Demanding Excellence From Your Insurance Broker By: Angus McRae, CEBS, Angus McRae Insurance Brokerage Svcs, Inc.

Late last week I received a phone call from a client with some horrible news.  While vacationing in England the wife of the company’s president (I will call her Jane) found out she has inoperable lung cancer.  The doctors say Jane has weeks to live and that her medical condition makes commercial air travel impossible. 

Since getting that phone call my office has been busy ensuring that the insurance company and the hospital are coordinating their efforts – from the standpoint of patient care and payment of claims.  We are fortunate in having contacts within the air ambulance community and are gathering pertinent information about that mode of travel in the event the doctors think she can be returned to the United States.

I am afraid, however, that nothing my office does will prevent the inevitable.  But, maybe somehow, we will have given everyone the peace of mind that no effort was spared to give Jane and her family the dignity and concern they deserve.

What is an insurance broker?

Just as a real estate agent shows you many houses you may want to buy, an insurance broker shows you different insurance companies.  A broker is an insurance agent that represents multiple insurance companies.  An agent – principal relationship exists between the broker and his insurance companies.  You may also come into contact with “captive agents” - insurance agents who can only represent one insurance company.  In Georgia, the requirements to be an insurance agent are relatively low and therefore the quality level of brokers will vary widely.

The services that a broker provides vary, but should include:  (i) shopping the insurance market place on an annual basis, (ii) providing the employer with an honest assessment of the competing proposals and insurers, (iii) conducting employee educational/enrollment meetings once the employer decides on a plan, (iv) assisting the insurer and employer to ensure that there is a smooth transition to the new plan, (v) educating the employer as to the administrative policies and procedures of the new plan, (vi) informing the employer of issues, legislative changes, product developments that would have an impact on the benefits plan, and (vii) assisting with claims, billing and administrative problems.

How is an insurance broker compensated?

Each time you pay your premium to the insurance company, your insurance broker receives a commission check.  Multiply your monthly premium by 5% and you can bet that you are close to the monthly commission income your broker is receiving.  This is not an insignificant amount of money, especially in this day and age of increasing health care costs.

For small group plans (less than 51 employees) the rates an insurer files with the state of Georgia will typically include an amount of money for agent commissions.  So, if an employer buys the policy direct from the insurer what money would have been paid in commissions is just pocketed by the insurer.

My point is that if you are paying for a service, you deserve excellence. 

Demanding Excellence.

Your expectations will determine what you consider to be excellence.  Human nature often allows us to accept substandard behavior because it is easier than confronting the problem.  As you consider whether or not you are getting your money’s worth from your broker think about it from an idealistic standpoint – “What do I, as the firm administrator, and all the plan participants deserve from our broker?”

It all starts with ethics.  If your broker is an ethical individual, you will usually receive excellent service.  An ethical broker will take the steps necessary to develop an above average understanding of the products he sells.  An ethical broker will know that the real work starts after the insurance has been sold.  An ethical broker will know it is important to understand the legal environment in which he operates.  An ethical broker will be willing to take a reduction in his income if it benefits his client.  An ethical broker will be willing to lose you as a client if you ask him to do something unethical.

It is possible to have an ethical but inexperienced broker.  In that situation, you will have to weigh lack of knowledge – particularly product and legal knowledge – against the broker’s enthusiasm and work ethic.  If you have someone who will honestly say they do not know the answer but will provide you with a timely, accurate reply then that person is probably worth a continued relationship.

Now, on the other hand, if your broker has questionable ethics, there is no sense in trying to rehabilitate him.  Fire him! 

Two Mutually Exclusive Decisions

Decision One:  “Who do we want to have as our insurance broker?”  Assuming you have less than 51 employees, if you ask two brokers to quote on your benefits package and give them the same census/RFP information you will receive two identical quotes from each insurer.  No broker can do any better than any other broker.  Once you get above 50 employees insurers have more leeway in the prices they offer and that may result in a slightly better quote from one broker in comparison to another.  The bottom line is that the insurance proposals themselves will be identical or very similar at the least and it is therefore logical to choose your broker first. 

Use the shopping process to evaluate the ethics and knowledge level of the competing brokers.  How do your consider intangible criteria like Jane’s situation?  Such problem solving capabilities do not fit neatly on a spreadsheet.  My suggestion is to look the broker in the eye and ask him to describe three service issues he has faced and what was done to have them successfully resolved.  Gauge his reaction and the quality of his answers.  They should be telling.  Then pick a broker and address Decision Two.

Decision Two:  “Which insurer do we want to write the insurance policy?”  With your new broker’s help, evaluate the insurance proposals in a logical, comprehensive way and decide which insurer will best suit your needs.

Your Ace In The Hole

Simply put, insurance brokers serve at your pleasure.  Like a monarch of old, you wield an axe called an “agent of record” letter.  It goes something like this:  “Dear Insurer, Effective immediately, appoint insurance broker John Doe as our agent of record.  Sincerely…”  With a stroke of the pen you have replaced your insurance broker, but not changed your insurance company, premium rates or benefit plan.

An agent of record letter is your ultimate way of demanding excellence. 

Conclusion

Last year our greatest success was getting a widow $100,000 in life insurance benefits that had been denied because of a misunderstanding over the deceased employee’s last day of work.  I think, this year, Jane’s case will prove to be one of our finer moments.  I just hope we don’t have too many more like it soon.

Editor: Todd A. Wiggins (twiggins@cpmas.com) (This publication is the property of the Atlanta Association of Legal Administrators. Reproduction or reprint without prior permission is strictly prohibited. Click here to request reprint permission.)

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