Brokers need to walk the walk: A Q&A with Seth Denson
The benefits industry's Seth Denson weighs in on what it will take brokers to be successful in the coming years.
The COVID-19 pandemic has rocked nearly every facet of our economy. And while the benefits business hasn’t been immune to these effects, many of the setbacks could be temporary. While stay-at-home orders and economic uncertainty may have dampened the market for acquisitions, many industry professionals expect it will heat back up quickly.
The same is true for the health care industry, where even businesses once immune to the effects of economic recession are now stumbling. But the expectation is those that are able to weather the storm will come back even stronger.
Related: Walmart entering the insurance game?
BenefitsPRO reached out to Seth Denson, partner and co-founder of GDP Advisors, to get his perspective on the market forces shaping our industry now and in the years ahead.
How will the coronavirus pandemic impact the benefits industry?
There was an interesting thing happening before COVID that I think will actually accelerate. The industry was stuck in the “shiny object syndrome” phase—all of the bells and whistles everybody was talking about, and the search for the silver bullet. Our industry was in a place where you had a lot of people who were good at talking but had no idea how to walk the walk. That won business, but it was not sustainable unless you were really lucky.
What the coronavirus will do is exacerbate the timeline of that luck. Employers coming out of this won’t be satisfied with the talk; they’ll want to see how you’re going to execute.
Our biggest competitor in the industry pre-COVID was complacency. When you have a booming economy, those of us in the industry talked about the rising cost of health care, but it was just not a big rock for employers/CEOS. The days of complacency are over, which screams opportunity. We will have our best year ever, and it will be on the back of coronavirus.
What do brokers need to do to stay successful?
If you’re trying to get into this industry without significant capitalization and a Rolodex, you’re in a lot of trouble. You have to be able to deliver on the things that you’re talking about. It’s expensive to invest in the resources to be able to deliver on the strategies that are out there.
For the independents, they’re at a crossroads. Do we double down on being independent and make the big investment to deliver what our industry is going to require? Do we find one of these conglomerates that we can be part of? Do we sell and get out? Or do we stick our head in the sand and hope for the best? We saw that after the ACA when there was this massive movement of mergers and acquisitions.
What impact will the upcoming election have on the benefits industry?
If Biden wins, those who were going to stick their heads in the sand are going to get really scared and sell. Those who were going to double down on investment are going to look more toward maybe doing something with somebody who has already invested.
If Trump wins, the people sticking their heads in the sand will dig in deeper. The independents debating whether to make a deal will instead look more toward making the investment themselves.
What impact do you think health insurance startups such as Bind, Gravie, Sidecar, etc., will have on the industry?
I love the idea behind what Bind is doing. I think they could be a gamechanger. The challenge that any of these companies are going to have, though, is their ability to crawl/walk/run into what it is they want to accomplish. Employers don’t want to just rip the Bandaid off. Culture still matters. We still have a vast variance of populations inside of companies. Bind, which sounds really cool and sexy to younger people, may not appeal to our 55-year-olds who don’t want that structure. There has to be a way that we can align both structures so that one takes the lead and the other slowly fades.
How has the sentiment toward M&A activity changed?
M&A is not necessarily the taboo topic that it once was. A decade ago, it was those who had and those who felt they never would.
The new players in the M&A world are changing the game. They’ve allowed the independent players to stay independent but do so in a consolidated manner, much like we’re seeing in that captive space on the health care delivery side. We’re seeing more of them say, “Hey, you still be you. We’re just here to help you.” That’s going to open up a new opportunity for firms that think, “We don’t have the resources to invest, but we want to grow and know what we can do if we have those resources. Maybe we align ourselves with one of these partners who’s going to provide the support we need.”
We’re seeing it on the health care side, too, with the emergence of captives and risk retention pools. It’s that idea that there is strength in numbers, whether you’re an employer buying reinsurance or a broker who needs to make a $100k investment in a new technology suite. When you can share these resources, you get to be you and we all work toward the greater good, I think that’s powerful. Our industry finds itself in a really cool place right now.
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