Types of Employee Benefit Insurance Advisors
For companies looking for a benefit plan quotation, it can be a confusing process to determine who best to deal with and reach out to. As with most industries, specialization within the employee benefit industry has continued to evolve and take hold over the years but at the same time, in the name of consumer choice and cross-selling, the variety of practitioners in the field on one level or another has increased significantly.
This is why, in this current era of flex and self-insurance options being routinely combined with traditional benefit plan offerings, dealing with a practitioner that specializes in this area makes more sense now than ever. The good news is that specialization and the experience and expertise that comes with it, can be found for the same cost (automatically included in the quoted rates) that you would pay for a less industry focused and inexperienced generalist.
In the following, with our accumulated knowledge and experience in the industry, we do our best to define and explain the primary colloquial differences between the various types of employee benefit practitioners that are able to provide companies with a benefit plan quotation.
Employee Benefit Advisors
The term benefit advisor originated from the insurer side of the industry as they felt they needed to come up with a catch-all term for all the various employee benefit insurance practitioners they deal with, agnostic to the specificities of the dealings they had with them. For insurers, an employee benefit advisor is essentially any practitioner dealing with employee benefit insurance plans at any level.
Insurance Company Agent
These practitioners are generally housed within a regional office of an insurance company with larger insurers having more office space and therefore more licensed Agents that they sponsor. Some agents, as they become more established, eventually move out and set up their own offices. They are incentivized to market and sell the products and services offered by their licensing insurance company.
The types of services and products they offer can include: life & critical illness insurance products, financial & investment products (e.g. segregated funds), or company employee benefit plan insurance. Essentially, these practitioners are life & critical illness insurance product focused and offer additional products as peripherals, including employee benefit plan insurance quotations.
Employee Benefit Consultants
These practitioners are generally housed within large consulting firms’ regional offices (Mercer, AON, Willis Towers Watson, Morneau Sobeco, Hewitt, etc.) and derive a significant percentage of their revenue on a fee-for-service basis - not unlike fees charged by large law firms. In fact, the consultants are generally required to internally account for their time based on an hourly billable rate. Any work done by their support assistants and analysts are also charged out to their client on a lower hourly billable rate. Increasing billable hours as with law firms is a primary motivation for these practitioners.
Although it differs slightly by which regional office they are located (regional offices located in smaller cities will deal with smaller client companies), services and related fee charges provided by these firms are generally better aligned to larger companies (500+ employees) who have a well-defined internal HR department that require selective task-oriented employee benefit plan advice, plan marketings etc. Bills from these billable hour consultants and their support staff tend to get quite high very quickly; however, they tend to be well educated and experienced specialists in the employee benefit insurance industry.
Employee Benefit Brokers
These specialist industry practitioners usually have their own office and support staff that cater to the daily needs of their clients. They often specialize to provide superior service to a particular type of business industry or business size; at HFI Benefits Inc., although we do deal with companies who have fewer than 20 employees and companies who have more than 750 employees, we specialize in providing superior plan designs and service for mid sized businesses (25 to 750 employees) with partial ASO and Flexible Benefits because we excel at providing that type of plan, and because we have learned through experience that partial ASO with Flexible Benefits is very effective for businesses of that size.
As the name implies, employee benefit brokers represent many insurers and broker the business to the most appropriate insurer based on several criteria: competitive pricing for the company’s industry, technology offerings, service quality, etc. They and their support staff provide full support & service to the client companies they deal with including advice on plan design, plan quoting and periodic re-marketing of the plans, Employee and Family Assistance Programs (EAPs), individual Health & Dental plans, travel insurance, Group Critical Illness and Group Optional Life plans.
TPA (Third Party Administrator)
TPAs are very common in the United States as many insurers there tend to prefer to market employee benefit insurance via third parties as they choose not to incur the overhead of doing so through a housed agent. Also, due to the significantly larger size of the employee benefit insurance marketplace in the US, there is merit to separating the many lines of insurance that fall under benefit plans in order to gain better pricing by specific benefit line through a number of different insurers.
Doing so however requires sophisticated billing systems that combine all lines of benefits into a single bill for their benefit plan client companies. Because of the larger coverage volumes by benefit line, US insurers also tend to be more open to direct electronic data interfaces with larger TPAs, but the Canadian marketplace is not as large as the US marketplace.
In reality, regardless of what they claim, not much of the forgoing applies to Canadian based TPAs other than some isolated better pricing on certain secondary lower claim and premium benefit lines like Accidental Death & Dismemberment or Dependent Life. In general, Canadian based TPAs do not receive the same level of accommodation with insurers to interface and upload their client companies’ data so they tend to essentially be a ‘middle-man’ between the client company and various insurers. This in-turn, eventually adds another level of expenses charged to the client over and above the broker’s fees (some TPAs also employ in-house brokers). TPAs are businesses; they need to make a profit to stay in business.
This is why for a one-off company in Canada, dealing through a TPA's middleware software to bypass an insurers’ normally more technically sound and secure application interface makes little sense from an economic or convenience standpoint. Not to mention the inconvenience of dealing through the TPA to get to various insurers for the different types of benefit line claims.
For Canadian companies, it generally makes much more sense to use an experienced group benefits specialist advisor that brokers their benefit plans directly from insurers.
Although, there are particular client structures where TPAs bring good value and support. An example would be association plans that have many member locations with a small number of employees at each location that each require their own bills. The direct to insurer cost structure for these types of plans tends to make this type of arrangement cost prohibitive for insurers; therefore a TPA is a good option here.
Financial and Investment Advisor
Because these practitioners are required to be life licensed for certain investment products they market and sell, they are also able to acquire employee benefit quotations from the life insurance based insurers that deal in employee benefit insurance (not all life insurers offer employee benefit insurance plans). Similar to the aforementioned life insurance agent, these practitioners tend to offer and deal with employee insurance as a peripheral offering to their focus of investment advice and support. Therefore, they are viewed as a generalist within the employee benefit insurance industry.
Home, Auto & Commercial General Insurance Agent
It has become increasingly common for home & auto insurance brokerages to employ life licensed practitioners (there is a separate general insurance license for practitioners within the industry) in order to cross-market various life insurance based products and services to their general insurance business or individual clients - including employee benefit insurance plans. As with Financial Advisors, employee benefit plan insurance would be a peripheral product or service offering to the core general insurance products and services that the brokerage primarily deals in.
It is for this reason that these practitioners would be defined as generalists as it relates to the employee benefit insurance industry. In fact, it is common to have a single life licensed person doing all life based lines with no additional support staff within the general insurance brokerage because employee benefits is not their primary area of business.