More Than One Lane

More agencies are providing value to customers by bulking up on the services they offer. A recent survey by Reagan Consulting indicates that not only is the number of agencies offering value-added services increasing, but so is their growth rate.

Nearly four-fifths of the 100 leading sales agencies surveyed by the consulting firm offer at least one in-house, value-added service related to property-casualty risks. Three out of four provide in-house employee benefits.

And the study reports a 2.6% growth rate for agencies offering property-casualty services—twice the growth rate of firms not offering these resources.

“The competitive dynamics in the marketplace dictate that insurance brokers must compete on the quality of the value-added services they offer,” says Kevin Stipe, president of Atlanta-based Reagan Consulting. “Agents are out there competing for business, and they’re getting their heads handed to them if they have nothing to offer other than the ability to provide some quotes on a spreadsheet.”

Many agencies have always offered value-added services, but the practice truly took off in the aftermath of the 2007–08 financial crisis, when more firms hedged potential reductions in their insurance commission income with the revenues generated by the services. Now that the economy appears to be reviving, agencies are not pulling back on the services provided—rather, they’re investing more in them.

This is the case at Bouchard Insurance Inc., which specializes in workers compensation and offers statistical analyses for forecasting and verifying experience modifications, says agency president Ray Bouchard.

“We’ve hired three people on staff, and all they do is experience modification calculations leveraging statistical data from the [National Council on Compensation Insurance],” says Bouchard, whose agency in Clearwater, Fla. “We’ve even got our own proprietary software system that takes the client’s payroll and loss data and puts it into a formula for comparison purposes with NCCI statistics.”

Such services are increasingly important to attracting and retaining customers, more so than the actual insurance product.

“When our producers sit down with a potential client, they’re more apt to sell the services before the insurance,” he says. “We’ll offer to do an evaluation of the experience mod, running it through our formula, and then if we find an error that saves the client money, we say we will split the return 50-50.

“What’s really happening, however, is that we’re looking for them to hire us as the agent of record,” he adds. “Often, that’s what occurs.”

It’s also occurring at many other agencies with a services-oriented sales philosophy.

“It’s now pretty common for a producer to show up at a client’s shop with two or three different resource specialists in tow,” Stipe says. “The producer is the quarterback and they’re passing the ball to other key people on the team to make the touchdown.”

In offering value-added services to prospects and clients, many agencies are hiring specialists, rather than tasking current staff with mastering additional skills. Such specialists have backgrounds in employee benefits consulting, claims administration, risk management, loss prevention and workplace safety design.

But the related fees, where applicable, are not the primary reason for providing the services. Agency principals instead are hoping to grow business by differentiating their value proposition—and consequently, the services are often free.

“Clients pay nothing for what we offer, so this is purely an expense for us,” says Steve Shea, agency principal at Barney & Barney LLC, a San Diego-based agency with three other offices in California.

This expense is not insignificant. The agency has 14 people on staff providing workers compensation claims and risk control services—they do not directly sell insurance, but the work they do helps to secure and retain business.

“The partners are convinced this is absolutely a must-have,” he adds.

Service specialization was also deemed a competitive necessity by Robbie Smith, chief operating officer at Dallas-based MHBT Inc., which spends 8%–10% of its business expenses on value-added services.

“As we evolve up-market from Main Street customers to the middle market, we have found it prudent to increase the services we provide,” Smith says. “Our average account size doubled over the last eight years, and our services expenses have kept pace.”

MHBT offers workers compensation claims analytics, resolution, risk modeling, workplace safety and loss control resources.

“We’ve recently added contract review services, so our clients know what they’re signing with regard to insurance contracts,” Smith notes. “It’s just a higher degree of hand-holding. The contract review services also extend to client acquisitions and spinoffs, insuring they are protected from a risk transfer standpoint.”

While these agencies have staff specialists to provide value-added services, Greene Hazel Insurance Group uses the Zywave software program to access risk management tools for helping clients manage exposures.

“We can provide an OSHA log for clients online or help them develop an automobile fleet safety program,” says Chip Greene, owner and CEO of the Jacksonville, Fla.-based agency. “We feel we owe it to our customers to assist them in becoming better stewards of their risk management programs.”

One person on the staff rides herd on the service. The charge to customers? Nothing.

Some agencies have found similar merit in offering employee benefits services to clients, especially to help them navigate the regulatory complexities of the Patient Protection and Affordable Care Act.

Shea says his agency, Barney & Barney LLC, employs two actuaries who “crank out benefits data to make sure our clients understand their loss scenarios.” The agency uses the information to educate clients on their claims experiences and to negotiate with carriers.

Barney & Barney developed a proprietary software program called Atlas that helps guide clients on what they need to do when certain health care reforms are implemented in 2014. To help minimize the financial effect of reforms, the tool also helps them prepare five to seven years in advance.

Bouchard Insurance has a full-time human resources consultant on staff to assist clients with health care reform compliance, and it also provides training on employment practices liability.

MHBT’s benefits services run an even wider gamut, including bill reconciliation, wellness programs, a call center and a self-service technology tool for employees to review their 401(k) plans, make an address change or check their tax payments.

“We’re spending a huge percentage of our revenues helping clients model the impact of the health care reforms on their business, especially accounts with seasonal workforces like hospitality and construction,” Smith says.

How huge? “Five years ago, we spent 2% of our benefits revenue on the related value-added services; now it’s closer to 7%,” he says.

TCOR Management not only offers employee benefits consulting, it has created a separate division with its own personnel and P&L that houses its value-added services.

“We’re doing specialized HR consulting in the [health, safety and environmental] area, monitoring and managing subcontractors in the energy and construction industries for compliance with wide-ranging regulations,” says Rick Dudney, managing partner at the New Braunfels, Texas, agency.

Six specialists tend to this work—up from one person seven years ago—and he anticipates hiring another expert this year.

“After several years of breaking even or failing to make a return on the related expenses, we finally recorded a profit last year,” Dudney says.

Greene also is helping his clients through the maze of health care reforms, in addition to guiding them through regulations for the Employee Retirement Income Security Act and the Health Insurance Portability and Accountability Act, also known as HIPAA, by using the Zywave tool. The agency also provides advice on setting up a wellness program.

“Our goal is to help clients reduce overall medical care utilization,” he explains.

These agents say their provision of value-added services is just that—a service to clients that is invaluable, protecting them financially against wide-ranging threats to their businesses and net personal wealth.

“This has led to an incredibly high client retention rate,” Smith says. “The big brokers like Marsh, Willis and Aon have recognized that if you don’t provide value-added services you’ll lose the business to someone who does. Nowadays this is just a cost of doing business.”

Reagan’s Stipe says it’s a cost that will likely grow in future.

“The next iteration in the agency business will involve agencies that are increasingly specialized on a particular industry, with all the services related to that industry,” he adds. “If you’re serving the construction sector, it would be a wise bet now to have the best construction claims specialist on your staff tomorrow.”

Bouchard agrees: “We’re not going into clients’ businesses and selling a product, we’re selling the idea of a business partnership. Selling insurance at a competitive price is the easy part.”