The Consolidation Appropriations Act 2021 brought some significant changes to the employee benefits arena. As a broker, you know that you must now practice complete transparency in disclosing the compensation you receive from the products you sell. While you may view the law in a negative light, most of your clients probably view it positively. As a result of the law, broker benchmarking has begun.
A Basic Explanation
Broker benchmarking is a fancy term for vetting benefits brokers to ensure that clients are getting what they pay for. Slowly but surely, we are starting to see an emerging class of consultants who specialize in broker benchmarking. They are creating tools and offering seminars explaining how HR managers can effectively vet their benefits brokers.
The two main purposes of broker benchmarking are as follows:
- Ensuring brokers are providing reasonable services, and
- Ensuring they are receiving reasonable compensation for the services they provide.
Benchmarking a benefits broker is not all that different from benchmarking computer hardware. When you benchmark a new server for example, you put it through a battery of tests and measure its performance. Likewise, the expectations a company has of its benefits broker constitute the testing environment. HR then measures the broker’s performance against those expectations.
Transparency Is a Must
From your perspective as a broker, the first thing to settle in your mind is that transparency is a must. Being transparent about your compensation is no longer simply a matter of good business. It is also the law. The last thing you want is for a client to benchmark your performance only to discover that you have not been fully forthcoming about your compensation.
BenefitMall compliance experts Misty Baker and David Mordo put together a great podcast talking about transparency and the Consolidation Appropriations Act in late 2021. If you are concerned about your own brokerage’s transparency, it would be a great podcast to listen to. There is also a companion blog post to go along with it.
Improving Customer Service
Something else to consider is the level of customer service you provide. You expect a certain level of effort from the company from which you obtain general agency services. You know when your general agency isn’t giving you the kind of service you expect. Likewise, your clients can tell when your customer service is not up to par.
The best way to avoid being found wanting by broker benchmarking is to up your customer service game. Find new ways to provide the level of service that exceeds your clients expectations. That may mean investing in new technology. It might mean changing the way you communicate.
Perform or Be Replaced
The bottom line here is that broker benchmarking will become more commonplace in the coming months and years. And just like benchmarking computer hardware, brokers either have to perform or accept the fact that they will be replaced. Now that the transparency cat has been let out of the bag, clients are going to make a concerted effort to vet their brokers.
Your brokerage should not be the insurance equivalent of decades-old computer servers that are no longer able to keep up. It should not be the equivalent of computer equipment that promises cutting-edge results but doesn’t deliver. Once broker benchmarking services are established in earnest, the strongest brokers will be separated from the weakest.
Are you ready for broker benchmarking? It has begun. If you need proof, just Google it. Then get working on developing a plan that will guarantee you meet or exceed all client expectations. Your brokerage’s survival depends on it.