ALBUQUERQUE - Broker commissions are evaporating while the amount of work required to enroll and serve clients is expanding.
How can brokers expect to make money? The fee-for-service model is one way to go, but brokers may be reluctant to ask clients to accept such an arrangement.
Moving to a fee-for-service arrangement is a way for brokers to be paid what they're worth for the professional services they perform. It's also a way for brokers to weed out clients that may not be the right fit for a particular agency.
That was the word from Karen Kirkpatrick, owner of On Your Mark Consultants. Kirkpatrick led a panel discussion on moving to a fee-for-service model as part of Monday's sessions at the National Association of Health Underwriters annual convention.
“It's not enough just to survive,” she said. “If you don't know how much you're worth per hour, shame on you.”
The first step in moving to fee-for-service, she said, is determining what she called the “sweet spot” for clients – who your agency's ideal client should be. After determining the ideal client, brokers then can look at “secondary sweet spots” - certain areas where the broker has special expertise.
After that, she advised, devise a system for categorizing clients based on the amount of revenue they bring in and the level of service they will receive. After examining the clients on their revenue and their required level of service, implement a tiered structure of fees and services, with a greater menu of services given to clients in return for their paying the broker a higher fee.
“Too often, we don't run our business like a business,” Kirkpatrick said. “We start out selling and then go from there instead of putting a business structure in place first.”
Brokers should change their focus from “selling” to being a “consultant,” she advised. “'We are a consultant' should be the overriding theme in everything you do – that you will do whatever is best for the client.”
Kirkpatrick urged every broker to become the “Column A” broker – the broker everyone else is compared with.
Mark Gaunya, co-owner of Borislow Insurance, compared the current status of health insurance brokers to taxi drivers, long-distance telephone carriers and film camera manufacturers. All have been the victims of disruptions that were unforeseen 10 years ago.
“My advice is to Uber your business before you get Kodaked,” he said.
“There's no need to apologize for delivering professional advice and getting paid for it,” he added. “We can let the carriers value us or we can let the customers decide our value. We can refuse to share our knowledge with prospects unless there is an agreement for payment.”
Gaunya said that his practice moved to a fee-for-service model several years ago. Within his practice, he and his business partner created eight specialty practices such as Medicare, technology and compliance.
“We hired people who go deep and wide into these subjects and we can charge extra for these services,” he said.
A market segmentation system also was implemented in which clients were categorized into one of four levels – platinum, gold, silver and bronze – based on the revenue generated by that client.
Finally, Gaunya and his business partner sat down with each existing client to explain the change in the payment model and the reasons for it.
A broker's typical workday is made up of three types of tasks, according to Chad Schneider, chief sales officer of Code SixFour. There is transactional work, which consists of routine tasks.
Then there is low-value knowledge work, which includes customer support, answering questions and explaining claims denials for clients. Most important is high-value knowledge work, which Schneider described as “what clients pay you for.”
“The highest performing brokers spend the greatest percentage of their time on high-value knowledge work,” he said. “The goal is to spend more time on this type of work and get paid for it.”
Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at Susan.Rupe@innfeedback.com.
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