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In my opinion the proposed health insurance exchange will end broker based IFP business entirely. For the very central reason that the carriers wont need us any longer. I welcome any and all opinions on this very central concern to our agencies.
A Health Insurance Exchange Will End Broker Based IFP?
- Thread starter Paradigm
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- 9,744
Although no one know the final shape yet, I think the best case scenario is that compensation for IFP will end up in the 5% fyc range.
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Without the health exchange that would be true but with the health exchange the companies get their wish: a direct advertising conduit to the consumer courtesy of the federal government. I see no reason why they would need a field force under that scenario.
- 9,744
Oh, I agree, but nobody should be surprised.
Some have been stuck in denial (and some still are), but once I saw Obama was going to be the norminee last summer...
Some have been stuck in denial (and some still are), but once I saw Obama was going to be the norminee last summer...
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We must remind ourselves that as advisors and financial planners we hold a broad license. Comparatively IFP compensation is low but most make it up on volume because it is low hanging fruit. Life, DI, CI, LTC, annuities, variables, securities pay greater compensation but there is more to know and not everyone in IFP will transition well to those lines due to lack of knowledge or a poor service mindset.
- 2,908
I stay only with the idea that change is coming, we are past the point of no return, and guaranteed issue alone is the major gamechanger. GI alone will "bust" the current independent system down. Not saying it will eliminate it. Only that it is the gamechanger.
Whether there will be any crumbs such as a 5%, I dont have strong views. My guess though is that, even though the carriers will not be dependent on independent sales agents that there could be 5% or so commissions. After all, at a certain point, it just becomes "found money" for the carriers if an agent presents a case they would not otherwise have and they toss him a bone. Much like the current model with AARP Med Supps. They are running a telemarketing/TV operation but if agents want to submit some cases that they would otherwise not get, then what the hey. In addition, there will always be carriers that are either not competitive on price or image and will have some feature, gimmick, angle, or real benefit that needs to be marketed more individually, at least worth 5% to them.
I suspect that the government will require the development of core "creditable plans" that carriers can get approved for inclusion in the Health Exchange. These would qualify for government subsidy/tax credits and have the government seal of approval that they provide certain minimal coverage. (this would be the equivalent of "original medicare" for example). Additional features, supplements, cadillac plans, etc may be marketed outside the exchange I would imagine. Even though the republicans are not in power the dems do have to toss some bone to the free-market types. In addition, this will work for the dems long-term too as they find that the basic plan they can offer is somewhat less than what they have in mind and will be less every year (just as with medicare). So instead of telling the voters that they are being cut or shortchanged, they tell them that they can go to the aftermarket add-on plans as needed. This would be slimey of course and contrary to campaign promises but sooner or later the lack of available dollars will come into play even though it is not even a consideration now.
Of course, this does not disagree with your view that they would not need a field force. They would not need it. However, there might be crumbs for independents who want to either grovel for them or find a volume niche in some yet-to-be learned way.
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Now see, I disagree with a lot of this, except the fact commissions will go down.
There are a couple of things that occur in history that show agents are still the best model for the business.
- Auto policies: Mandates to show financial responsibility for driving a car have made agents more popular. Though attempts to market to enable sales through the web are increasing, this is still far more expensive than agent based sales.
- Flood Insurance: In many cases, flood insurance is mandatory (based on lender requirements). The federal government is the primary source of flood insurance, and this is sold through agents.
- Earthquake insurance: At the state level, in California, the state underwrites earthquake insurance (California Earthquake Authority, or CEA). This, again, is sold through agents.
People will still need to enroll, make changes, cancel, complain, etc. This will happen somewhere, with some form of agent. This is where agents will make their 5-10%, probably recurring, matching more a P&C model rather than a health model.
(Mostly) Gone will be the days of the individual running an agency out of his spare bedroom. You'll have to have enough volume that it will require staff to do the day to day work, again, similar to most P&C agencies.
As an agent, you'll have more service work to perform, less pay to do it on, but an easier time selling the policies you write.
If you are already in the business, don't sweat the changes till you know what they will be, but be ready to change quick, you'll do well. If you are not already established in the business, unless you are sure this is what you want, I would probably wait to jump in.
Dan
There are a couple of things that occur in history that show agents are still the best model for the business.
- Auto policies: Mandates to show financial responsibility for driving a car have made agents more popular. Though attempts to market to enable sales through the web are increasing, this is still far more expensive than agent based sales.
- Flood Insurance: In many cases, flood insurance is mandatory (based on lender requirements). The federal government is the primary source of flood insurance, and this is sold through agents.
- Earthquake insurance: At the state level, in California, the state underwrites earthquake insurance (California Earthquake Authority, or CEA). This, again, is sold through agents.
People will still need to enroll, make changes, cancel, complain, etc. This will happen somewhere, with some form of agent. This is where agents will make their 5-10%, probably recurring, matching more a P&C model rather than a health model.
(Mostly) Gone will be the days of the individual running an agency out of his spare bedroom. You'll have to have enough volume that it will require staff to do the day to day work, again, similar to most P&C agencies.
As an agent, you'll have more service work to perform, less pay to do it on, but an easier time selling the policies you write.
If you are already in the business, don't sweat the changes till you know what they will be, but be ready to change quick, you'll do well. If you are not already established in the business, unless you are sure this is what you want, I would probably wait to jump in.
Dan
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I would agree except that this is Obama and the liberal whackjob fringe we are talking about. This whole government interference nonsense in the freenmarket chaffs my ass. I dont know what will happen with commissions or with an exchange or GI for that matter. It could all be lip service or there could be substantive changes. My point is that the ROI allowed by IFP would not be possible in that model. lets say is 500% now vs. 200% later. That return on investment will not allow continuation of the current model and only high volume brokers will even see the need to stay in this business.
My point is there is more fertile ground out there than a post reform IFP business and that is the contingency we should all plan for. As far as staff; if that is necessitated I'd prefer to invest those dollars in servicing advanced case design life insurance and financial planning rather than low compensation IFP.
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- 10,275
I bet a few lead companies go under as well.
- 2,908
Probably quite a few things in history show that many aspects of health insurance are best left to the private sector rather than be socialized. Makes no difference. We have a socialist in power who hates the private sector at worst and at best has no experience with it. Rebuttals about it being too expensive or unworkable or whatever are not going to turn it around even if true.
It is amazing how in just a few short days the discussion has transitioned from whether there would be major reform over to whether we think there could be 5% commissions. Interesting.
Although I think there could be some commissions around and about, I would also watch out for the carriers cannabalizing us too. There is not only the problem of our not being needed but that they may actively try to discredit us too as part of their marketing gig once they get their captive telemarketing/health exchange gig in place. Take the example from the securities field. An increasing number of discount brokerage firms don't "need" independent brokers. That is bad enough. What is worse is that they poison the well with ads day in and day out on TV about how your high-priced broker only cares about himself and is ripping you off. There will be a lot of that anyway along the way. Obama seeks to promote his plan by villainizing agents even more than they are already. Before it is over clients will think that 90% of the their 200,000 hospital bill goes to you and if they get you out of the system it would only cost 20,000.
Not good.
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