Future of Individual Health for Brokers

[ABC]

This individual health market is dead man walking for brokers. The carriers are quietly building national online campaigns. These carriers are spending $120,000 a month on SEO. Right now they are going after very broad search terms like "health insurance". It is only a mater of time they go state specific and city specific.

The cost for a carrier to sell through a broker is about $180 per policy to go direct it's under $70.

Most individual brokers are not building any type of relationship with the client so the transition to captive agents will be easy.

 

[GreenSky]

This individual health market is dead man walking for brokers. The carriers are quietly building national online campaigns. These carriers are spending $120,000 a month on SEO. Right now they are going after very broad search terms like "health insurance". It is only a mater of time they go state specific and city specific.

The cost for a carrier to sell through a broker is about $180 per policy to go direct it's under $70.

Most individual brokers are not building any type of relationship with the client so the transition to captive agents will be easy.

I don't disagree that brokers have little or no place in the future.

But, if you are correct about the cost of selling a policy, then why have carriers not cut out the broker channel years ago and just go direct? Where did you get the cost of selling?

Rick

 

[ABC]

I don't disagree that brokers have little or no place in the future.

But, if you are correct about the cost of selling a policy, then why have carriers not cut out the broker channel years ago and just go direct? Where did you get the cost of selling?

Rick

The info came from the developer of the SEO campaign.
I think the direct approach has a lot to do with the MLR.

 

[taterpeeler]

The info came from the developer of the SEO campaign.
I think the direct approach has a lot to do with the MLR.

the seo developer that landed the contract and would do anything to convince his client(the insurance companies) that his way is correct? that guy?

I have been one on here to also state the future of indy health is toast but my reasons were more related to health care reform, not because carriers wanted to do it all marketing themselfs... humans still cant navigate applications, not yet. until such time as the application is easy with only 1 or 2 pages and the registration process is simple client will need brokers.

the bcbs tx app requires a software engineer to figure out the process. their new password requirement are a beating.

once the first quarter numbers are released by the carriers their will be a little concern on their end. i think sales will be down 35% across the board. after the 2nd quarter numbers are released and the numbers are still down you will see panic on their end and then goofy bonus programs will get more play all in an effort to spark sales.

here is your benchmark for knowing that they are panicing... if the carriers start more aggressive bonus programs, not tien to member growth but raw new sales then you can say they understand they cant do it without agents.

now, move the clock to 2014. agents are not needed unless the law is thrown out

 

[GA in GA]

Just like the internet has enabled independent brokers to increase the size, scope, and efficiency of their businesses, it has enabled the insurance companies themselves to do the same.

I can easily see how their direct cost to acquire a policy has gone down over the years, but now with reduced commissions, their broker acquisition costs should be down as well.

 

[aheff]

Agree, indy market will, at best, be substantially less profitable for agents, and at worst, completely toast. That being said, why is it that brokers still drive a huge % of volume? If brokers were that disposable, why are they still around? Answer- many consumers demand the broker, and the carrier realizes that the broker still drives a fair amount of business their way. Unless we are written out politically, I feel there will still be business for brokers-albeit at a much lower fee. Perhaps similar to Med Sup model. Med Sups are completely standardized by medicare, yet brokers are much involved? Why? Same reason why they are involved today in indy market-many consumers want and need brokers.

 

[cmbilt]

The info came from the developer of the SEO campaign.
I think the direct approach has a lot to do with the MLR.

The direct approach would have little to do with the Medical Loss Ratio. The MLR, which must be 80%, requires that 80% of the generated revenue in premium dollars go to paying claims of it's members. Which is why many of the carriers have had to re-work their commissino structures. If you land above this 80%, the carrier will be fined by the government. Land below this 80% and the carrier will have to give rebates to its members.

The broker channel of distribution is by far the most profitable and influencial channel of distribution for carriers. Captive agents working within carriers cost more money in business overhead and overall production is not on the same level as non-captive brokers.

By 2014, research is indicating an influx of roughly 20 - 25 million individuals who will need individual health insurance and be required by law to get it. The broker channel is going to play a pivotal role with this demographic. Now its a given, some of these people will go through the exchanges, but most likely the majority will go through the broker channel. With this being said, carriers will only be able to rate these individuals on where they live, their family size, tobacco use, and their age. All individuals will be guaranteed issued policies. To me, as an indivdual non captive broker here in GA, I see a lot of opportunity.

Now something to think about:

Could major carriers be developing SEO key words for future insurance exchanges? The exchanges will most likely be handled online, which would be dominated with key words through search engines. The work your SEO developer is doing should not be classified as wiping out the broker distribution channel because this channel is the most viable and profitable channel of distribution for companies. It could, however, by SEO work done for future insurance xchanges as well as a better web prescense in this ever increasing virtual environment.

 

[bill3173]

Not trying to be a smart aleck, but the carriers are going to lower their acquisition cost through direct business, and cutting out the agents?

That's the funniest thing that I've read all day.

 

[GreenSky]

By 2014, research is indicating an influx of roughly 20 - 25 million individuals who will need individual health insurance and be required by law to get it. The broker channel is going to play a pivotal role with this demographic. Now its a given, some of these people will go through the exchanges, but most likely the majority will go through the broker channel. With this being said, carriers will only be able to rate these individuals on where they live, their family size, tobacco use, and their age. All individuals will be guaranteed issued policies. To me, as an indivdual non captive broker here in GA, I see a lot of opportunity.

First, HAHAHAHA.

Second, and more important. The reform was not designed to give people more access to health insurance. It was from the start a system that cannot work if private insurance carriers are involved.

It is clearly designed to allow the socialists in power to say "See, we told you. Insurance companies cannot provide a benefit at a reasonable cost. The only thing that will work is a single payer system."

Nevermind that it will cost more and provide terrible coveage. We're moving to this model and agents certainly won't be involved.

You can believe this is an opportunity if you wish but you damn well better have a Plan B.

Rick

 

[cmbilt]

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Agree, indy market will, at best, be substantially less profitable for agents, and at worst, completely toast. That being said, why is it that brokers still drive a huge % of volume? If brokers were that disposable, why are they still around? Answer- many consumers demand the broker, and the carrier realizes that the broker still drives a fair amount of business their way. Unless we are written out politically, I feel there will still be business for brokers-albeit at a much lower fee. Perhaps similar to Med Sup model. Med Sups are completely standardized by medicare, yet brokers are much involved? Why? Same reason why they are involved today in indy market-many consumers want and need brokers.

You make a very valid point.


If 2014 comes with no changes, and health insurance breaks down similar to NY and Mass (where agents are paid a flat fee per application), we can continue to look at simple economics to explain the opportunity in the individual marketplace (at least to me)

Let’s simplify the mathematics for general understanding:

Commission: $25/application
Target Market: 25 million people
Potential Commission Available: $625,000,000

This is how I relay the potential to my agents down here in good old rural GA! But to each his own!