ANDOVER, MA -- (Marketwire) -- 03/13/12 -- Employers can often save money by partially or fully self-insuring their benefits program or moving to a different carrier. But your broker may not tell you that because it could cut his bonus, Jim Edholm of Business Benefits Insurance writes in Business Insurance magazine.
Brokers are subject to conflicting currents because insurers give the broker a bonus to place new business with it and renew business with it, he writes. The more products and the more accounts sold in a given year, the bigger the broker's bonus.
That gives the broker a strong incentive to keep your account with Carrier A, even though Carrier B offers a better rate, Edholm writes.
He offers these five steps to keep your broker straight.
One: Ask your broker, "What percent of your total income do bonuses, as opposed to commissions, represent for your business?"
Two: Look back at how long you've been with your current carriers. If it seems like you almost never switch, perhaps the bonus -- even if seemingly small -- is influencing your broker's advice.
Three: Periodically have another broker compete for the business. It's probably unwise to have multiple brokers quoting every year because that limits your broker's ability to get price concessions from your current carrier. But every fifth year or so, it's probably worth doing.
Four: If you have more than 100 employees, examine your 5500 Form from the last couple of years. Look at both the absolute bonus amount and at its growth trend. If you're insuring fewer than 100 lives, ask your broker what his commissions and overall bonuses were. He won't be able to tell you what the bonuses were on your specific case, but he'll know them for his entire book of business.
Five: You can, at a certain size, opt to compensate your broker directly, via a fee, and request that he quote the plan commission-free. Most carriers don't pay bonuses when there aren't any commissions. However, since some insurers quote the same rate without commissions, this move may shortchange your broker without saving you money.
Jim Edholm is President of Business Benefits Insurance (BBI), an employee benefits planning firm based in Andover, Mass. He can be contacted at (978) 474-4730, via his website (www.group-insurance-guide.com), or via e-mail: firstname.lastname@example.org.
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