Selecting a Broker – Making the Right Choice

Besides flushing great money down the toilet, choosing the wrong broker can get one to unwittingly break the law. This is the area where you state”Wait a moment; making a wrong decision can’t be bad!”

Seriously, I am not making this up. Alright, I will tell you a real-life story, 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 is not it?

Listed below are 3 incorrect reasons for choosing an insurance agent:

1. Allowing Allergic to Cloud your awareness of Judgment

Alright, the broker you chose is a fantastic friend, brother or sister-in-law, faculty roommate. Employing sentiments in your own insurance agent choice will land you in trouble. It’s necessary to know that”group insurance” is a place of expertise and will require someone with technical knowledge. You won’t understand till they march through your door that you have problems with the DOL or IRS if your agent is clueless! Be sure to pick group benefits experts in your agent selection process. 

2. Choosing an Insurance Broker who is a Jack-of-all-Trades and Master of None!

You’ll be doing something wrong if you think that group insurance is just one”those” insurance coverages that your P&C (property and casualty) insurance broker can handle just fine. After all, it’s”business insurance,” right? They may be. Your attorney might believe your estate planner can do no wrong. But hey, we are talking about type insurance; and some specialty is required by this insurance. Both lifestyle and P&C insurance are their own specialties… thankfully, we are knowledgeable enough to steer clear of them – the jack-of-traders must also do exactly the same in regards to class insurance! McConville Omni Insurance Brokers

3. Choosing the”Big Name Broker”

It might not be obvious that selecting the mega-broker in your town can be incorrect. In the end, if they do the benefits for all those”name” companies, they must know what they’re doing, right? Absolutely true. They DO know exactly what they’re doing, but with the broker who works with top companies that are your company’s size HAS the understanding. However, do they care enough to take the time to apply that understanding?

A good example of that occurred with a potential customer we recently fulfilled. This fresh prospect was. That is our”Sweet Spo.t” We focus our service on employers with a selection of 10 to 200 workers, so in this scenario, the match was pretty great.

They were presently working with a”regional broker” that is 4 times larger than us and that which I greatly respect. They’re a broker – for the best-sized customer. They’re perfect if there are 200 + members of staff. Do they want this smaller business? Well, yes, they still need it! But do they put their backs? Oh heck NO!

What exactly happened? 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 agreement, the health plan usually has a deductible that employees must meet before the provider pays claims. Into the employee, the employer reimburses some component of it with an HRA. If $2,000 is the deductible, that’s the employee accountability in this circumstance, the employer reimburses the next $1,000 of it.

Despite this payout, the company remains a winner because the premium for the $2,000 deductible program is smaller than for the $1,000 deductible plan which the members of staff efficiently get. Just a few of employees will incur sufficient allowance to garner a reimbursement, therefore typically the top saving on every worker will far exceed the reimbursements that the employer will have to pay for the handful that exceeds the $1,000 point. This usually means the staff receives a $1,000 deductible plan, but the employer will not be paying for a $1,000 deductible plan. Personal Protection | McConville Omni | Insurance for Families, Property and Vehicles in London, Ontario

A large concept, at least in concept. But when we looked at it a problem was found by us. Among the staff being reimbursed were the 2 LLC owners. That’s a rule-breaker. LLC owners aren’t allowed to take HRA reimbursements under tax law. Doesn’t the broker know that an LLC owner cannot be reimbursed? Sure they do, however, they had been too busy and did not catch this error.

What’s more, when they did their renewal evaluation, they showed the employer just the renewal rates out of the present carrier. They included a remark that”each of the other carriers is all about the exact same price or more.”

Totally wrong. Another carrier – one of Massachusetts’ top 3 – had a cost compared to their present carrier for a slightly richer strategy. A much better plan, less money… however, the client never saw it.

Why? Because the broker didn’t believe commission income and that this customer’s dimensions warranted doing the whole job. Then it is to perform the work it’s a lot easier to spend the client’s cash.

It works the other way, also. While my firm may know enough to perform all the work and analysis we do not have the staff to properly attend to their needs. So we don’t go after that business. But plenty of brokers will take all and any clients, whether or not they’re set to properly support the accounts.

How do you avoid this exact same issue? Simple. Throughout your insurance broker choice, make sure that the agent’s existing clients are inside your size group and both groups smaller and only bigger than your firm. In order to know where your broker’s loyalties lie, all You Have to do is to ask your broker what percentage of his/her clients fall in the group of:

  • 1-10 staff,
  • 11-50 employees,
  • 51-100 employees,
  • 101-250 staff, and
  • more than 250 staff.

If lots of the broker’s clientele are in categories bigger OR larger than you, you will either wind up picking an insurance agent who’s not knowledgeable enough or one that would not truly appreciate your business.