Broker evolution: Are you ready?
Employee benefits brokers have served as a long-standing bridge between carriers and their clients. Many employers value working with a trusted benefits…
LIMRA recently partnered with EY to better understand the future direction of the workplace benefits industry. The research explored the perspectives of key stakeholders in this segment (i.e., employers, employees, brokers, and technology providers) and found that while brokers are still highly regarded, their role is rapidly shifting from a sales-focused, transactional business model toward one that is more consultative in nature. We expect this shift to accelerate over the next five years as several environmental trends driving this change continue to unfold.
With five different generations of employees, the makeup of the U.S. workforce was already changing prior to the COVID-19 pandemic. Increased use of independent contractors, the rise of the gig economy and emergence of remote work arrangements were each altering the traditional work model. The pandemic accelerated many of these trends and created new ones. Work-from-home became the only way for certain employers to remain open. The importance of benefits technology grew significantly. Employees, meanwhile, gained a renewed appreciation for protecting themselves, their families, and their livelihoods, which exposed the gaps in their existing coverages and available benefit options. As these trends converge, employers struggle with making sense of this rapidly evolving benefits landscape, increasing their reliance on brokers to help them navigate it.
LIMRA research reveals that an overwhelming majority of employers feel that their broker provides them with valuable support and advice, beyond simply presenting benefit options. More than 2 in 3 employers are very or extremely satisfied with the services provided by their broker or benefits advisor (a rating of 6 or 7 on a 7-point scale), with very few clients expressing dissatisfaction. When we look closer, businesses that receive consultative services and advice from their brokers tend to rate them higher than those that do not.
Brokers, however, cannot sit still. Despite the current high levels of broker satisfaction, our research shows that nearly half of employers are willing to purchase certain benefits directly without the help of a broker if presented with the opportunity. Does this suggest that brokers will be cut out of the sales process? Hardly. About half of employers expect to be more reliant on their broker over the next five years than they are today. This increases to 2 in 3 midsize and large businesses.
Rather than being cast aside, successful brokers will evolve to provide more strategic consultative services to their clients; it is the transactional brokers who are most at risk. Demand for advice will be higher than ever due to the growing complexity surrounding workplace benefits and the rapidly evolving landscape as employers look to build competitive benefit packages to attract and retain employees.
Employers are increasingly looking for brokers to address a broader set of needs, such as helping them with benefits strategy, benefits communication, and legal/regulatory issues. They will also turn to brokers for help when evaluating the myriad digital solutions that now support workplace benefits for both employers and employees. Many are looking to offer benefits that fit within their existing technology ecosystems, even if these solutions are priced higher than otherwise similar offerings that are less compatible.
Given the whirlwind of changes occurring within the industry, we expect a growing reliance on brokers moving forward, but in a different way than was the case just a few years ago. The broker’s role will continue moving away from fulfilling transactions and towards providing strategic advice and direction around clients’ benefits programs, as more benefits are acquired directly. Many brokers are already adapting. Leading-edge benefits advisors are well aware of growing customer expectations, realizing that unless they elevate their value proposition, they are at risk of losing clients to competitors who have.
Ron Neyer is associate research director of LIMRA’s Workplace Benefits Research. His area of expertise is monitoring and communicating trends in workplace insurance distribution. He manages carrier practice studies, as well as research projects focusing on employers, employees, and brokers/advisors.