It's clear that small businesses are truly an economic phenomenon. According to government statistics compiled by the Small Business Administration, companies with 500 or fewer employees are now a major engine in the labor market. They make up 99.7 percent of all employer firms, dole out 45 percent of the private sector's payroll, and create from 60 to 80 percent of the economy's new jobs each year.
We in the insurance industry know that the small-business market for employee benefits -- including health, life, disability, and dental insurance -- provides a strong opportunity for underwriters and brokers alike. At the same time, there is an even more compelling niche within the small-company market: the "micro market," a segment that remains relatively untapped. It's thriving, teeming with both employers that want to give their workers the best benefits and a workforce that is eager to protect its assets and earning power. The fact that it was overlooked for so long can be attributed to both its size and the need for a clear strategy to help brokers, agents, and providers tap into its potential.
Micro market, macro opportunity
The group in question can be labeled as "micro" or "small-group" businesses. Whatever name you choose, the sector is composed of companies with fewer than 16 employees. Whether they have as little as two employees or a personnel pool of 15 full-timers, management at this end of the benefits marketplace doesn't have many choices. Only a handful of insurers and providers have ventured here. Few in the industry understand the effort -- or even the commitment -- necessary to succeed in this end of the market.
To better grasp what working the micro-niche market requires, just look at the makeup of companies that thrive in the segment. Many small businesses often set up shop by taking on tasks that big corporations outsource at a lower cost and with greater efficiency. In some cases, they take on accounting responsibilities. Others might be consultants who train a large company's workforce.
No matter what the job in question, a small-group business manager is resourceful and through sheer necessity must juggle myriad responsibilities. The CEO, of course, heads up the operation of a micro-outfit but may also have to function as the key revenue generator, the chief of personnel, the chief financial officer, and even the receptionist -- depending on the time of day and the minute-by-minute needs of the company.
Spread thin
Those responsibilities can easily spread thin their talent, time, and energy. But the fact is, in the current labor market, employee benefits are now more important to small businesses than ever before. U.S. unemployment rates have dropped significantly in the past year, a signal that big corporations -- big competitors -- are now facing off with small businesses in a fight to secure the best employees. That means small-group employers are challenged every day, both in their markets and on their payroll ledger. In order to compete, small groups have to offer benefits that match or closely resemble those the big players can provide.
There are indications that the burden of managing day-to-day operations and jockeying for the best employee benefits package is in many cases proving to be too much for the small-group business. When left to fend on their own as benefits coordinators, the micro-niche CEOs often cannot devote the attention that employee benefits require. Consider the findings of a 2005 LIMRA study titled "Small Business Owners." The report found that few small-business owners had business life or disability income insurance. In many cases, small-business managers were paying twice as much for health insurance. LIMRA also reported that there was a significant opportunity for advisors to help small-business owners devise ways to fund health, life, and disability coverage with pre-tax business dollars rather than using after-tax income to do so. Those results indicate that brokers and providers can do a lot to help.
One-stop handholding
The first step in meeting the small-group market's needs is straightforward: Provide a simple solution. Micro-niche managers are stretched to their limit with daily duties, so it is difficult for them to actively shop and examine a portfolio of single-line products. They want a plan that is easy to administer and simple to manage over time.
Put into practice, that means small-group bosses don't want a dozen offerings clouding the horizon. They don't want to deal with multiple carriers, either. At the same time, they know they can get the most choices for employees and the best package for their money in a multi-line offering that includes health, life, disability, and dental coverage. It is therefore only natural for the small-group CEO to adopt a "once and done" mindset and seek one solution that fits all their company's needs.
A simple plan, however, doesn't mean policies can just be pre-packaged and airlifted onto a small-group business. The best approach to small-group sales goes well beyond a mere distribution strategy; it depends on solidifying relationships over time. It calls for detail work on pricing, packaging, and even product design to help develop well-fitting benefits coverage.
It is also very important to know just where the small-group boss seeks advice. The micro-niche CEO needs guidance and a sense of security. Handholding starts as proposals are tailored to a firm's needs, but they don't stop there. A nurtured relationship goes well beyond posting rate sheets on the Web, but it need not be a time-consuming ordeal. Close telephone contact works best -- it allows brokers leeway to manage their many clients while still providing an important link to insurers. That's an invaluable connection as a deal progresses from the initial stages to a well-crafted arrangement. It is also equally important post-quote, when small-group employers might require additional guidance.
Clancy Merrill is the executive director of marketing & sales for The Guardian Life Insurance Company of America.
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