Benefits Products & Services

Ramping up retirement plan revenues

The Hartford helps P-C agencies to diversify into sales of retirement plans

By Thomas A. McCoy, CLU

Independent property/casualty agents seeking to diversify into the employee benefits market can turn to a variety of insurance companies for products. Except in the group major medical field, where the list is rather brief, there is no shortage of financially strong carriers offering benefits products—including life, disability, supplemental health, long-term care and retirement products. Many of these companies are household names, marketing individually as well as through benefits plans.

These benefits providers can bring to the table a solid product lineup and decades of experience in the employee benefits market. What they often lack, however, is a familiarity with the property/casualty agency business model. These carriers are certainly willing to work with a P-C agency's benefits department, but they are more used to working with pure employee benefits brokers, consultants and financial planners.

This is particularly true in the retirement products market, where the lineup of retirement plan providers includes not only insurance companies but investment firms as well.

One exception to this scenario is The Hartford. The company has some 11,000 independent property/casualty agents under contract. Yet it also is a major player in the retirement market, ranking in the top 10 in plan count in two independent studies of plan providers, including insurance companies and asset managers. A 2010 LIMRA study (Life Insurance Marketing and Research Association) ranked The Hartford #1 in plans written for the small business market (under 25 lives).

Like many of its large competitors in the retirement market, The Hartford derives the majority of its retirement business from financial advisors and consultants and third-party administrators. But its P-C agencies are contributors as well. In 2010, its property/casualty agents produced $230 million in sales of defined contribution retirement plans for the company.  Since 2008, the number of P-C agencies producing retirement plans for The Hartford has doubled, and over the past four years The Hartford has seen a five-fold increase in sales of its retirement products through property/casualty agencies.

"We feel that this is just scratching the surface," says Eric Pumiglia, assistant vice president and head of distribution development for The Hartford's Retirement Plans Group. Pumiglia has been charged with leading a new initiative to boost retirement plan production from the company's P-C agents.

He explains that The Hartford plans to provide additional marketing assistance to P-C agencies that are already selling retirement products, and also help P-C agencies that are not currently in the retirement market to get started.

"We surveyed our own independent P-C agencies a couple of years ago concerning their interest level and fears about the retirement market. We found that their number one barrier to getting into this business was their perceived lack of expertise in it.  The retirement market can be complex and full of changing dynamics, including regulation," Pumiglia acknowledges.

To deal with this uncertainty, The Hartford's Retirement Plans Group has assembled a Channel Development Team dedicated to property/casualty agents.  This team handles a wide range of sales assistance, including supporting the agency's development of a retirement practice, determining specific client retirement plan needs, and coordinating a wide variety of available resources to implement those plans.

The P&C Channel Development Team is backed by a sales force of 150 sales-assistance representatives, half of whom are located in the field to provide face-to-face sales support. There are an additional 70 retirement plan specialists who run employee meetings and coordinate other on-going communication once a plan is in place. "The assistance doesn't stop when the plan sale is done," Pumiglia says.

One property/casualty agency that has taken advantage of The Hartford's retirement market support is Lee Insurance Services in Dallas, Texas. Warren Lee started the firm four years ago, after leaving another property/casualty agency. He was operating under the restrictions of a non-compete clause. He obtained a contract with The Hartford  for P-C business, and then began a fortuitous diversification into employee benefits including retirement plans.

"I fell into about 10 or 12 employee benefits business accounts based on relationships I had. That, in turn, led to some 401(k) plans. I leaned heavily on The Hartford, especially in the early going, to help sell those. Over the last four years we've had great growth, but in the last 18 months the fastest growing part of our business has been the benefits and 401(k) piece."

When starting out as a "total novice" in the retirement plan world, Lee says he learned from one of his Hartford P-C reps that retirement plan sales and implementation assistance was available.  He wrote his first retirement plan account by taking a team of these Hartford retirement specialists to meet with a P-C client firm with 12 employees that had been having difficulties with its 401(k) plan.

"I introduced the Hartford reps to the owners and kind of sat there while they talked through some of the retirement plan problems. We addressed some of the problems, implemented a safe harbor, and got the deal done.  I've had that plan now for three years and it has doubled in size."

One of the keys to his success in working with The Hartford's retirement plan services, Lee explains, is the quality of the TPA firms that they use.  He also likes the degree of control which The Hartford places in the hands of the client.

"We refer to the 401(k) plan as a bicycle wheel," Lee says. "One spoke is the custody and clearing platform—which would be The Hartford; another spoke is the TPA service; another spoke is the broker; and if there are investment advisory services along with it, that would be another spoke. The beauty of The Hartford platform is that if one of our clients wants to remove one of those spokes, they can put somebody else in its place. Knock on wood, that hasn't happened.

"Only two of the retirement plans we've written have been start-ups," Lee continues. "All the others have been existing plans where there was some neglect. In some cases the TPA services had kind of fallen apart, and the plans were having to refund some money because they didn't pass the testing. So that has opened a lot of doors."

Account rounding strategy

About two years ago, Lee partnered with a benefits firm, which handles the back-office work and administration on his benefit accounts. They also have an HR management software platform to provide payroll services.

"So we can say, 'Not only can we do your comp and your benefits, your P-C, flex administration, your COBRA, but we can implement a 401(k) and have a direct feed from a payroll standpoint to the 401(k) provider.'"

Pumiglia says The Hartford's retirement market support for its P-C agents can take different forms, whether it is start-up support, like what Lee initially received, or those who need help in expanding their current strategies. "Some like to partner with local financial planners, and we can help out there also," Pumiglia says.

The Hartford's Business Develop­ment Managers work consultatively to help P-C agents uncover retirement plan opportunities. "For example, an agency might have a lot of clients in professional services, or doctors," Pumiglia states. "We can work with that agency to set up a cash balance retirement plan to serve their needs."

He points out that the economic reasons for P-C agencies to be in the retirement business are convincing.  "The agent's first-year revenue from a retirement plan on a 50-life case will be, on average, roughly triple the revenue that the agency would receive on that client's P-C business," he says.  "We pay a trailer commission on renewal every year. The business has a 95% retention rate, and the average plan lasts over 12 years."

Regardless of what changes may come to the employee benefits business over the next few years, retirement plans are likely to remain the cornerstone of most benefit programs. The Hartford will be a major player in helping P-C agents tap into that market.