Don't let others determine your future
Now, more than ever, it's time for benefits producers to take control of their future.
During a recent discussion with the principal of an independent benefits agency, we talked about the variety of challenges typically faced by independent agencies. It was a lively discussion and he was very honest about the fact that he faces many of these challenges himself. Not surprisingly, his biggest concern is the financial challenge he faces as commissions start to be reduced and eliminated by carriers.
I was encouraged about his openness and honesty regarding his situation. However, my optimism quickly turned to disappointment when he stated, rather emphatically, that he already has a strategy to deal with his primary challenge. He is betting his future, and that of everyone else in the agency, on the hopes that someone will fix his problem. He has convinced himself that either through court challenges and/or additional legislation/repeals, health care reform and the threat it poses to his revenue will be cleaned up.
Wow! Here is a business owner, an entrepreneur, someone who has made his own way in the world--waiting for someone else to fix his problem!
But historically, like other entrepreneurial businesses, independent agencies have found success because we fix our own problems and believe much more in our ability to take care of ourselves than we do in someone else's ability to do it for us. We are successful because of our ability to find opportunities in every challenge and exploit those opportunities for our own advantage.
I have been reading the book The Big Short by Michael Lewis, which is about the subprime market and the catastrophic failure it brought to our economy. In the book, Lewis states that when an event or potential event is catastrophic, we have a way of convincing ourselves that it couldn't possibly become a reality. Catastrophes can and do happen, and here is a clear example of a business owner seeing a future impact to his revenue stream so catastrophic that he is trying to convince himself it can't possibly become a reality.
As a result, the business owner is putting his future into the hands of the system that helped create his problem in the first place. It's a little like the person who is looking to lose weight by expecting their favorite fast food restaurant to change its menu for their benefit. That isn't going to happen.
We know if we want to lose weight we have to take control and change our behaviors. Because just "one more burger and fries" doesn't seem all that threatening and because the effects of our poor eating choices are so gradual, it's hard to get a sense of urgency. Unfortunately, it often takes a medical crisis or a doctor declaring, "change your habits or you'll die young," for people to finally take control.
Well guess what? Our traditional business/compensation model is lying on an ER table and the doctor is looking down telling us "change your habits or you're going to die a premature death." It's time for some preventive measures. It's time to take control, now.
While I can't know for certain, my belief is that, regardless of what happens politically with health care reform, commissions will be less in the future than they are today. What I do know for certain is that the more you are in control of in your revenue stream, the better off you are going to be, period. Here are a few suggestions as to how you can take that control.
Control over how you get paid
More often than not, we are being paid commissions for the placement of insurance products. It is those very commissions that are already coming under attack. Almost every day, I am hearing stories about carriers that are reducing/eliminating commissions. As business owners, it is inexcusable for us to continue to expose ourselves, and our employees, to this uncertainty. The only way to change the exposure is to start transitioning to a compensation model controlled by us rather than the insurance carriers.
Here is how you can gain that control:
Transparency. Start by having a conversation with every client and prospect about exactly how much you get paid and what you do for that compensation.
Documentation. It has to be very clear and well documented to your client exactly what you do for your compensation and how it will positively impact their business.
Transition. State your preference with clients that you move to a fee-based compensation arrangement. If the policies in place don't allow commissions to be netted out, you still need to follow through on the previous two points. It will make the conversation much simpler once the current commissions have been reduced or removed entirely.
This is also a discussion that will make your client relationships much stronger and will protect you from competition that tries to make you look bad by asking, "Do you know how much your current broker is making?"
Or, you can wait:
You can wait until you are forced into this conversation because commissions have been reduced/removed. However, by then your motive will be seen as completely self-serving and the conversation will be much more difficult.
You can wait until your competition has decided to exploit your problem as their opportunity.
You can follow the lead of the agency principal I mentioned above and wait for someone else to fix your problem.
Control how much you get paid
When you think about it, isn't it a little odd that the amount of your compensation is determined by someone else? If the carriers decide you're making too much, they lower their compensation and there's nothing you can do about it. That's the problem with the approach too many benefits producers use. Because they, and their clients, see the placement of insurance policies as what they are getting paid for, the control of the compensation belongs to those who control the insurance policies, the carriers. It's time for producers to take control and to start getting paid for the value they create rather than the product/policy they place.
You can gain control by:
Transparency. Again, start with an open conversation about how much you get paid and what you do for that compensation. Are you starting to see that being completely open with your client actually gives you more control?
Business acumen. Understand your ability to make a difference in the business of your client and how to quantify that impact. (For example, if you can help them lower their rates of turnover at a cost impact of 50% to 150% of total annual compensation for each position that turns over, you can demonstrate a significant impact to their bottom line.)
Quantify. Be able to quantify and articulate the value you bring. Then have the confidence to ask for fair compensation for the value/results delivered.
Or, you can wait:
You can leave control with the carriers, wait for them to tell you how much you are going to be paid, and then make the necessary adjustments that will allow you to remain profitable.
You can hope that the carriers are so concerned about what you make that they will protect what they pay you at all costs.
Control over what you are being paid for
It's unfortunate, but most benefits producers are competing with something over which they have no real control. The typical value proposition is based on:
- Insurance policies, which are controlled by the carrier.
- Service, which all too often they don't get to provide until the client has a problem that needs fixing.
- A list of value-added services, which, again, are typically the product of some third party.
It's time to make the focus of what you are selling something that is actually within your control.
You can take control by:
Delivering value. Start making sure there is value in your sales process. Your sales process should deliver value to your prospects even if they never do business with you. The litmus test is whether or not someone would actually pay money to go through your sales process.
Changing focus. Stop making the focal point of your value proposition the insurance product, reactive service, and a list of value-added services.
Emphasizing how instead of what. Don't get me wrong, the product, service and value-added services are all important, but they are your "what." And what you have to offer is almost always going to be the same as everyone else. "How" you work and how you use those same resources is what adds true value and is something you can actually control. (Hint: If at decision time, the prospect is comparing your spreadsheet to that of your competition, you're not in control.)
Or, you can wait:
You can wait until there are so few carriers in your market that you have no real options to offer.
You can wait until the Exchanges are in place and don't want/need you.
You can wait to be disintermediated because, with so few options, it is too easy for your prospects to do their own spreadsheet.
Convincing yourself that someone else is going to fix your problem is not a strategy. At best it's a hope. Yes, we are facing some real challenges as an industry, but for those ready and willing to take control, develop an effective strategy, and make the necessary changes, it is also a time of unprecedented opportunities.
Originally published in Rough Notes magazine December 2010.
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