Besides flushing good money down the toilet, picking the agent that is incorrect can get one to break the law. This is the area where you say”Wait a minute; creating a wrong decision cannot be that bad!”
Seriously, I am not making this up. Alright, I will tell you a real-life narrative, it is known as”The Client, the Broker, Money down the Drain and the very long arm of the Law” – hmm, a fairly long title isn’t it?
Listed below are 3 incorrect reasons for choosing an insurance broker:
1. Allowing Allergic to Cloud your awareness of Judgment
Alright, the broker you picked is a fantastic friend, brother or sister-in-law, college roommate. Sentiments in your insurance agent selection will land you in trouble. It’s necessary to know that”group insurance” is an area of expertise and will require a person with specialized knowledge. If your broker is totally clueless, you will not understand you have problems with the DOL or IRS, until they march through your door! Be sure to only pick group benefits experts in your broker selection procedure.
2. Choosing the”Big Name Broker”
It might not be obvious that selecting the mega-broker on your town can be wrong. In the end, if they do the benefits for those”name” companies, they must know what they’re doing, right? Absolutely true. They know what they are doing, but with the broker who works HAS the knowledge. However, do they care to take some time to apply that understanding for your dinky little firm?
4. Choosing an Insurance Broker Who’s a Jack-of-all-Trades and Master of None!
You will do something wrong if you think group insurance is one”those” insurance coverages that your P&C (property and casualty) insurance agent can handle just fine. After all, it is”business insurance,” correct? She or he may be a real Einstein who saved you tons of cash on your Workers Compensation. Your lawyer may believe that your estate planner can do no wrong. But hey, we’re talking about group insurance here; and this insurance requires some specialty. Both life and P&C insurance are their particular specialties… thankfully, we are knowledgeable enough to stay away from them – the jack-of-traders must also do the same when it comes to group insurance! Click here to learn more
So what happened? Well, the customer, an LLC – where the owners are equally taxed as S-corp owners, partners or sole proprietors – had an HRA (Health Reimbursement Arrangement). Under this arrangement, the health plan usually has a deductible that employees must meet before the carrier pays claims. With an HRA, the employer reimburses some part of it to the employee. If $2,000 is the deductible, that is the worker’s theoretical accountability in this circumstance, the employer reimburses the second $1,000 of it.
Despite this payout, the company is still a winner here because the premium for the $2,000 deductible program is smaller compared to the $1,000 deductible plan which the members of employees efficiently get. Just a few of staff will incur sufficient allowance to garner a reimbursement, so the premium saving on every worker will exceed the reimbursements the employer will need to pay for the handful that surpasses the $1,000 point. This means the staff receives a plan, but the employer will not pay to get a plan that is $ 1,000 deductible.
An example of that happened with a prospective customer we recently met. This prospect was. That is our”Sweet Spo.t” We focus our service on employers with a selection of 10 to 200 employees, so in this scenario, the match was pretty good.
They were presently working with a”regional agent” that is 4 times bigger than us and whom I greatly respect. They are a remarkable broker – for the right sized client. If there are 200+ members of staff, they are perfect. Do they need this more compact business? Well, yes, they need it! However, do they put their backs? Oh heck NO!
A great idea, at least in theory. But when we looked at it a issue was discovered by us. Among the employees being reimbursed were the two LLC owners. Regrettably, that’s a rule-breaker. LLC owners aren’t permitted to take HRA reimbursements. Doesn’t the agent understand an LLC owner cannot be reimbursed? Sure they do, however, they had been too busy and didn’t catch this error.
What is more, when they did their renewal evaluation, they revealed the employer just the renewal rates from the present carrier. They included a remark that”each of the other carriers are about precisely the exact same price or more”
Entirely wrong. Another carrier – one of Massachusetts’ top 3 – had a price four percent lower compared to their present carrier to get a strategy. A better plan, less cash… nevertheless, the customer never watched it.
Why? Candidly the agent didn’t feel this client’s dimensions and commission income justified doing the entire job. It’s easier to spend the customer’s cash than it is to perform the work. McConville Omni Insurance Brokers
It works the other way, also. While my firm may know enough to perform all of the work and analysis we don’t have the staff. So we don’t go after that business. But plenty of brokers will take all customers, whether they’re set to service the accounts.
How do you avoid this same issue? Simple. Make sure the agent’s present clients are within your size group and both groups only smaller and just bigger than your company. In order to understand where your agent’s loyalties lie, all You Have to do is to simply ask your broker what percent of his clients fall from the group of:
* 1-10 employees,
* 11-50 employees,
* 51-100 staff,
* 101-250 employees, and
* more than 250 staff.
If lots of the broker’s clientele are in groups bigger OR larger than you, you may either wind up choosing an insurance broker who’s not knowledgeable enough or one which wouldn’t truly value your business.