If you’re like most brokers, your small group profitability has taken a hit in recent years. As a result, you’re likely spending less time with your smaller clients and perhaps even considering moving out of the small group business. This blog examines why small group profitability has suffered and, more importantly, how to regain it with your upcoming renewals.
The erosion of small group profitability
If you’ve been in the business long enough, you know that the Affordable Care Act (ACA) of 2010 resulted in two small group profitability killers. The first culprit was the introduction of adjusted community rating. The goal of this provision was a good one, to prohibit insurers from considering health status or pre-existing conditions in determining a small group member’s premium.
The problem came about with the other part of that provision, which allows rates to be adjusted based on age, tobacco use and family size. Suddenly, a small group that had only a few premium rates before ACA could have a different rate for each employee—which turned simple carrier quotes into dozens or hundreds of pages for each group. This significantly increased the amount of work the broker had to do to quote and present to each small group.
The other part of the profitability-killing equation was the trend of carriers reducing commissions on those same small groups that now required enormous amounts of added time for the broker.
How to reclaim small group profitability
So what is the secret to reclaiming small group profitability? Since you can’t change carrier commissions, you need to reduce the time you spend on each small group. Many brokers have already squeezed these groups, spending less facetime with each employer and using more remote meetings and communication. While this can help make each group more profitable, you’re also potentially risking your relationship with the client.
Instead, look for ways to increase efficiencies behind-the-scenes and the best place to look is the quoting process. As discussed earlier, time required to quote just one small group is significant, making it a good opportunity to create efficiencies.
Rather than quoting manually, top brokers are beginning to adopt quoting engine software to greatly streamline the process. A quoting engine allows you to simply input an employer census, then instantly get rates from all desired carriers, turning hours of work into minutes. Drastically reducing time spent behind the scenes allows you increase profitability while continuing to provide quality service to every client.
Get started now
If the idea of a quoting engine has your mind racing thinking about all the hours you could save this renewal season, it’s not too late to get started. Just in time for renewal season, Dynamis is introducing a quoting engine to their existing plan modeling and proposal generation solution.
The quoting engine, which covers over 90% of carriers nationwide, makes the quoting process a breeze, plus integrates with the proposal generator and live plan modeling for a seamless, streamlined client experience. Contact us today to learn how you can make renewal season much less hectic while boosting profitability.
Interested in a quoting engine but not sure where to start? Download our free guide for key areas to consider when evaluating potential quoting engine vendors.