Renewals: Challenges for advisors

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Renewals are a key part of a benefits advisor’s relationship with their client. In Part 1 we looked at how advisors can prepare themselves for dealing with each of their client renewals.

In this article, Dave Patriarche, owner of Mainstay Insurance Brokerage Inc., which has 65 to 70 small-business clients, talks about the challenges an advisor can face at renewal time. He’s been in the business for 13 years, working with clients in the US and Canada and, through Canadian Group Insurance Brokers (www.cgib.ca), running seminars for advisors.

Challenges advisors face and how to overcome them

Client’s lack of knowledge. Renewal time is an opportunity to educate to your clients, especially about the need to promptly enroll new employees and remove terminated ones (to avoid legal disasters). Also, review basics about how to administer the plan. Many clients don’t know all the basics of their plans – and they don’t want to, because it’s not their primary business — and very few employees read those little insurance booklets. Some common education pointers:

  • Mention that employer-paid life-insurance premiums are a taxable benefit for employees.
  • Advise that plan enrolment should be mandatory for all employees, because even signed opt-out waivers can be defeated in court.
  • Get Benefits Administrator liability coverage (usually as a rider on your business insurance policy), because a costly mistake or mess can fall on the shoulders of one human-resources staffer.
  • Ensure benefit booklets are up to date.

Client shock. Most of your clients won’t expect a rise in renewal rates, which can average 6-8% a year. But averages show only part of the picture, says Patriarche. Just as important are ranges. Last year for example, his clients saw reductions as low as -24% and as high as +29%. For first-time renewals, assuming stable claiming patterns, you’re often looking at relatively high renewal rates, compared to subsequent renewals. Patriarch shares the highs, lows and averages over five years to his clients. Either before a meeting or during the meeting itself, you need to have a conversation to explain possible reasons for rises:

  • more, fewer, larger or any change in employee claims;
  • employee demographics – older employees tend to make more claims;
  • regardless of age, all employees are one year older during renewal time, which means more health, disability and life-insurance claims overall;
  • insurance-company renewal philosophy;
  • demographic changes (see above);
  • increasing health and dental rates in the industries (see above);

Recession challenges. During economic downturns, clients lay off employees, which leads to increased claims from the remaining employees. Clients respond with, “Hey, that’s not fair. I have fewer employees. Why are claims rising more quickly?” You need to educate clients about reasons, ideally long before the renewal date.

Catastrophic claims. Expensive chemotherapy drugs can be bought as prescriptions now, while “blockbuster drugs” for arthritis can cost $17,000 for a base dosage. Muscular Sclerosis medicines can cost $35,000 a year, and HIV, which used to be a death sentence in Canada, is now more of a chronic illness—with annual drug costs over $20,000 a year. Keeping privacy in mind, you need to highlight possible big claims.

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