What's ahead for the benefits industry in 2018? There are several trends that will affect benefits professionals in the coming year, including the evolving relationship between brokers and payroll, Zenefits' strategy shakeup, and industry dynamics benefitting small firms.
Let's look these questions one at a time.
Will payroll provide more referrals to brokers, or vice versa?
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The sometimes-complicated relationship between brokers and payroll providers is not often discussed outside of the benefits community. Some brokers have great, mutually beneficial relationships with one or more payroll companies, while others see payroll providers as a threat. How this relationship evolves will depend on whether payroll providers provide more referrals to brokers, or vice versa.
Some payroll companies pay referral fees to brokers. Some don't, but see brokers as crucial channels for business-building. Other payroll providers feel they have the bulk of HR's attention, and can therefore provide more referrals to brokers than brokers could provide to them.
But a good broker can absolutely influence payroll, especially as brokers shift toward an increasingly comprehensive HR consulting role. Whether payroll or brokers provider more referrals could have implications for the success of both segments.
Will Zenefits push big houses to consider tech for small employers?
With a strategy shakeup earlier this year, the Silicon Valley tech company is still disrupting the benefits industry. Zenefits sold its advising book of business and now partners with brokers, focusing at first on the nation's biggest firms.
This strategy will likely lead large agencies to evaluate their tech strategy. The big brokerages will be pursued by Zenefits and will want to see what else is out there. Large agencies not initially targeted by Zenefits will begin to evaluate software too, in an effort to compete with their larger counterparts.
The result is that most big agencies will be reviewing tech next year. But the question is whether they will actually get online. It may be that 2018 is spent reviewing options, while the options continue to sort themselves out.
Will reduced consolidation benefit the smaller players?
M&A may be reaching its peak, and smaller players may begin to crop up. This is cyclical — the benefits industry, like finance, legal, and other industries, tends to oscillate between periods of M&A and segmentation. Agencies have been consolidating for years, but independent agents are beginning to see the opportunity to split off and pursue a more entrepreneurial strategy.
Those smaller agencies will have a big advantage in 2018 related to the industry's push toward technology. This is because it can be much easier for smaller firms to adopt technology. If technology is important to the employer and the smaller agency has it, then the small agency will have a greater chance to win.
No doubt it will be an interesting year!
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