The group insurance market, known to be ultra-competitive, has become even more so in the last few years as premium increases have driven many plan sponsors to seek greener pastures. When negotiating renewals of group insurance plans, however, loyalty to an insurer may pay off for clients and advisors.

The group insurance market, known to be ultra-competitive, has become even more so in the last few years as premium increases have driven many plan sponsors to seek greener pastures. When negotiating renewals of group insurance plans, however, loyalty to an insurer may pay off for clients and advisors.

This is the opinion of Alain Robillard, senior adviser group insurance at Mercer, who says many sponsors shop around more often than they should. Going to market every three to five years is often enough, he says. "But often the client wants me to find him a better offer than the one the insurer made during the renewal," he explains.

Fleeing the scene as soon as an insurer puts a less than ideal renewal rate on the table is a mistake, Mr. Robillard says. Judging by his experience, an insurer will be more flexible during negotiations if the client has been on board for several years. "When a sponsor has good relations with an insurer, it is sometimes possible to work out a deal and avoid an increase if they had a rough year," he adds.

Marc Carrier, vice-president, pricing, at Desjardins Financial Security (DFS) agrees. He confirms that this practice exists, and is applied when a fund sponsor that has been doing business with DFS for several years runs into temporary difficulties.

The insurer also makes exceptions for advisors with a healthy portfolio. "If we have a long-term relationship with an agent and his portfolio is sound, we’ll keep this in mind if he needs breathing room for a year."

DFS does not consider this practice loss leading. Rather, Mr. Carrier views offering lower premiums as an investment. "Instead of cutting premiums, we offer rebates. It’s an investment because we’re advancing the money to get a return."

Bob Easton, an Ontario-based independent advisor specialized in group insurance, says he has certainly found that loyalty has paid off for his clients, but not just in terms of premiums. He steers most of his business towards one group plan provider primarily because of high service levels.Years ago, Mr. Easton says he used to deal with several insurers. But once he started working with a fully integrated third party administrator called MDM Insurance Services of Guelph, Ontario, he has focused most of his business there.

He says the company’s rates are competitive with other plan providers, but he finds they give "wonderful" service to his clients. "It’s not that I don’t want to place business elsewhere, but honestly it is a hard job for me to find a better place." Mr. Easton adds that he hasn’t concentrated business with this provider to receive volume bonuses, something the TPA is only beginning to offer.

In any case, Mr. Easton says his experience has shown him that the "better rates" he might find for a client by going to market are not truly lower in the long run. "You can always find someone who will offer a better rate, but they’ll claw back what they need to claw back."

Premium hikes hard to swallow

Mr. Easton adds that when a client’s group plan has had a bad year of claims and the renewal rate is high, it is not always easy to convince the client to remain loyal to their plan provider. He says this is particularly true for public sector clients who find large rate increases hard to swallow.

When a client balks at a high renewal rate, Mr. Easton may suggest reworking the plan design and also explains that for any group plan there are good and bad years, no matter who is the insurer. However, this kind of argument only works "for those who will listen – and that’s a factor – even when there is a good broker-client relationship. Sometimes, you just see their eyes glaze over a bit." For these clients, going to market may be the only option.

In one recent case, a client received a 17% increase this year even though for the past several years they’ve been with their provider, the average rate increase has only been 2%, which is very good. But, the client is so alarmed by this year’s 17% figure that they want Mr. Easton to go to market.

He does manage to keep shopping around to a minimum. Last year he only went to market for three clients in his whole block and one of them did not change in the end.

Advisors, come prepared

When faced with a high increase from their current plan provider, Mr. Carrier of DFS recommends that the agent should build a strong case for their clients, backed by concrete facts, to see if they can negotiate something better. Too many agents are rushing in at the last minute and flatly rejecting an increase "(just) because it’s too expensive," Mr. Carrier says.

He offered this advice: monitor your clients’ files year round. "We work with underwriters and we like to negotiate with people that have sound arguments," Mr. Carrier says.