Selling P&C and selling employee benefits are two very different disciplines, yet market factors have created cross-selling opportunities.
The consolidation of the brokerage industry continues, and with that comes a trend that brings two distinct types of coverage under one roof: employee benefits and property and casualty insurance.
The two areas have different issues and different costs. P&C premium rates have been mostly steady or even decreased in recent years, while rising health care costs have continued to drive up premiums for employers.
This cost issue is playing a role in merging the two areas, according to industry experts. “Due to turmoil in the benefits environment from the cost standpoint, people are taking a much harder look at how to address those costs,” says Josh Fragoso, vice president and director of sales at Oswald Companies. “Even in the larger companies, you're seeing more of a collaborative approach because of the financial impact that benefits have as a risk to the profits and losses of an organization.”
Related: 3 ways P&C and benefits brokers can set themselves apart
Craig Hasday, president of EPIC Northeast Benefits and Frenkel Benefits, agrees that rising health care costs have played a role in brokerages' decision to offer products in both areas. “It's a very different discipline selling employee benefits than it is selling P&C,” he says. “You need a completely different skill set. In the past, it was difficult to bridge that gap. But recently, because the costs have grown so exponentially, the C-suite has started to move on the employee benefit space, and the financial sophistication that has existed in the P&C side is spilling over to the employee benefits side because health care financing is different than it used to be.”
A turbulent market
Consolidation of brokerages as an industry trend is leading to two types of agencies, says Dave Evans, senior vice president at Independent Insurance Agents and Brokers of America. “What we're seeing are agencies that are either very good at a niche market, or they have really leveraged a holistic approach between the P&C and the benefits world,” he says.
Hasday notes that P&C, while profitable, has not seen the kind of growth that the benefits side has seen—partly as a result of grappling with cost issues. “We've had a sustained, soft P&C market for many years,” he says. “At the same time, brokers see the growth of benefits revenue has by far outstripped the P&C revenue and they say, 'Hey, I want a piece of that!'”
“The fact is that there's been more disruption in the benefits field, and that has driven that field to evolve very rapidly,” says Fragoso. “When health care reform came, there were a lot of firms that said, 'We're just not going to deal with it.' Most of the firms we've acquired have been on the benefits side.”
Trust and communication
So what's the secret to success in a business that requires two different skill sets? According to Fragoso, good communication is key. “It's crucial to have an understanding of how clients digest information, according to the culture of their company. That understanding can lead our teams to really jump-start the relationship and ensure that we're communicating and working in a way that supports what's unique about that client,” he says.
That includes meetings between the two shops to coordinate their work. “We'll have the teams meet and we'll talk about observations we have and challenges that the client may face in their industry,” Fragoso says. “It helps us to better understand the needs of that client and where we could execute value. The communication between both sides is absolutely critical.”
Fragoso adds that without communication, the dual approach is unlikely to work for clients. “If a brokerage doesn't have a collaborative environment, we'll see a redundancy of information being communicated, we'll see areas that are missed, inaccuracies in information. You can tell they're just not communicating.”
“They key for the brokers is trust,” says Hasday. “The confidence that your colleagues on the other side are going to be as diligent and resourceful and client-focused as you are,” he says. “If you're confident that the other side of the house is just as good and just as diligent as you are, there's no reason why you wouldn't cross-sell.”
“There's tremendous opportunity in cross-selling,” he adds. “There are more revenue opportunities; there is better 'stickiness' with clients; it's one less relationship to foster. But you have to be confident it's the right answer.”
Breaking down silos
According to Hasday, there can be territoriality among both brokers and clients. “There's definitely a desire among the HR people to have control of their domain, and they don't necessarily welcome the encroachment of the risk force into the mix,” he says. But the high costs of health care makes doing it the old way more and more difficult, he adds.
On the other hand, clients often welcome cross-selling because it can simplify things. “If they can find a firm that has expertise in benefits and in P&C, they'll welcome the cross-disciplines; that's one less relationship they have to manage,” Hasday says. “There is risk with expanding the relationship, but the rewards outweigh it.”
Fragoso says some companies are fearful of putting too many eggs in one basket. “They ask, 'Are we dealing with a jack-of-all trades instead of an expert in each field?' But overall, we've seen a reception that's positive, because they have a firm where there's expertise in both areas, and they can leverage that for the best outcomes. There's a lot to be said for efficiency.”
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