capitalizing on Benefits

Beyond cross-selling

Expanding product line and acquisition of benefits broker spur growth

By Len Strazewski

Metropolitan New York is a buffet of commercial insurance agents and brokers, ranging from the largest publicly held brokerage companies with Midtown Manhattan offices to small, family-owned agencies in suburban storefronts.

But for small and middle-market employers struggling to manage their businesses despite lean risk management and human resource staffs, the glut of choices isn’t always an advantage. The agents who focus on their special business needs have to make that clear, says James Krantz, chairman of York International Agency, LLC, in Yonkers, New York, just north of New York City.

Founded in 1985, and now celebrating its 25th anniversary, York has strong regional roots as a leading property/casualty insurance agency and risk advisor and has been recognized by several leading industry publication and organizations. York was a Rough Notes Marketing Agency of the Month in 2006, an Independent Insurance Agents and Brokers of America “Best Practices” agency in 2008, and a National Underwriter honorable mention for Commercial Agency of the Year by in 2009.

One of the ways this privately held, award-winning independent agency differentiates itself from scores of other commercial agencies is its commitment to employee benefits and human resource consulting services, Krantz says.

“Employee benefits and our HR services has become a great differentiator for us and a source of new business opportunities,” Krantz says.

Cross-selling the client base has become a standard component of the agency’s marketing approach. Evaluation of their clients’ benefits and HR compliance is an integrated aspect of the agency’s RADAR (Risk Assessment and Data Analysis Review) approach, he says.

The agency first entered the benefits field in 1997 when David Kane, an independent employee benefits agent, joined the firm with his own book of benefits business. Kane is still a producer with the agency and is one of its leading benefits specialists.

“Our expansion into employee benefits has had both defensive and offensive advantages for us,” Krantz says. “When we originally began our benefits practice, we had assumed that we would be able to market to our existing client base, generating new revenue. We also believed it would help us to retain existing business in the face of competition from the larger brokers that offered property/casualty insurance, life insurance and benefits.

“But we soon learned that our benefits resources allowed us to develop deeper relationships with our prospects and clients. We found that employers were seeking a more comprehensive trusted advisor relationship with a firm that could help management identify, assess and mitigate systemic risk.”

The new business and benefits expertise arrived at a time of significant growth for York. From 1985 to the present, agency revenues increased from $1.2 million to about $10.7 million in 2009, with employee benefits contributing 18% to the total.

The agency has also grown to 39 employees, including seven in the benefits department, working on group benefits as well as individual insurance products such as life insurance. Chairman Krantz, CEO Robert Kestenbaum and President Michael Bodack all continue to produce new business across all lines with several other producers.

The agency continues to grow, despite the economic recession and depressed property/casualty insurance rates, though not as quickly as it did during the 1990s and early 2000s, notes Kestenbaum. However, he says the agency anticipates an annual growth rate of 5% to 10% this year as it continues to add the infrastructure that supports its increasingly sophisticated services.

Employee benefits have been at the forefront of the agency’s development in the past several years. For example, in 2003, the agency took a big step to expand its benefits practice to support the human resource needs of its clients. The agency added the Compliance Check program to help their clients navigate the myriad of state and federal employment laws.

Compliance Check has been another strong differentiator for the agency, Krantz says. It allows York to provide added value to small employers without professional human resource management, and a growing group of larger employers with lean and overworked HR management staffs.

The program also fits well into the agency’s RADAR approach. The agency notes on its Web site (http://www.yorkintl.com):

“At its core, we believe that a client, who has systematically identified their risks, ultimately makes smarter business decisions and purchases insurance more effectively. It is a long-term strategy to control the cost of risk, not just the price of an insurance policy. Our approach to risk management has broad applicability across all industries and, as such, the process yields unique results for every client.”

Says Kestenbaum: “At York, our strategic approach is a relationship sale. We take time to get to know our clients, understand their business strategy and their needs. In the long run, our goal is not just to sell them insurance, but to work with them to change their risk profile and reduce their costs over time.”

In 2008, York increased its benefits operations and added a new depth of service with the acquisition of Sequoia Financial Partners, headed by Michael Bodack and Josh Marcus. Sequoia was a leading regional employee benefits agency with a life insurance wholesale brokerage operation.

Now, as president of York, Bodack is shaping the future of the benefits practice, which is now expanding beyond group health benefits to include voluntary group benefits, individual life insurance, annuity products and the growing area of life settlements. A life settlement is the negotiated sale of an individual life insurance policy for less than its face value but more than cash surrender value.

Bodack says York is continuing to expand its benefits services in several directions, but he notes that health care costs continue to be a challenge to York’s clients, thus one of the agency’s top priorities.

“The New York metropolitan area has a tradition of very rich, strong health benefits programs,” he explains. “But after several years of absorbing rate increases of up to 25%, employers are starting to say that they just can’t do it anymore. They have increased co-pays and employee contributions but are also feeling that they may have already reached the limits of those techniques, and they are looking to us for ‘out of the box’ solutions to reduce the increase in costs.”

For employers, options include consumer-directed health plans (CDHPs) using either Health Savings Accounts (HSAs) or Health Reimbursement Accounts (HRAs), coupled with wellness programs that could reduce the cost of chronic and preventative health risks over time. Bodack says HSAs and HRAs have become popular in the region York serves, after languishing for a few years. For employers with 25 to 150 employees, HRAs have become useful designs for containing employer costs.

“We have found that the integrated approach of these CDHPs with employee wellness can make a real difference in reducing the trends that lead to increased claims costs,” he says.

Bodack notes that health risk assessments, biometric testing and health coaching have been a little more difficult for local employers to commit to, but many are taking “baby steps” as they realize the positive long-term effect they have on health care costs.

What’s next for the York benefit operation? Every agency across the country that provides employee benefits is waiting for the outcome of federal health care reform that is expected to transform the way health insurance is designed and distributed.

However, Krantz says health care reform is unlikely to upset the evolution of the York benefits business, which has developed a very stable and diverse base with the acquisition of Sequoia. One of Sequoia’s strengths includes a very robust wholesale life brokerage agency that services several hundred independent life and financial advisors throughout the country. The operation provides independent producers access to a wide array of carriers and products including life insurance, annuities and life settlements.

“York is very bullish on our wholesale division which we are expanding by adding a National Director of Annuity Sales,” says Bodack. He believes that with the continuing aging of the population, York is poised to capture an increasing market share of the multibillion-dollar annuity industry.

“Despite all of our strategic initiatives, we have not forgotten our commitment to client service that has developed very strong relationships with our customers over the past 25 years, in particular, the executives responsible for human resources,” Krantz says. “We are pleased to say that when employee benefits issues arise, it’s the HR directors who are the first to say, ‘Call York.’”