Educate your clients so they can make good decisions
Dave Patriarche is nothing if not blunt about the potential future of the benefits brokerage industry in Canada – but as much as he can foresee challenges, it’s the only place he wants to be.
“I love this business and the value I can add to employers for their employee benefits,” says Patriarche, owner of Mainstay Insurance and founder of Canadian Group Insurance Brokers Inc. (CGIB), an association aimed at educating employee benefit brokers. “It’s true we’re not saving lives, but we are providing disability income when people are disabled and we’re making sure life insurance proceeds are paid – we didn’t pay for the premiums, the employer did, but we’re making all of that possible.”
Since he started in employee benefits back in June 1996, Patriarche has seen a number of changes, mainly in the major rise in benefits costs primarily for certain life-saving drugs. Their costs may become so expensive that drug plans for small- and medium-sized employers may be capped within five years’ time, he cautions.
Falling service levels
Another challenge in benefits has been falling service levels from a number of insurance companies, says Patriarche. In fact, he says they have dropped to such a point that the industry has become fixated on price rather than on value or other differentiators. It’s at a situation now where some insurers may decide to sell direct to employers over the next year or so and cut out brokers altogether.
“I know that’s going to happen and I’m actually OK with that because all it does is get rid of the commodity buyers that want the cheapest price,” says Patriarche. “The people who value me for me, will still hire me.”
Patriarche says all of these disruptors mean a great opportunity for brokers to distinguish themselves and demonstrate how much value they bring to the table. “Brokers are about introducing and maintaining good product, minimizing liability, ensuring clients understand the product or service and understand other programs out there. It’s about how to help employers prepare for the big bad ugly claims and help them support their staff when they happen.”
As for regulatory issues, Patriarche says he believes that in the not-so-distant future, benefits brokers may well face the same kinds of fee disclosure as their counterparts in the investment funds industry. When that happens, he says, one-third of benefits brokers will be wiped out because they don’t exhibit the kind of value add that cash-strapped employers want. “When the client finds out how much they’re paying for someone who doesn’t talk to them, they’re going to say no to doing business with them.”
And with half of the industry over 60 years of age, many advisors will just pack up and retire.
The answer for many benefits brokers is to specialize and provide as much education as they can to group clients. Prove to them, he says, that while the bottom line for plans is important, it pales in comparison to the knowledge and expertise of a good broker.
“A good, educated client makes good purchase decisions and realizes the value of their benefit plan.”