Disruptors Series Part VI: The Issue of Experience

This is the sixth installment of our Disruptors Series where we provide additional information on each of the issues that we believe “Disruptors” are missing for employee benefits in the long term. We offer the following information for your consideration around the key Issue of Experience. To follow this series and more, visit our blog. You can read the original article here, as well as the other articles where we covered the issues of Cost, Invincibility, Risk Management and Communication.

More and more we hear references to the word “Disruptors” in various industries, including employee benefits. Some new players are entering the market with promises to revolutionize benefits programs and thus make them more appealing to employees. Other new players are promising to provide other human resource services for “free” if you purchase your employee benefits through them. However, is what they offer really all that new and can you really get “something for nothing” in the long run?

Some of the new ideas being generated in the employee benefits industry are being generated by individuals with little or no experience in the group benefits industry. While it is no doubt beneficial to challenge the status quo, it is also important that ideas be well-tested to ensure they achieve objectives and are sustainable in the long term. So why would a “Disruptor” promote new ideas in the short term when they may not have the skills, reputation or experience to support clients in the long term?

The Issue of Experience:

• Many of the current “Disruptors” in the employee benefits industry have one thing in common – they are software companies or they were founded by individuals who ran software companies.  Without trying to sound rhetorical, would you hire a plumber to fix your car?  Do they truly have the expertise and market presence to add value to your employee benefits program.  And do you expect them to be there in the long term – many of them are founded by entrepreneurs who have founded, developed and ultimately sold companies in the past.  Your employee  benefits advisor should be there for you in the long term, through the good times and the tough times.
• If we look south of the border, arguably the first major “Disruptor” in the employee benefits industry was Zenefits.  They entered the market with the intent to disrupt, ran into legal problems based on their lack of knowledge of the industry, eventually changed the company leadership by ousting the company’s founder, and now have effectively shut down all broker operations and are selling their software solution to others in the market.
• Many of the current industry “Disruptors” continue to change their business models.  Often they started with a strategy of going direct to plan sponsors with their new ideas but many then changed their strategy by trying to partner with insurance companies in the market or with other established traditional employee benefits Advisors, and now some have decided to become Advisors themselves.  When working with them, do you know what role they are currently providing and if they represent you or the insurer, and how should you react when they change their business model.  Perhaps plan sponsors should look at other areas of their business to assess how they work with business partners who continually change their role and perspective.
• As an employee benefits advisor, we pride ourselves on being independent in the market as our clients hire us to represent them, not an insurer or provider of any kind, free of any conflict of interest.  However, some of the “Disruptors” in the current market have insurers as major investors in their businesses, so how can they be independent.  Are they motivated to steer employee benefits business to one of their underlying shareholders?  Or can they even steer the business to other insurers?  How is it that they can claim to want to disrupt the industry when they are partially owned and supported by major players in that very industry that they claim to disrupt.
• It is not widely known but some insurers are choosing to not work with “Disruptors” and that means not accepting Agent/Broker of Record letters if plan sponsors appoint them to work on their behalf.  That ultimately means the need for the plan sponsor to change insurance companies, not necessarily because it is good for the company or its employees but because it is good for their advisor.  Plan sponsors should know in advance whether their advisor is truly independent in the market and able to work on their behalf with all insurers in the market.
• Like in many other industries that have seen “Disruptors”, technology is not the real reason for disruption but rather a lack of focus on client service.  For example, Uber has not revolutionized the taxi industry simply because of their “App” but rather they took advantage of an industry that was providing terrible service and no accountability to customers.  Likewise, traditional retailers like Costco and Walmart have not been displaced by online retailers like Amazon given their strong focus on their customers’ needs.  We agree that the employee benefits industry can at times be stale and dated and there is reason for change, but ultimately the bottom line should focus on client service.  We recommend that plan sponsors work with independent advisors who continue to provide strong service and have strong expertise and market presence.

Perhaps there is an underlying reason why many parts of the employee benefits offering have remained intact and connected to a broader HR strategy over the last 30 years.  Employers continue to provide benefits that include life and disability insurance along with extended health and dental benefits, and employees continue to value them for the most part.  Risks around income protection in the event of disability and cash payouts for beneficiaries in the event of death continue to be needed as the underlying risks are still unchanged.  Extended health and dental benefits are arguably even more important now as governments continue to download (or delay taking on) new drugs and services.

Note that at ZLC Financial we believe there is a better way for employee benefits, but we also believe the solution is not in “throwing the baby out with the bath water”. We are concerned that these new Disruptors are attracting attention with flashy ideas in the short term but are missing the key issues for employee benefits in the long term. Instead we recommend reviewing your current and future employee needs, understanding the financial reality for your company around projected inflation trends, and developing a benefits program that works for you in the long term and truly supports your broader HR strategy and business plan.

Each organization’s needs are unique and warrant a customized solution. We would be pleased to discuss your specific situation with you to identify the best strategy with respect to your employee benefits program. Should you have any questions on the above, please don’t hesitate to contact me or a member of our team.

ZLC Financial is one of the fastest growing employee benefits advisors in Western Canada and we are fortunate to have the best people, resources and clients. Our goal is to work with you to find a better way for your employee benefits plan. We provide this value to you by leveraging one of the most skilled benefits teams in the city – collectively over 300 years of experience within our team of 14 employee benefits specialists. We have been working with businesses ranging from 3 to over 65,000 plan members for over 30 years.

By Dan Eisner