Big accounts mean better bottom-line profits. Yet as anysuccessful agent or broker knows, if you want to providecomprehensive service, drawing a line in the sand regarding apreferred account size isn't always easy. For example, commissionsfor a commercial real estate company with multiple holdings but fewemployees could be significant, while the benefits commissionsmight be minimal–not to mention the time associated with managingsuch accounts.

During one of the most difficult economic environments everfacing our industry, many agents may be tempted to cling to everypiece of business, regardless of the profitability factor. Butthree geographically diverse firms took a different approach. Eachbrought in a partner to manage its smallest employee benefitsaccounts and increased revenues by focusing on larger clients orother types of insurance.

The Massachusetts model

Independent insurance agents, particularly those who sell healthinsurance policies, are operating in a challenging era. While noone can predict the eventual impact of healthcare reform,Massachusetts offers a glimpse into one possible future. In 2006,it was the first state to institute mandatory health insurance fornearly every resident. Some anticipate that national healthcarereform may mimic aspects of the Northeastern state's model, whichrequires employers to offer employee health coverage and penalizesthose that don't. The Commonwealth Health Insurance ConnectorAuthority, an independent public entity also known as the HealthConnector, provides subsidized coverage and facilitates theselection and purchase of private insurance plans by individualsand small businesses. Residents earning up to 100 percent of thefederal poverty level receive subsidized healthcare; partiallysubsidized coverage is available to others based on a slidingscale.

In response to these major changes, Chris DeLorey, principal ofBostonian Solutions Inc. (part of Bostonian Group, a Boston-basedemployee benefits and property-casualty brokerage and consultingfirm), believes the future looks better than expected. The phonehasn't stopped ringing. Statewide, employers offering coveragejumped from 50 percent to 75 percent. By 2007, the brokerage was sobusy, particularly selling high deductible plans, DeLorey engaged asmall group specialist to manage its smallest clients. This enabledhis team to focus on larger accounts, while providing all customerswith the quality service they deserve.

“There are more opportunities than ever; we're working twice ashard for the same money,” DeLorey said. “We've evolved into anadvisor, playing a consultative role to help clients navigate thecomplex legislation.” Bostonian Solutions routinely interacts withits larger clients each month. The firm advises senior managementand helps present new programs and initiatives to employees–oftenexplaining high deductible plans, COBRA coverage or flexiblespending accounts. “Many of the services we provide today fallunder the 'benefits communications' moniker, increasing our valueand worth in the eyes of our customers,” he said.

At the same time, the workload has expanded exponentially.DeLorey has worked in the insurance business since 1986, and someof the firm's smallest clients have been with him since themid-1980s. He's become personal friends with many of them, and hasan allegiance to these accounts.

“We have a history of offering high-touch service,” he said.“When we surpassed the $1 million revenue mark, I realized thelarger clients needed more attention and our smaller accounts–theones I started with–were not receiving enough. We were beingreactive instead of proactive. It wasn't fair to them, and ourclient representatives were concerned.” Such challenges werecompounded by the new demands of healthcare legislation, whichtakes time and people power to support.

The solution was to partner with a small group specialist tohandle about 140 of Bostonian's accounts that each generated $5,000or less in annual revenues. DeLorey said it took a while to getover the idea that an outside firm would directly manage theclients he'd served for years.

His due diligence included visiting each candidate's operationalheadquarters to determine whether they supplied dedicated staff,systems and carrier connections. He sought a partnership that coulddeliver against three criteria:

1. Is a sophisticated system in place to ensure that the firmwill be in compliance with state and federal regulations? “Ifyou're seeking a partner and they can't provide an acceptableanswer to this question, move on,” he said.

2. Are processes in place that will deliver better service thanour customers currently receive? Does this company offer moreefficient systems so that client contact is actually more frequentthroughout the year?

3. Will my brand remain foremost in my customers' minds? Willthe firm truly become an extension of my brand? “Health insuranceis an important service,” DeLorey said. “It's not the same asoutsourcing maintenance on a piece of equipment.”

By folding the partner's services under the Bostonian Solutionsbrand, his customers still feel connected to his firm. “Our clientsare our biggest asset,” DeLorey said. “They are the source offuture referrals. But I realized if we did not properly servicethem, they would be willing to listen to competitors. Our partnerhas a proactive approach to serving and renewing business. Theyreach out to our clients, as well as offer online human resourcesand wellness portals that our customers never had before. Theseadvantages separate us from our competition.

“Ninety percent of the time when you lose a piece of business,clients will say 'you weren't proactive or you were late with therenewal,'” he said. “If you spend time inefficiently reaching outto small-business customers, by nature your larger clients will bein jeopardy. You can't serve both well at the same time. That'swhat our partnership offers us: the ability to be in two places atonce.”

Because Bostonian now uses an efficient profit model for itssmallest base of business, the firm can provide even better serviceto its larger clients and has “increased its win rate in themarket.” One lost account even returned. The customer works withthe same Bostonian representative she had before, but she is nowcapable of handling 10 clients instead of 40. “She offers so muchmore time, talent and effort,” he explained.

DeLorey said he believes other states will implement planssimilar to Massachusetts and brokers will shift more towardcustomized services, similar to the role advisors play in the401(k) business. Federal legislation is potentially anotherdouble-edged sword presenting both threat and opportunity. InMassachusetts, with the advent of the nation's first mandatedhealthcare reform and the complexity of high deductible healthplans, “there is an increased need for and value associated withour services,” he said. “If you structure business right, there aremore opportunities now than ever.”

Partnering improves service

Pasadena, Calif.-based Bolton & Co. is not yet dealing withstate-mandated healthcare reform issues, but shares a strugglesimilar to Bostonian's in managing its smallest employee benefitsaccounts. “Every year we strive to focus on bigger clients,” saidJudy Whitson, vice president of Bolton's account management team. Afew years ago, the company found that its smaller clients inhibitedits ability to grow.

Established in 1931, Bolton & Company is one of the nation'slargest employee-owned insurance brokers,
providing clients worldwide with insurance and risk managementservices, employee benefits and financial products. The companyemploys more than 120 insurance professionals and manages more than$150 million in annual premiums on behalf of its clients.

In 2004, the firm had concerns about the increasing amount oftime required to service small employee benefits customers. Becausemany of these companies lacked HR departments and management wasrarely knowledgeable about insurance issues, Bolton personnel wouldcarve out time to help educate owners and employees and processenrollment forms. And because money frequently was tight, the firmexpended a tremendous amount of effort for low-priced quotes thatproduced minimal commissions.

Bolton decided to explore a partnership with a small groupspecialist, but did not want customer relationships to suffer. Theydiscovered that a partner with the right resources could actuallyenhance services. Among the advantages:

o An employee help desk to immediately answer employees'questions

o A 24/7 Web site that supplements the efforts of liverepresentatives

o Online wellness services, including health risk assessments,interactive health education lessons, health logs and trackers,wellness calculators and self-care resources

o Benefits resource tools with employee training tools, documenttemplates and information about state regulatory requirements.

The partner now manages all employee benefits accounts thatgenerate less than $7,500 in annual gross revenue.

“The arrangement affords our talented staff the time to focus onlarger relationships and prospects,” Whitson said. There also is acompetitive benefit to the partnership. When pursuing riskmanagement accounts that desire employee benefits coverage as well,“it allows us to say 'yes' to a deal and not have other brokers inthe mix.” The end result? “We've able to bring on more businesswithout adding staff.”

P&C firm expands

South Bend, Ind.-based Gibson Insurance Group, known for itsproperty-casualty business, pursued a partnership with a smallgroup employee benefits specialist to achieve a different objectivethan Bostonian or Bolton. Gibson wanted to grow its employeebenefits business to further diversify its product offerings.Management determined that its agents could focus on moreprofitable accounts if the right partner was in place to managesmall accounts.

“We did a great job with P&C business, but had notcross-sold employee benefits the way we could have,” said Tim D.Leman, Gibson president. “We wanted to ramp up rapidly.” Gibson, anIIABA Best Practices agency since 1994, ranks in revenue amongIndiana's top five privately held independent agencies.

Gibson ended up transitioning more than 60 percent of itsemployee benefits clients to its new partner, which actually onlyrepresented 15 percent of the agency's revenues in that specialtysector. The move freed several Gibson employees to service largeraccounts, and the results speak for themselves. With 20 of theagency's 85 employees devoted to employee benefits, this businesssegment more than doubled during the first 33 months, from 12percent of agency revenue to about 25 percent.

Surprisingly, part of the expansion came from smaller accounts.During the transition, the agency reorganized its small commercialinsurance business unit, eventually asking the partner tocross-sell employee benefits to its small risk managementcustomers, writing 29 new policies. “Our partner createdopportunities that we really didn't have before,” said Debra L.Smith, client executive for the business and private client groupwithin Gibson's property-casualty practice.

At the same time, it enhanced service to smaller clients.Because the partner specializes in small group business, it has thetechnology, systems, processes and efficiencies afforded by greaterscale. Gibson's customers also have access to a greater choice ofcarriers.

The partnership opened doors at a time when many brokers arestruggling for business. Gibson recently approached a prospect withabout 25 employees. “We couldn't identify how to improve theirP&C coverage, but they asked about employee benefits,” Smithsaid. No one had talked to them about health savings accounts, andthe company was intrigued. “In the end, we didn't write the P&Cbusiness, but we now have their employee benefits,” Smith said.“We'll stay in contact and re-approach them about P&C when theeconomy improves.”

Challenging times call for new strategies, as these three firmshave discovered, and partnerships are one option that may be worthexploring. “Don't be afraid to do things differently than you'vedone in the past,” said Gibson's Leman. “This strategy leads tosolid growth. We are focused on getting in front of as many clientsas we can, positioning ourselves well for the long haul.”

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