Employee Benefits – The Problem With Shopping Your Benefits Around
From the time we first step into a mall we are told to shop around. After all, you can save a lot of money by looking around. So it’s natural that your first inclination would be to shop for the best employee benefits plan you can find.
But it’s very important to understand that the cheapest offer is not always the best one for you– especially in the long run.
Some employee benefits brokers are willing to undercut everyone else with lower rates and extended rate guarantees, and this will feel like a victory. Another win for the bargain hunter in all of us. But before you start celebrating, it’s time to revisit this bargain and see if it’s actually ‘too good to be true’ (spoiler: it is).
- Lower Rates and Rate Guarantees are Usually Introductory – You got a deal, that’s true. But what your broker may gloss over is the fact that those lower rates he worked so hard to get for you are most likely introductory, and your prices will rise (often dramatically) after the rate guarantee runs out. Rates don’t vary as much as you might think. Based largely on your employee demographics, plan design, and the anticipated claims associated with it – and of course the cost to pay those claims – The only factor that varies between insurers is the cost to pay claims. In today’s competitive marketplace that cost doesn’t vary by much. The reason brokers can offer materially lower rates initially is because they convince insurers to temporarily ignore these above factors, investing or discounting the rates. Deep discounts are rarely sustainable, and will eventually be raised (to the price your plan should have had right from the start) to recoup costs for the insurer. An expert advisor will walk you through the process to get the best plan with fair sustainable rates, instead of a low, introductory rate that blow up at the first renewal.
- Frequent Shopping Deters Insurance Companies – ‘No problem,’ you think, ‘I’ll just jump insurance companies every couple of years.’ The trouble is, after a few years of going to market repeatedly, the new insurers will be leery of investing the time, effort, and money of quoting a plan for you. If your company has a history of shopping around frequently or even jumping around between insurers every couple years, it can make others hesitant to work with you, as they want some commitment from you. And so, jumping from company to company gives you fewer choices each time you move.
- The Hidden Costs – You may initially save money moving insurance companies, but some of that money is going to go back into the administrative costs you will incur from changing over, along with all the other administrative costs that go along with figuring out a new backend for your employee benefits plan. This, plus distractions, downtime, as well as the questions being driven from employees wanting to clarify concerns and confirm coverages with the new plan, will create a long cycle of annoyance regarding employee benefits for you and your employees.
Just because there is little price variance, that doesn’t mean all insurance companies are created equal. Sometime it’s better to bite the bullet, deal with the admin costs and employee questions in order to find a better plan.
When You Should Shop Your Employee Benefits Plan
Yes, we’ve just finished convincing you it’s a bad idea to shop around. But there are always exceptions. You may want to consider changing brokers or shopping your employee benefits plan around if:
- Your broker or insurer is not providing you with the claims resolution you feel they should.
- Your broker or insurer cannot provide the type of coverage/feature/benefit you want or need for your employees.
- Your broker or insurer is lacking in communication or has given you reason to doubt their ability or caused your trust and confidence in them to waver.
Trust is the bond between you and your benefits advisor, as they’re your guide to navigate the choices that will affect you and your employees. At Bayview Financial, we strive to be upfront, transparent, and to build the best possible solutions for your business.
A Good, Stable Employee Benefits Plan
Short term price manipulations such as introductory rates and extended rate guarantees are novelty tactics in the pockets of short-sighted brokers. But, it’s not the best way to obtain a good employee benefits package, for your employees, or for you, as the employer. You deserve better. Valuable and sustainable employee benefits plans which are built around you and your employees is a service we, a team of trusted advisors at Bayview Financial, take pride in. It’s our goal to help you find the best-fitting plan, with the best insurer – not to lure you into plans based on temporarily-low prices just to make a sale.
Many brokers aren’t in it for the long haul. But you need someone who looks further into the future – you need a trusted advisor on your side who will work with you to make sure you get the expertise you need to do well today, tomorrow, and into the future.
Talk to us at Bayview Financial today and make sure you’re getting the plan that’s right for you. We’ll walk you through the 3 pillars of creating an attractive and sustainable benefits package to create the right plan for your company.