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As we approach 2014, it is crucial to develop a strong business plan in order
to prepare for the major Health Care Reform changes which will take place in
our industry. With less than 24 months left to make adjustments, what are you
doing to direct your efforts in order to gain enough momentum to survive the
effects of the anticipated changes? Have you already felt the effects of
commission reductions and changes from a percentage of premium to a Per
Employee Per Month (PEPM) commission structure?
Those who wait passively will be left behind.
Where do you start to make adjustments or changes? As in any business, “you
can’t manage what you don’t measure” – so I suggest you start with a solid
understanding of your current book of business before planning for the future.
How well do you know your book and how does it compare to the trends in the
marketplace?
I recommend that you take a few minutes to complete this simple four step
exercise, as it may give you a better understanding of the areas of
concern or the opportunities that exist for you, which will help you throughout
the planning process.
Begin by measuring:
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Geographical Diversification First, list all of your cases by
geographical market (e.g. NY, NJ, PA, DE, etc.) and determine each market’s
unique opportunities and obstacles. Typically, as one market struggles, another
may thrive, so diversifying your book of business geographically can help you
to ensure the longevity of your business. Make a note of how geographically
diverse your current book of business is and decide where you would like to
make changes and focus your efforts in the future. How geographically diverse
is your book?
-
Segment Size Diversification Next, organize the same list of
cases from smallest to largest according to the number of contracts, and then
separate the list into three market segments: 1 to 9, 10 to 50 and 51 Plus.
According to most studies, the 1 to 9 segment is at the highest risk of moving
to an individual exchange, which leaves an incredible amount of uncertainty. Do
you have a significant percentage in this high-risk segment? If so, it is a
good time to consider how you can grow in the other larger group segments or
handle larger volumes in the individual market, as you will likely receive less
commission on cases in the 1 to 9 segment in the future. Which segment size(s)
will be your focus?
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Lines of Business Selling lines of ancillary coverage with your
medical cases will increase your earnings as well as the likelihood that you
will retain the case. How many of your cases also have one, two, three or more
lines of ancillary coverage? Record the number of your multi-line cases and
note the percentage of cases that include ancillary coverage (50% and under,
25% and under, etc.). This information will help you to pinpoint the
cross-selling opportunities that exist in your current book of business. Do you
have enough penetration in the ancillary market?
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Carrier Diversification Make a note of whether the growth or
compression of your book is consistent with the carrier’s growth or compression
in the market, or if it is disproportionate. Be sure to ride the wave with the
products and carriers that are gaining market share! How does your book of
business compare to the current market share of each of the carriers in each
market?
You may be surprised when you complete this exercise.
Many business owners are so consumed with the rigors of their day-to-day
operations, that they do not always “see the trees through the forest”. One
example of an extreme case of this was in an episode of Restaurant: Impossible
that I recently watched on TV. It is a show where a consultant helps to turn
around struggling restaurants. In this particular episode, the consultant asks
two longtime owners (an Italian mother and her daughter-in-law) to separately
identify their top five selling dishes. Each only had two out of five correct!
With all of the economic challenges and impending changes to our industry, it
is extremely important to know your business well and identify the
opportunities or challenges that may exist for you. Armed with this
information, you are in a better position to develop a business plan that
includes measurable goals, calculated changes and a great mix of products and
services for the future.
If you do not already have a diverse book of business, start by differentiating
yourself and taking steps to expand the geographical markets you cover,
the market segments you target, the lines of products
you offer, and the carriers you utilize. In addition, please remember
that as you proceed, it is essential to have a partner who has the experience,
relationships and services you can count on to take your agency further.
Over the past several years, Savoy Associates has strategically expanded and
developed direct contract partnerships with medical and ancillary carriers
(Individual, Small and Large Group), third party administrators, banks,
wellness companies, human resource firms and other value-added organizations,
encompassing four states (New York, New Jersey, Pennsylvania and Delaware).
The expertise and knowledge accessible through Savoy Associates can only be
leveraged successfully if you are a momentum broker willing to embrace change
and work with a strategic partner who can assist you in your efforts to expand
the products and services that you offer to your clients.
Are you a momentum broker?
We encourage you to contact your dedicated Savoy Associates Business
Development Team today to discuss strategies and sales opportunities in 2012,
and moving forward towards 2014!
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