Why a Consumer-Driven Approach to Employee Benefits Will Work
Something is afoot in the employee benefits industry. That something is a shift in ideological approach. In the midst of the Great Resignation, general agencies and brokers alike are beginning to adopt a consumer-driven approach to employee benefits. This potentially seismic shift has been a long time coming.
General agencies and brokers should not fear this new approach. It will work, probably better than most expect, because it is based on the fundamental principles of a free economy. It will work because it more accurately reflects how consumers interact with all sorts of businesses.
Give Them What They Want
The consumer-driven approach is based on the fundamental principle of giving customers what they want. Most businesses operate in this manner. Unfortunately, a few do not. The few include healthcare and insurance, two industries that have a tendency to tell consumers what they need and then offer limited options that may or may not meet those needs.
Why do Americans generally believe they need health insurance? Because they have been told this fact all their lives. Technically, health insurance is not a requirement. It is called a benefit for a reason. Millions of people without health insurance still manage to pay their medical bills.
Rather than telling clients what they need to offer employees by way of health insurance, the consumer-driven approach dictates that brokers ask clients what they want and then find a way to make it happen. In many cases, the answer will be a better health insurance plan. Yet there will be those clients that want something different.
Serving Customers at Every Level
This new, consumer-driven approach to employee benefits does not begin or end with the broker. It is all about serving customers, and that should occur all the way up the line. Take general agencies, for example.
Dallas-based BenefitMall, a company that specializes in general agency services, recently posted a blog challenging benefits brokers to question whether or not there general agencies were giving them enough choices. The topic was brilliant in that it addressed an issue brokers talk about all the time: they want more product choices but cannot seem to get them.
A general agency adopting the consumer-driven approach will bend over backwards to give brokers as many choices as possible. They will seek to bring on new carriers. They will work with carriers to create new and better plans. They will do all of this with the knowledge that failing to give brokers what they want will lead to those brokers going elsewhere.
The Transparency Issue
It is impossible to fully appreciate the consumer-driven approach to employee benefits without considering the new transparency requirements codified in the Consolidated Appropriations Act 2021. In short, the new law requires brokers to be transparent about their compensation. Brokers are required to disclose to clients how much they earn from the products they sell.
Such disclosures automatically plant the seed of value in the client’s mind. Understanding that broker compensation is built into the prices they pay, employers will now wonder if they are truly getting full value for their benefits budgets. Are they getting the services for which they are paying? Are the products they buy really worth the price?
This is not a bad thing. Whenever we allow consumers to drive the marketplace, good things happen. The consumer-driven approach will work in the employee benefits because it will foster greater competition. It will spur innovation that will lead to benefits packages employees actually want, rather than those someone else tells them they need. That is the way it should be.