2008 Agent Media study shows stagnating sales, shifting challenges
Today’s health market appears to be ailing.
In early 2007, 64 percent of agents indicated that they’d seen a rise in new health insurance sales, with only 8 percent indicating a decrease. This year, however, Agent Media’s* third-annual Health Insurance Study showed that only 54 percent saw an increase over last year’s sales, with 20 percent suffering a decrease in new policies since 2007. (Chart 1)
So why the drop? Many experts say that, while the individual marketplace has stayed steady or even increased in volume, sharply rising premiums have forced many small-business owners to cut down or eliminate the health benefits they offer to employers, leaving a gap in many agents’ businesses.
“They feel it’s become just too expensive,” said Carolyn Goodwin, president of the Texas Association of Health Underwriters. “I think that’s a valid objection if you look only at numbers as opposed to the value of what you have. But I’ve used car insurance as an example and I’ve used homeowner’s insurance as an example — we insure our homes and we insure our cars because they’re assets. The largest asset, though, is our health, so why not insure that, as well?”
One avenue for agents to help their small-business clients — a group defined as workplaces with fewer than 100 employees and which comprises 99 percent of U.S. businesses — is a high-deductible health plan paired with a health savings account (HSA), which can help shift the burden of cost to employees while encouraging them to pursue preventive treatment against catastrophic illness. We reveal the results of the HSA portion of Agent Media’s 2008 Health Insurance Study, conducted in partnership with the Association of Health Insurance Advisors (AHIA), the Council for Disability Awareness (CDA), and the National Association of Health Underwriters (NAHU).
But first, let’s take a look at the challenges faced by and experiences of those producers in the health insurance marketplace.
Optimism and opportunity
While sales have waned over the past year, producers remain optimistic: Seventy-five percent of agents said they expect their sales to increase over the coming year, while only 20 percent believe they will stay the same and 4 percent expect a decrease.
“I think the message is getting out there that it’s as critical to take care of our health care as it is to take care of our assets,” said Goodwin.
While Mike Norderhaug, vice president of sales strategy for Assurant Health, agrees that the group marketplace is suffering, this trend creates an opportunity for agents to move forward in the individual health marketplace as employees with reduced or nonexistent health benefits at work seek other avenues for coverage. Already, in fact, most agents sell individual major medical more than any other policy (42 percent), with group health trailing behind at 22 percent. (Chart 2)
“With a great deal of pressure on small employers to reduce coverage, more people are shifting to the individual market to buy health insurance on their own,” Norderhaug said. “This is new to lots of people. They’re facing this on their own, and they will need agents. They will really need advice to help them sort out their options.”
Challenges faced and shifting priorities
The top five challenges faced by agents in today’s health marketplace speak largely to two of the strongest pain points for health consumers: cost and accessibility. Forty-five percent of agents say their biggest challenge is that clients believe they can’t afford coverage, while 42 percent say their clients are not qualified because of health issues. (Chart 3)
Forty-two percent said rate increases are impacting their business (with only 34 percent struggling with the same challenge in 2007), 27 percent said underwriting is one of their biggest obstacles, and 24 percent said prospecting and finding new clients is the most difficult issue they face.
The cost obstacle, said experts, is a fairly easy one to overcome.
“My response to a client who says they can’t afford health insurance is, ‘How can you afford not to have it?’” said Goodwin. Yet while this remains the No. 1 challenge faced by agents, fewer agents are seeing a negative impact than did last year, when 59 percent named it as their top obstacle.
When faced with clients who may have difficulty qualifying for coverage, Goodwin continued, agents can help by directing them to resources that may help them qualify for high-risk pools, offered by many states to help cover consumers who would otherwise have great difficulty obtaining health insurance.
Rate increases are certainly on everybody’s mind, as inflation and rising health care costs in general drive carriers to up premiums in order to cover liabilities. This presents a challenge not only when clients worry that they can’t afford to purchase or continue coverage, but also when they regularly shop around for the carriers with the lowest rates. According to one agent, “It is a constant battle to reposition your clients to another carrier when they receive an increase that is higher than they are able to afford.”
To help combat this issue, said Norderhaug, many carriers are beginning to offer two and three-year rate guarantees that lock in premiums and help prevent carrier shopping on the part of clients.
When faced with underwriting difficulties, Norderhaug stresses the importance of field underwriting to make sure your bases are covered before submitting a case. This can help prepare the client for any possible outcomes while helping to speed the process and obtain higher ratings.
“We’re always surprised at what’s left off the application. It’s too late at that point to underwrite,” he said. “You don’t want to underwrite after services have been given. The better job agents do up front helps protect their E&O (errors and omissions insurance) and makes them a trusted advisor.”
When faced with the perennial challenge of prospecting, made more important by the shift from group to individual marketplaces, referrals are a popular option, selected by 50 percent of agents as the most effective form of prospecting. This popular method is trailed by cross-selling to existing clients (12 percent), purchasing leads (10 percent), and direct mail (6 percent). Ten percent of agents said they do not prospect for new health insurance clients at all.
One way to prospect for new group clients as others drop out, said Kaplan, is to explore niche markets that are experiencing growth rather than decline, such as communications and telemarketing. “There are some industries out there that are hurting,” said Kaplan “You have to look for pockets of the market where times are better.”
And while negative media attention was the eighth biggest challenge faced by producers today (7 percent), this issue has risen in the ranks from No. 12 in 2007 (3 percent), highlighting the need for conscientious agents to make clients aware of the fact that bad press illustrates the exception rather than the rule.
“In every industry, there are people who are bad apples,” said Goodwin. “You need to be truly dedicated to doing the right thing. Perhaps by sharing more accurate stories based on personal experience or displaying contact information on your Web site, you can help clients approach you when they hear something negative and ask you if it’s true. If you continue to do a good job the right way, though, you have nothing to fear.”
Riding out the current climate
As for what to do to cope with decreasing sales, Kaplan suggests taking a path she chose for her own business: diversification.
“The diversification of my business is what saves me, because (employers) aren’t buying one kind of thing and they may be looking at their personal situation more closely than that of their employees,” she said. She also recommended constant prospecting using the techniques described above to keep business coming in while waiting out the storm.
The future may also require producers to specialize as the health field can prove complicated for both agents and consumers, what with different plan designs such as limited benefit plans to HSAs.
“It’s too complicated of a business for somebody to do one or two (policies) a year, so the marketplace is going to force (agents) to specialize,” he said. “We need to figure out what’s most important for our clients so the consumer can make an informed decision.”
Christina Pellett is managing editor of the Agent’s Sales Journal. She can be reached at ASJeditor@AgentMediaCorp.com or 800-933-9449 ext. 226.
*Agent Media is the publisher of the Agent’s Sales Journal
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