Capitalizing on Benefits

Benefits/financial products fit risk management strategy

Clients respond well to new approaches to controlling financial health & physical health

By Len Strazewski

Employee benefit sales don’t have to dominate or even match property/casualty insurance to invigorate an agency. An active and aggressive benefits operation can stimulate cross-selling in commercial and personal lines and multiply opportunities to build client relationships.

And in a rapidly evolving business world, employee benefits is a critical component of a sophisticated financial services firm, agency executives say.

At Schiff, Kreidler-Shell Insurance and Risk Services, Inc. (SKS), in Cincinnati, Ohio, employee benefits is still a minor portion of the agency business—about 20%— says Executive Vice President Tom Colvin. But it’s an important part of the agency’s long-term business strategy to be a comprehensive business advisory firm.

Steadily rising health insurance premiums and employers’ increasing needs for human resources and benefits cost containment strategies drive across-the-board growth, and are helping the agency develop a reputation as a total risk management advisory firm that assists clients with a broad range of financial concerns, he says.

“We are still primarily a property/casualty insurance agency,” Colvin explains, “but employee benefits have been the fastest growing segment of our business. And in our overall business strategy, it is an important component of what we have become.”

Corporate financial and human resource executives are always on the watch for opportunities to better manage their expenses, and agencies that can suggest new strategies for risk and employee benefit management always find an open door, according to Colvin. SKS’s comprehensive set of resources gets them access to these decision-makers and gives producers opportunities to discuss a wide range of services.

“We have become very proactive at cross-selling, and while employee benefits gets us in the door—since benefits costs are on the forefront of clients’ concerns—we often leave with a commitment for property/casualty insurance services as well.”

SKS has a long history in Ohio and Kentucky, a region that is known for a broad base of commercial business, including manufacturing and construction. The agency roots go back to 1876 as the A.R. Witham Co., a personal lines agency that remained in business until 1970 when it was purchased by the Cincinnati Equitable Insurance Agency.

In 1984, the agency was known as Kreidler-Shell and was sold to Robert Schiff, a local insurance executive. The agency adopted its present name and began developing a broader mix of business that, while still predominantly personal lines, included minority portions of commercial property/casualty and employee benefits insurance sales.

About 15 years ago, the agency began to evolve toward its present configuration as a comprehensive financial services firm with a solid commercial lines base. Tom Dietz, a property/casualty insurance producer, was appointed president and chief operating officer in 1991 and became chairman and chief executive officer in 2004 with Schiff’s retirement. Alvin Roehr, another veteran property/casualty executive, became president.

As the agency began its evolution, “we realized that from an agency management standpoint, we had to circle the wagons and take a more sophisticated approach to our business—adopting the total risk management concept,” Colvin says. “That meant expanding our services and expertise and providing the value-added that supports the human resource and financial service executives who had become our customers.”

Today, the agency is an employee-owned corporation consisting of 32 employee shareholders and about 115 employees. Operations are divided into three divisions, representing business insurance and risk management, employee benefits and financial services, and personal insurance. The agency is an Assurex Global Partner and subscribes to HR Connect and Zywave online services. SKS has a second office in Edgewood, Kentucky, acquired in an acquisition.

Since the implementation of its total risk management strategy, the employee benefits division has increased from just a couple of producers and support to nine producers and 13 support staff, Colvin notes. The commercial insurance property/casualty insurance division has also grown to 20 producers, and both divisions share new business calls on a regular basis.

“We knew what we had to have available if we were to succeed in this more sophisticated employee benefits marketplace,” Colvin says.” Our producers could not just walk in as they did in the old days with their spreadsheets and make a pitch based exclusively on price and expect to walk out with new business.

“We have to be the resource for service and information about a wide range of issues that confront our customers and that include legislative matters, regulatory compliance, employee education and communications.”

The agency now provides a full range of employee benefits services, including group health plans, ancillary benefits such as short- and long-term disability insurance, dental insurance, travel accident insurance and voluntary supplemental life and disability coverages. The agency also has specialists in executive compensation and retirement plan design.

Group health benefits, however, are the largest portion of the employee benefits practice, and health care costs remain among their clients’ biggest concerns, Colvin says. Employers are always on the lookout for new health care cost management strategies. “They realize that they can no longer continue to shift costs back to their employees. They have about bled that dry,” he says.

Cindy Macke, vice president of employee benefits, agrees. “Our clients are very savvy. They understand all of the issues that affect their business and their operational costs. But in some areas, such as health care, they are between a rock and a hard place. They need to lower their costs but they realize that they can’t do much more in demanding higher out-of-pocket costs from their employees.”

In 2006, SKS launched a wellness initiative within their own agency, modeling the approach that agency executives say is the way of the future for health care cost containment. The initiative included health risk assessment for all employees, health fairs and health improvement services.

A year later, the agency expanded the initiative to clients, offering free health risk assessments to executives from present and prospective client companies. Nearly 100 executives took the agency up on the offer, getting a very personal example of what the wellness services can do to raise individual health consciousness.

Last year, the agency followed up the program with a healthful eating and nutrition seminar for present and prospective clients.

Colvin and Macke say the promotions produced significant new business and helped confirm the agency proposition that wellness is the best and most practical way to control health care costs in the future.

“Employers are beginning to come to us asking, ‘What can we do to make our employees healthier?’ because they realize the value of wellness, both in containing costs and improving morale and productivity,” Macke says.

The agency is also promoting consumer-directed health plan designs as the next step in the evolution of group health benefits, Macke says. Interest has been building slowly, but Health Savings Accounts (HSAs) have become particularly popular with local employers as one alternative in the group health plan mix.

“Consumer-directed health plans are one of the best ways to get employees to take ownership of the health process and begin to manage their own costs with their own health decisions,” Macke says. Employers are also continuing to explore the consumer-directed model in conjunction with the growing range of wellness and health incentive services available from the health plans.

Though the account-based plans require a strong employee education plan, “each successive generation of employee seems to understand the process a little better,” she says.

Business management issues are also important employer concerns, adds Vice President Mike Young. An executive compensation and life insurance specialist, Young works with client executives in developing special benefit programs that support their management goals.

Business perpetuation agreements funded by corporate-owned life insurance, deferred compensation agreements and non-qualified retirement plans have all become part of the SKS portfolio of products and services that appeal to the owners and senior executives of client companies, Young says.

Many executives have learned some hard lessons from the recent recession and equity markets crash, Young explains. They have seen the value of their companies shrink, along with the value of their retirement savings in defined contribution plans.

“Executives in their late 50s or older have come to realize that they cannot afford to lose half of their retirement assets due to market volatility. They need to protect themselves and their security and the security of their companies.

“Lately, we have had more and more questions from executives about managing their own retirement and increasing their own options for providing retirement income.”

Young says the agency has seen a resurgence of interest in permanent life insurance, which can secure a cash value, as well as non-qualified retirement plans which can establish higher levels of retirement assets against insufficient qualified retirement plans.

Business perpetuation is a related strategic issue, he adds. Executives of privately owned businesses realize that their future may be tied to the continuity of their company, and more clients are working with SKS to review their needs for formal buy/sell agreements and insured funding programs that would pay the transfer of ownership and the recovery of ownership value for retirement or untimely passing of ownership partners.

These agreements could be funded with term life insurance or other agency products. SKS has four producers who specialize in executive compensation and life insurance products that can be used to develop supplement-funding plans.