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. 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, be they passively involved or a specialist in this area, has increased significantly.
This is why, in this current era of where flex and self-insurance options are routinely combined with traditional insured benefit plan offerings, dealing with a practitioner that specializes in this area makes more sense now than ever before. 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 when it comes to employee benefits.
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 benefit plan quotations.
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 specifies or amount of the dealings they had with them. For insurers, an employee benefit advisor is essentially any practitioner selling and servicing 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 and sometimes segregated or mutual fund 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 generally derive a significant percentage of their revenue on a fee-for-service basis - not unlike the fee structure of law firms.
In fact, the Consultants, regardless of the benefit plan's compensation structure, are generally required to internally account for their time based on their 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 tends to be a primary motivation for these practitioners.
Although it differs slightly by which regional office they are located in (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 i.e. annual renewal analysis, plan marketing's etc.
Consulting costs from these billable hour Consultants and their support staff tend to become quite high very quickly; however, Employee Benefit Consultants are generally well educated and experienced specialists in the area of employee benefit insurance.
Employee Benefit Brokers
These specialist industry practitioners usually have their own office and support staff that cater to the various benefit plan or related needs of their clients as required. They often specialize to provide superior service to a particular type of business industry or business size range.
At HFI Benefits Inc., although we do deal with some companies that have fewer than 15 employees and more than 750 employees, we particularly specialize in providing superior plan designs and service for mid-sized businesses (15 to 750 employees) with a focus on partial self-insurance ASO and Flexible Benefit spending accounts because we excel at providing this type of plan. We have also learned through experience that partial ASO with Flexible Benefits is very effective for businesses of that size in our Western Canadian marketplace where these benefit plans are still tax deductible for the employer.
As the name implies, employee benefit brokers represent many insurers and broker the business to the most appropriate insurer for their client based on several criteria: competitive pricing for that company’s industry, technology offerings, service quality, etc.
Employee Benefit Brokers 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 (EFAPs), individual Health & Dental plans, travel insurance, Group Critical Illness and Group Optional Life plans, etc.
TPA (Third Party Administrator)
TPA's are very common in the United States as US based benefit plan insurers tend to prefer marketing employee benefit insurance via third parties to avoid incurring the overhead of having housed agents &/or adjudicators. Also, due to the significantly larger size of the employee benefit insurance marketplace in the US in general, there is more merit to separating the many lines of insurance that fall under one benefit plan in order to gain better pricing by specific benefit line through a number of different insurers.
Separating benefit lines requires sophisticated billing systems that combine all lines of benefits into a single client premium bill. Due to their size, US insurers also tend to be more open to direct electronic data interfaces with larger TPAs and have better developed APIs to accommodate this process. Also, unlike the US, Canada has a National universal health plan which is administered provincially. In short, US and Canadian employee benefit marketplaces are very different and what works well in the US does not necessarily work as well in Canada i.e. TPA's in this case.
Due to the afore-noted reasons and more, regardless of what they claim, Canadian based TPAs are simply unable to provide the same level of service & support of a company's benefit plan in Canada as their US counterparts, nor in dealing with a group benefit insurer directly because in Canada they do not receive the same level of accommodation to interface and upload their client company's data via direct system interfaces. Therefore they are essentially a ‘middle-man’ between the client company and the various insurers they deal with which adds another level of expense charged in the client's rates over and above a broker’s fees who market their plans.
That's not to say Canadian based TPAs do not have a place in the Canadian marketplace; better pricing on some certain secondary lower claims risk benefits like Accidental Death & Dismemberment or Dependent Life with their ability to pull in multiple lines of benefits together on one premium bill, make them a great option for certain situations like Association type Benefit Plans which often have small numbers of employees in numerous locations.
In summary, for a one-off business company in Canada, using a TPA's middleman software and admin processes to bypass an insurers' now much better & more secure web-based applications makes little sense from either an economic or convenience perspective. In particular, the inconvenience of dealing through the TPA to get to the various insurers that either underwrite or administer one of the many different benefit coverage's is generally a significant service issue. For Canadian based businesses, it generally makes much more sense to use an experienced group benefits specialist advisor that 'brokers' their benefit plan through established group insurers that have invested significantly in their systems, including fraud protection, over the decades as they then deal directly with their chosen insurer for all core lines of benefits that fall under one employee benefit policy.
Financial and Investment Advisor
Because these practitioners are required to be life licensed for certain investment products they sell and market, they are also able to acquire employee benefit plan 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 Agents
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 that 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 their core general insurance products and services that the brokerage primarily deals in. 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.