How top employee benefit brokerage firms stand out from their competition
Where the top-grossing brokerages in the U.S. are headed next
By Kathleen Koster, Published July 27th, 2016, Employee Benefits Advisor
Among the top five large-group brokerages in each state, both large national firms and fierce independent brokerages cream the crop. What they all share is a focused sales strategy and strong commitment to their employees. The list is the latest released by miEdge, a Boston-based consultancy, which determines the top large-group brokerages based on revenue from the Department of Labor schedules of Form 5500 filings.
“The beauty of our rankings is that they are the only rankings that give a level playing field look at [the top advisory firms],” explains Mark Smith, CEO of miEdge. There’s no self-disclosure, he adds, so “there’s no overstatement or understatement; it’s a very clean look at the marketplace by state.”
According to Smith, the most successful brokers offer three key components:
- An aggressive sales culture. “They have a proactive approach to not only consistently retain their accounts but also to find new accounts,” Smith says.
- Top talent. “The best quality talent translates to the best customer service,” he explains.
- Best-in-class value proposition. “The best and brightest brokers have a data-driven way of finding strategic partnerships and maximizing those partnerships where they can close the loop on relationships they might have and find innovate ways to get introductions to new accounts using the people they already do business with,” Smith adds.
EBA profiles three of these star brokerages that exemplify this trifecta.
Mercer, No.1 in California
Mercer stood out as a top earner in 32 states.
They aren’t the only large firm to top several states, as mergers and acquisitions continue to escalate in the marketplace. “The biggest surprise has been that the pace of consolidation in the marketplace has continued to be very strong,” says Smith. “A lot of that has been forced by the complexities of delivering the value proposition to their clients. You need more resources, a bigger and brighter talent pool.”
In addition to Mercer, Smith points to two other firms that have jumped out with significant growth. Arthur J. Gallagher & Co. has risen to be one of the largest two or three firms in the country and, according to the miEdge data, “spearheaded the pack in virtually every state within the country,” says Smith.
Marsh & McLennan Agency saw the most dramatic growth. “They really weren’t around in the last five years and they’ve grown to be a solid top 10 brokerage across the country,” says Smith.
As for Mercer, they attribute their success to their ability to scale to diverse employer groups. “We can work with employers with less than 100 employees to Fortune 500 companies, which is a big contributor to our success. In addition, many clients in California have global populations,” which is why many turn to a global firm with expansive resources like Mercer, explains Chris Renz, a partner and health & benefits office leader in their San Francisco office.
What’s more, Mercer didn’t form as a brokerage, but rather a consultancy, which Renz says is in their DNA. It permeates their sales culture and business strategy as consultants who do brokering, not the other way around. For example, clients are constantly looking to tackle rising healthcare costs and are often overwhelmed by all the options in the health and wellness space that promise to do just that.
“The fragmentation of the health and benefits system itself creates its own complexities,” Renz explains. “The clients we’re managing use a patchwork of 10 to 20 vendors to manage all their benefits needs. That’s complicated for our clients and for our employees.”
Mercer has tasked a specific group, Mercer Health Innovation Labs, to help employees comb through the clutter. The national effort is headquartered in San Francisco. The group “scours the innovation and start-up marketplace, looking for solutions that might benefit our clients and make these [solutions] more accessible for them so they don’t need to have that complex patchwork of solutions,” Renz explains.
The group has interviewed and validated more than 200 employers in this space. “We take the best solutions that we can find, then build them out and offer them to our clients,” says Renz.
One example of a health vendor Mercer has researched and selected for their clients is Progyny. The company provides infertility support for employees and family members, as well as education on the latest technologies available. It helps the employer reduce healthcare costs associated with premature birth and helps employees with better outcomes.
Another example is Rethink, an organization that focuses on helping working parents find solutions for children with disabilities, such as autism.
Renz recognizes that these technology companies are very niche, but if employees need these services, no matter how few, they’re providing an invaluable service for those workers.
Not only do they build these services out for their clients on a national scale, Mercer also advises them as clients.
In the San Francisco office in particular, technology is a huge focus. Mercer works with large tech firms, but also with emerging pre-IPO organizations with international employees. According to miEdge’s Smith, this is par for the course among top brokerages. “[We’re seeing] a move toward industry specialization,” says Smith.
For example, he explains how a manufacturing operation would have a very different kind of exposure and set of situations than a financial firm that’s all white collar and in a single location. These exposures differ based on types of medical issues within a population, different levels of stress among employees, whether they sit at a desk all day or do manual labor. If it’s a bilingual workforce or if employees work different shifts or in multiple locations, employers may have challenges communicating and enrolling certain employee groups. Claims dynamics also offer the opportunity for specialization if the carrier has a strong presence in certain industry segments, but not in others.
For Mercer’s California offices, the healthcare industry is another source of specialization, and they work with many hospitals and medical groups. “As employers, they’re facing tremendous challenges themselves,” says Renz. “As managing healthcare costs has become a top issue nationally, their business is under pressure to be more efficient and manage costs of their delivery, so their benefits have come under even more scrutiny at times than other industries to manage costs.”
They also have broad employee populations, from heart surgeons to janitorial staff, from union to non-union, and people working around the clock with complex overtime rules.
Renz sees Mercer’s advantage as being a large national firm. “We won’t move as fast as a local firm will with a new innovation. We’ll want to make sure it passes muster in terms of security and financial stability. Like any large firm must be, we’ll be a little bit more careful, and we believe that ultimately our clients benefit from that prudence,” he says.
Northwestern Benefit Corporation of Georgia, No.1 in Georgia
Independent firms, like Northwestern Benefit Corporation of Georgia, believe it’s their small, localized presence that gives them an advantage to react more nimbly to employer’s needs without navigating through a bureaucracy of red tape. “We’re a privately held company. We’re not owned by a large national player, so we don’t need to call New York or Los Angeles to check if we can make a decision that will best serve the client,” says CEO David Asbury. “We feel that we offer the same resources and tools as our larger, national competitors provide, but we’re able to make decisions much quicker, which allows us to be much more nimble and in flexible when serving clients.”
Instead of branching out to resources around the country like a national firm would, they bring the top specialists around the country to their firm.
They hired an in-house employee benefit counsel from Los Angeles to train their staff and host webinars and meetings that provide compliance guidance to clients. They also have a wellness team on staff for clients that want to explore new wellness strategies. And they have experts across fields to help clients with cost mitigation strategies, from a pharmacy cost expert to brokers offering funding strategies, telemedicine and wellness strategies.
“The pace of change in our space is unprecedented. I’d also say that the financial pressure and the compliance pressure that are clients are facing is also unprecedented, so we’re in unchartered waters. But we’ve been very focused and effective on building a specialty in areas [their clients need most help],” explains Asbury.
When the Affordable Care Act became law, their brokerage didn’t wait to see if the political tides would change. They became experts on the new law, and Georgia selected their firm to educate companies about the ins and outs of healthcare reform.
According to miEdge’s Smith, this is what makes independent firms stand out across the country, because “people know and trust them,” he says. “Many independent firms have found a way within their cost structure to provide a strong value proposition for clients and be able to compete with the big national firms,” Smith adds. “They have a long history in the marketplace with brand recognition and respected customer service.”
Other standouts on miEdge’s list include Holmes Murphy & Associates in the Midwest market, MJ Insurance and M3 Insurance Solutions in Indiana and Wisconsin, respectively. KELLY in Maryland has retained its leadership as a strong independent firm as well.
While Northwestern Benefit Corporation of Georgia serves diverse clients in all industries, it has also specialized in complex industries to become experts on that employer type’s particular needs. “One industry in particular that has been instrumental to our success has been the hospitality industry,” says Jason Brady, partner and employee benefit specialist at the Georgia firm. Restaurants, hotels and staffing organizations are complex industries because of their variable hour employees.
Brady believes their approach to sales and client retention enables them to be the best advisers for their clients. “Our independent sales team is not responsible for retaining the client,” he says. By separating the business development function from their client advising side, they believe they provide a superior focus on each client’s needs and business. “Because we separate the new business development and customer care/retention piece, it allows the sales people to focus on what they’re good at: delivering our message and value proposition to the marketplace,” says Asbury.
HUB International, No.1 in Louisiana
Another large, national firm, HUB International makes the top five in 10 states.
Like Mercer and Northwestern Benefit Corporation of Georgia, they credit their success with their top-notch brokers. “It starts with our people,” says Steven Terry, president of HUB International Gulf South Limited. “We have a company culture that fosters teamwork, entrepreneurship, integrity, discipline and accountability. Our people have bought into it and it’s a living, breathing thing that we do.”
They represent a large number of blue collar businesses, such as hospitals and legal firms, as well as one of the Gulf Coast’s largest employers: marine and energy companies like the oil rigs drilling off coast. HUB has large teams that specialize in these companies. They also do hands-on enrollments, and have a robust wellness team that coordinates with clients to create and roll out a successful wellness program on-site. Their sales strategy is equally hands on. “I’d say we win three-quarters of [accounts] we go after, if not more. We’re selective in where we go and we generally get referred into by accounts, which drives us into a 90-95% success rate,” Terry explains.
One of the biggest challenges HUB faces in Louisiana, says Terry, is a “people challenge. We’re not a big urban center, we don’t have as large a pool of people to pull from as [locations in big cities],” he explains. “And as demands come from our clients it’s hard to find the additional staff that’s knowledgeable in human resources.”
Especially as the industry has grown more complex, it now takes three to five years to train people, so they prefer to recruit employees who are already up to speed. This may account for the dramatic increase in mergers and acquisitions in recent years. “A lot of smaller brokers are finding they either need to spend a lot of money to get the resources they need or to join forces with a larger firm to get up to speed,” says Terry. “This also opens opportunities to bring in new partners to our organizations.”
Terry believes his firm “brings lots of resources to the table, whether that’s underwriting, analytical data, compliance attorneys, or wellness. We have a team of people and most of them are housed here.”
And if they don’t have a particular resource in Louisiana, they can turn to other offices. The Chicago office has an HR consulting specialty expert and there’s a technology expert in the Colorado office. “If a client has a question we can’t answer, we have a whole network of all the HUBs together to request information or expertise and within minutes get response back from all over the country. So that’s very helpful if you’re dealing with an issue you’re not used to dealing with for some reason,” he says.
Every state has its unique characteristics, says Smith of miEdge, particularly around their medical carriers. “Some states have a very closed marketplace where you might only have one, two or three core medical carriers, so brokers and consultants need to get creative in how the offer a differentiated solution. And that’s where combining that industry expertise with that core value proposition comes in. They obviously need to be strong in compliance, have strong technology vendors and partners to create positive experience for the client, and all of them need to have an eye on the results of the complete package” and make sure that the costs can be controlled over the long term,” Smith explains.
Whatever the challenges that lie ahead for employers, star advisers like the three highlighted here and those that topped miEdge’s list will strive to clear up compliance issues and provide solutions for their clients.
“We think that there’s a place for the broker, no matter what happens,” says Terry. “That’s our purpose: to remain relevant for our clients.”