lies with the thousands of sole proprietors and small agencies that lack the scale, capital and talent to evolve their offerings. I am not suggesting that this is a lost cause. In fact, there are immense opportunities for innovative ground-breakers who are willing to try new approaches to their profession. Where some see problems; others see opportunities. Where do you stand?