Besides flushing money down the toilet, picking the broker can actually get one to unwittingly break the law. This is the part where you state”Wait a minute; making a wrong decision can’t be bad!”
Seriously, I’m not making this up. Okay, I’ll tell you a real-life story, it’s known as”The Client, the Broker, Money down the Drain and the Long arm of the Law” – hmm, a fairly long name isn’t it?
Listed below are 3 incorrect reasons for choosing an insurance broker:
1. Allowing Allergic to Cloud your awareness of Judgment
Okay, the agent you picked is a good friend, brother or sister-in-law, faculty roommate. Employing sentiments in your insurance agent selection will land you in trouble. It’s necessary to know that”group insurance” is a place of expertise and will require someone with specialized knowledge. You won’t know till they march through your front door, that you have problems with the DOL or IRS if your agent is totally clueless! Be sure to only pick group benefits experts on your agent selection procedure.
You’ll be doing something wrong if you feel that group insurance is just one”those” insurance policies that your P&C (property and casualty) insurance broker can manage just fine. After all, it is”business insurance,” right? They may be. Your attorney may think your estate planner can do no wrong. But hey, we’re talking about group insurance; and this insurance demands some specialty. Both lifestyle and P&C insurance are their own specialties… thankfully, we’re knowledgeable enough to stay away from them – the jack-of-traders must also do the same when it comes to class insurance!
3. Choosing the”Big Name Broker”
It might not be evident that choosing the mega-broker in your town can be wrong. In the end, if they do the benefits for those”name” companies, they must know what they’re doing, right? Absolutely correct. They DO know exactly what they’re doing, but with all the broker who works with businesses which are your company’s size HAS the understanding. But do they care enough to take some opportunity to apply that understanding to your little company?
A good example of what happened with a prospective customer we recently met. This new prospect was. That is our”Sweet Spo.t” We concentrate our support on employers with a range of 10 to 200 workers, so in this scenario, the match was pretty good.
They were currently working with a”regional broker” that is 4 times bigger than us and whom I greatly admire. They’re a remarkable broker – for the right sized customer. If there are 200+ members of staff, they’re perfect. But do they need this smaller business? Well, yes, they need it! But do they put their backs? Oh heck NO!
What exactly happened? The customer, an LLC – in which the owners have been equally taxed as S-corp owners, partners or sole proprietors – had an HRA (Health Reimbursement Arrangement). Under this agreement, the health plan usually has a deductible before the provider pays, that workers must meet claims. With an HRA, the employer reimburses some component of it into the employee to limit the employee’s risk. When $2,000 is the deductible, that is the employee’s theoretical liability, in this case, the employer reimburses the 1,000 of it. McConville Omni Insurance Ltd. | London, Ontario
Despite this payout, the company is still a winner because the premium for the $2,000 deductible plan is smaller compared to the $1,000 deductible plan which the members of staff efficiently get. Just a few of staff will incur deductible to garner a settlement, so typically the top saving on every worker will exceed the reimbursements the employer will have to cover the handful that exceeds the point. This means the staff receives a $ 1,000 deductible plan, however, the employer won’t pay to get a plan that is $ 1,000 deductible.
A great idea, at least in theory. But when we looked at it a problem was discovered by us. Being reimbursed were the two LLC owners. Unfortunately, that’s a rule-breaker. LLC owners are not allowed to accept HRA reimbursements. Does not the regional broker understand an LLC owner cannot be reimbursed? Sure they do, however, they had been busy with leading priority clients and did not catch this mistake.
What is more, when they did their renewal evaluation, they showed the employer only the renewal rates from the current carrier. They included a comment that”each of the other carriers is all about the same cost or more.”
Totally wrong. Another carrier – one of Massachusetts’ best 3 – had a price four percent lower compared to their present carrier for a richer plan. A much better plan, less cash… nevertheless, the client never watched it.
Why? Because the broker didn’t believe commission income and that this client’s size warranted doing the job. Then it is to do the job the agent was hired to 22, it’s easier to spend the client’s money.
It works the other way, too. We don’t have the staff to properly attend to their requirements while my firm can know enough to do all the work and analysis necessary for your 200 + employee firm. So we don’t go after that business. But lots of agents will take all and any customers, whether or not they’re set to support the account. personal insurance
How do you avoid this exact same problem? Simple. Throughout your insurance broker choice, make sure that the broker clients are inside your size group and both groups just smaller and just bigger than your firm. To Be Able to understand where your broker’s loyalties lie, all you need to do is to simply ask your broker what percent of his/her clients fall in the category of:
* 1-10 staff,
* 11-50 employees,
* 51-100 staff,
* 101-250 employees, and
* more than 250 staff.
If lots of the broker’s clientele are in groups smaller OR larger than you, you may either end up picking an insurance broker who’s not knowledgeable enough or one that would not really value your business.