Earlier today, I received a call from a client (let’s call him Joe) asking for some advice. Joe is a benefits broker, and he described to me a prospect he was looking to close but who had just called him with a question that had him shaking his head.
He first called on this prospect last year, a company with two separate business units. He was initially told he would be getting the BOR on the business, only to have it taken away because of a “relationship” one of the principals in the second business unit had with another broker.
Joe was left with a single line of coverage for just one of the units.
The high cost of a “relationship” decision
Fast forward to this year. The business units have combined into a single entity, and Joe got a call from the CFO asking him to, once again, compete for the business. The CFO felt the other broker had put them in a dangerous situation by failing to help them address even the most basic compliance requirements.
Upon further review, it was quickly evident that the other broker had COMPLETELY failed the client; they didn’t even have basic COBRA processes in place. The CFO asked Joe to “throw me under the bus.” In other words, he wanted Joe to come in and not hold anything back about the dangerous compliance situation they had been placed in by the other broker.
Of course, Joe was more than happy to oblige. He left the board of directors angry, concerned, and ready for change. (You know, I wouldn’t be writing this post if the story ended here with a BOR for Joe.)
Wanting an explanation for his failure more than anything else, the board “invited” (insisted is more accurate) the soon-to-be-ex-broker in to explain the situation he had put them in. You would think he would have tried to cover up the mess or promised to get it all fixed, wouldn’t you? Nope.
I must be missing something
Joe received a call from the CFO, who said the other broker came in and promised to write a check if there was ever a fine for any non-compliance issues. Joe was expecting the next words out of the CFO’s mouth to be something like how ridiculous and short-sighted it was, how furious the board was, or if doing so was even legal.
Instead, the CFO asked, “IF we move to you, would you be willing to do the same?”
They were actually considering staying with the broker who had completely failed them!!
Joe was completely baffled and so perplexed by this turn that he felt he must be missing something, which is why he called for my advice.
Failure is NOT an option
In his follow-up with the CFO, Joe explained (paraphrasing), “No, I won’t make that promise (beyond his E&O policy, of course) because you have to participate in your own compliance, and anybody who tells you anything else is either wrong or lying.”
But I will tell you exactly what needs to be done to become compliant, remain compliant, and avoid fines in the first place. My team and I will help you put the solutions and processes in place so you don’t have to worry about it any longer.”
Joe took a firm stand and challenged the CFO to really think about what they were considering. He pointed out:
- You are more concerned about someone writing a check than working with someone who understands the job they’re supposed to be doing? Where else are they failing you?
- Even if they write you a check to replace a financial loss, how will you deal with the loss of confidence from your employees?
- What if the damage to your business is irreparable?
- What if someone can’t get medical attention because of your non-compliance?
- What are the other negative impacts that your business would suffer?
- What kind of fiduciary liability do you accept by knowingly working with someone so inept?
There is way too much on the line
As Joe told me the story, I’m still not sure if I was more disappointed in the CFO and his board or the sad excuse for a broker. This is one of the more painful examples I have ever heard about how damaging it is for brokers and their clients to make decisions based on these kinds of “relationships.”
The viability of your businesses, the health of your employees, and perhaps even personal liability are on the line.
This scenario is way too common
Was this a pathetic last-ditch attempt by the broker to save the business? Absolutely! But it happens every day.
If you’re an employer, you’ve probably been on the receiving end of such attempts. And, if you are a broker and you are being honest with yourself, you may have even been on the giving end of similar promises.
The partnership between broker and client is one of the more critically important decisions to be made. Decisions made over a social relationship or spreadsheet are short-sighted at the very least and often leave the business exposed to untold risks.
Employers should be demanding, and brokers should be prepared to offer a more comprehensive and strategic look at their business. The placement of insurance is critically important, but it MUST be seen as only one part of a more complete answer. An answer that must touch on compliance, communication, technology efficiencies, attraction/retention…and the list goes on.
But sadly, this critical decision continues to be made based on a spreadsheet, a social relationship, and lame promises.
This ridiculousness has got to change.
Two separate decisions
My challenge to all employers: Stop making your broker decision at renewal time. Your renewal is about choosing an insurance carrier and plan design. As important as that decision is, choosing an insurance broker is a separate, even more important, decision.
The next time you are deciding which broker to use, make the candidates come in off-renewal and force them to make a more comprehensive and strategic case for themselves.
Oh, and if you are wondering, the CFO appreciated Joe’s challenge. He fired the old broker and feels much more comfortable knowing that Joe and his team are watching out for his best interest.
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