By Len Strazewski

Thousands of pages of regulations. Public and private options. Incentives, penalties and plenty of confusion about what applies to whom.

Health care reform has made group medical benefits into a complicated morass of challenges for employers and their agents and brokers; but even before the Affordable Care Act was passed and implemented, employee benefits was a field for specialists, trained in navigating state and federal laws, markets and varieties of plan designs.

While many agents and brokers are working hard to build an employee benefits practice as a companion to property/casualty insurance and risk management, others have chosen to avoid group health programs entirely, preferring to refer customers to specialists with advanced training and a service infrastructure.

From left: David Swimmer, President; Matt Frazier, Vice President; Craig Katzman, Executive Vice President.

The Swimmer Insurance Agency in Charlotte, North Carolina, founded in 1953, began its history as an all-lines insurance agency and provided some employee benefits services to interested clients; but around 15 years ago, the agency virtually abandoned its group health practice, notes Executive Vice President Craig Katzman.

"Our founder Harry Swimmer was active in all lines of insurance," notes Katzman. "But he wanted to concentrate on property/casualty insurance. The agency continued to handle requests for some miscellaneous life insurance programs, but unless a client made a special request, we were not marketing group health insurance."

As group medical benefits began to evolve, becoming increasingly complicated, the founder became less interested in the field and finally, about 15 years ago, began referring any requests to a local specialist. But it wasn't just the need for expertise that was the issue, he says. One-stop shopping was not a popular concept among the agency's larger clients.

"When we polled several of our larger clients about their interest in consolidating benefits coverage with us, they told us that they had made a choice to work with separate brokers with unique specialties. They wanted to keep the relationships distinct. They didn't want us disrupting their relationship with their group health broker, and they didn't want the group health broker disrupting the relationship they had with us."

Katzman says group health insurance was also more volatile than the agency liked. Coverage rules and plan design were always changing and prices "were always going up. There was a chance that we might make our existing, loyal customers angry."

However, Katzman says the agency continued to leave the door open for other benefits opportunities, including individual and group term life insurance, individual and group disability insurance and long-term care insurance.

The agency has 22 employees, including three producers licensed for life and health insurance. Life, disability and long-term care insurance account for only about 3% to 4% of revenues but the products provide cross-selling growth opportunities.

Clients range from small businesses to large employers with as many as 10,000 employees. The agency also has a thriving personal lines practice, specializing in individual executive benefits for owners and senior executives of commercial client companies.

The agency is also a member of Keystone Insurers Group, Inc., in Northumberland, Pennsylvania, a national insurance franchise group that provides independent agencies with national market access, risk management services and national service partners.

Agency President David Swimmer has handled individual life insurance products throughout his career. Vice Presidents Matt Frazier and Brian Meltsner both work with risk management and property/casualty insurance clients, but can respond to benefits opportunities from new and existing customers, cross-selling clients with some life and specialized health insurance needs.

Life insurance has proven to be an important opportunity, Frazier says. The Swimmer Agency specializes in professional service firms, including law firms and dental groups which employ highly compensated professionals who have a need to secure family assets with life insurance and to fund business perpetuation agreements, Frazier notes.

Executives also noted an occasional need for short- and long-term disability insurance for executives and other employees.
Frazier is also passionate about long-term care insurance products and the long-term care needs of employees of all ages. He perceives a broad untapped market for the coverage, but he acknowledges that long-term care insurance has been a difficult sell for several years.

"One of the problems with marketing long-term care insurance has been the way it has changed over the years. The product design has changed dramatically and continues to evolve in pricing and coverage, making it very difficult to communicate to prospective purchasers."

"We bring long-term care insurance up with our dental groups whose principals are in their 40s and early 50s during renewals to start the education process." -Matt Frazier

Frazier joined the agency in 2010 after working as a commercial underwriter, but licensed in property/casualty insurance and life and health insurance. He recognized that life insurance was part of a list of products that the agency was not directly marketing to its commercial clients.

Frazier enlisted the assistance of the Keystone Insurers benefits division for technical expertise. "They coached us on how to do it the right way," he says.

Frazier says with the franchise group's help, he developed a new focus for the agency, mining and cross-selling the property/casualty insurance customer list and accepting referrals from commercial clients and their executives. About 85% to 90% of life, disability and long-term care insurance business comes from referrals.

Most of the life insurance business is executive benefit programs, funding buy and sell agreements and high-limit individual term life insurance. Group term life insurance, often packaged with health benefits, is a rare accommodation for a few client employers, though the agency has developed a group term life insurance program for a law firm client with higher limit needs, he says.

Likewise, group disability insurance is not a big seller, though Frazier has developed a short-term disability benefit for a dental group that wanted an expanded level of benefits for its professional employees. The program has become an effective model for professional service firms.

"We now have some other opportunities for group short-term disability insurance as our experience with the products has grown," he says.

Long-term care insurance is another growing but challenging product area, Frazier says. Few agencies specialize in the coverage, either as a group benefit or a voluntary benefit paid through payroll deduction. The coverage is rarely chosen by more than about 10% of employer groups and chosen by individual buyers only with special recognition of needs.

"In the early 1990s and 2000s, the coverage was underpriced and a lot of companies that came into the business with great excitement have pulled out," he says.

Today, plan designs have changed, limiting benefits, increasing premiums and often combining long-term care benefits with life insurance as "hybrid" plans. Only a few insurers, led by Genworth Financial in Richmond, Virginia, are very competitive.

"It's not a product that you can sell to everyone," Frazier says, "even though most people have a need in their future."

The most receptive consumers are 70 or more years old, recognizing a near term need for some form of long-term care. But by the time they recognize their personal vulnerability, the coverage is either unavailable or too expensive.

Prices and availability are best for individuals in their 40s, but few healthy individuals at that age rationalize their future needs and can make what they believe is an expensive purchase.

Frazier says the agency has found a niche with individuals in their mid-50s or a little younger, particularly professional groups who are looking to provide a broader range of benefits or financial security. This falls into one of the agency specialties.

"When we polled some of our larger clients about their interest in consolidating benefits coverage with us, they told us that they had made a choice to work with separate brokers with unique specialties. They wanted to keep the relationships distinct." -Craig Katzman

"Because we provide property/casualty insurance service for professional groups such as lawyers and dentists who have the individual income to pay for a broader range of benefits, we have had some success introducing the coverage. But it does require a lot of education and communication."

For example, "We bring long-term care insurance up with our dental groups whose principals are in their 40s and early 50s during renewals to start the education process," Frazier says.

Though the benefits sales revenues are still small, Frazier says the life, disability and long-term care business is growing every year and he anticipates accelerating growth as he and other producers continue to develop their expertise. "And I have grown with it," he says. "The more business we do, the more comfortable we become with it. It's like riding a bicycle."

Frazier says the agency has the potential to become a one-stop shop, meeting benefit needs as well as property/casualty and risk management needs-taking up the business path it rejected decades ago.

While the agency leadership says it has no plans to re-enter the group health insurance field at this time ?or hire group health insurance benefits expertise, Katzman leaves the door open for future health benefits programs-if the business climate changes and opportunities present themselves.

The agency website cites availability of employee benefits services, including group health benefits and Swimmer continues to refer local clients to an independent employee benefits business partner. Executives note that they can also use Keystone partners for additional services around the country.

Katzman says the agency may consider starting anew in the employee benefits marketplace if client needs warrant the services, possibly enlisting support from Keystone Insurers partner agencies.

The author
Len Strazewski is a Chicago-based writer, editor and educator specializing in marketing, management and technology topics. In addition to contributing to Rough Notes, he has written on insurance for Business Insurance, Risk & Insurance, the Chicago Tribune and Human Resource Executive, among other publications.