There is an opportunity that exists right now for independent insurance agencies and independent payroll companies to work together without complication. Both parties can benefit from positioning the other in shared accounts. Both parties work regularly with the leadership of the commercial entities they consider clients. The revenue streams that these two parties generate are completely separate from one another’s, so there is no conceivable reason to not refer each other into one another’s accounts. There are many reasons TO DO this, and we will introduce these reasons as a series of levels of sophistication/complexity:
LEVEL I …SIMPLE CO-EXISTENCE
Independent Agencies today have a new threat to their livelihoods…the national large payroll vendors…. ADP, Ceridian, and Paychex to name three. These organizations are quietly moving beyond their core payroll and taxes management services and into the product lines that independent agents market. Their first target was “pay-as-go” workers compensation. At this point, one of these companies’ offerings include: HR, COBRA Administration, Safety and Loss Control, Worker’s Comp, Group Health, Retirement Services, Financial Advisor Referrals…etc. Paychex Insurance Agency ranked #28 on Business Insurance magazine’s list of America’s top 100 brokers.
Given this insidious movement, independent agents should consider referring “agency friendly”payroll vendors into their commercial accounts. By placing a vendor that does not represent competition, the agent is effectively blocking some very capable competition.
An important thing to recognize is that referrals between “agency friendly” payroll vendors and independent agents do not need to involve finder’s fees or revenue share arrangements. Both parties have their own revenue models that do not compete with the others…and once a referral is completed very little value is added to the relationship going forward.
Agents should be more than happy to bring “agency friendly” payroll vendors to the table. The same payroll vendors should be referring independent agents into their payroll accounts. This cooperative, passive relationship can be extremely beneficial to both parties.
LEVEL II…ADD PAYROLL DEDUCTION VOLUNTARY BENEFITS
Independent Agencies that have licensed the Worksite Marketing Manager 2.0 system gain significant opportunities to grow business, improve the customer experience, and to further block the competition mentioned earlier when they establish a strategic partnership with an independent payroll vendor with state of the art systems. This relationship further blocks the payroll competition through a joint “bundling” of payroll and benefits services that rivals what the large nationals are offering.
Grow business-a Level II relationship means that beyond simply referring each other into new commercial accounts, the agency gains a personal lines and voluntary benefits sale opportunity with each new account. An often overlooked revenue opportunity is the Personal Lines of the employees of commercial accounts. In fact, it is not uncommon for the Personal Lines opportunity to exceed the revenue potential of the Commercial Lines sale. When you factor in the lack of a “renewal battle” necessary to retain a commercial voluntary benefits account, and the agency equity that each $1M in Personal Lines commissions adds, this is a clear winner for the agency.
If your agency has not evaluated the magnitude of this business opportunity, you should estimate the number of employees that work in the medium and large commercial and benefits accounts that your agency currently writes, and then multiply this number by your agency’s average revenue per personal lines account. Typically this is a 7 figure, if not an 8 figure revenue opportunity. Would that make a difference to your agency’s bottom line?
Improve the Customer Experience-when an agency-friendly payroll vendor and a savvy Independent Agent work cooperatively in a common account, the employer can enjoy the best possible voluntary benefits offering for both the employees and the company.
Given the electronic files capability of the WMM2 system, and the sophisticated ACH capability of the payroll vendor systems, a workflow opportunity exists that relieves the employer of virtually all “hands-on” deduction maintenance for the voluntary program, while the ACH capacity of the payroll vendor can deliver monies from current deductions back to the agency premium trust account on a rolling same-day/next-day basis.
The employer can be offered the following opportunity:
Mr./Mrs. Employer-because you are working with our firm and the EXCELLENT Payroll Company, we can offer you an opportunity to deliver a high quality menu of voluntary benefits to your employees. As you know, this is perhaps the best way to generate employee goodwill through benefits…no direct expense, virtually no required deduction maintenance, and no “pursuit” required for terminated employees as is required by COBRA and 401K’s.
Once we have worked together to deliver a high quality initial program introduction through employee meetings, the deduction maintenance can be managed with the following steps:
1. Each pay cycle a changes update will be emailed to HR for their review
2. Each pay cycle a changes e-file will be sent to the payroll provider
3. Each pay cycle the payroll provider will ACH deductions to the agency
Please note that your HR team always can review the changes taking place, but no further action is required by any member of your staff. The mechanics associated with actually updating payroll deductions and remitting those deductions can be managed between your payroll company and our agency through the efficient use of contemporary technology. You can deliver a great offering to your employees with no expense and no administrative load…the ideal benefit program!
The client is getting the best of all worlds, and both the payroll company and the agency are simultaneously growing their businesses and keeping the competition out. This is almost as good as it gets.
LEVEL III – ADD THE FINAL COMPONENT
Through the Level II model, payroll vendors and independent agents who sell singled-source billed payroll deduction benefits are promoting each other’s capabilities and seeking to gain maximum services penetration within their shared clientele. They are also using the contemporary technology that both parties have access to in order to improve the client experience and to improve their respective workflows.
The third player who can complete the picture is the “Pay-As-Go” Workers Compensation provider. There is an emerging market for this service and an emerging provider base developing quickly. Many of these providers can work with Independent Agents, enabling them to “keep”their commission revenues while adding this service.
With all three parties marketing their own services, and then referring in the other parties, they all can profit through both shared offense and shared defense.
Keeping the large national payroll vendors out of their accounts is crucial for the independent agents, and it is important to the other parties also. With no reason not to play nicely together, these three commercial services providers can help their strategic partners while helping themselves.
The time to worry about the large payroll companies was five years ago. Now it’s time to do something about it…and the key word in the sentence is “now.”
Worksite Marketing Manager 2.0
Central to Agency Catalyst is Worksite Marketing Manager 2.0. This online system enables your agency to make multiple products from multiple insurance companies available to employees while requiring only one employer payroll slot.
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