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Strength in Numbers.

Group programs are fast becoming a competitive weapon for independent agents.

Over a decade ago, Palmer Goodell Insurance Agency in Springfield, Mass., had a solid block of personal-lines business consisting mostly of individual policies. Today, 75% of its personal-lines business is derived from more than 100 group accounts, and its personal-lines business is growing far faster than the industry average. Palmer Goodell's success reflects a trend: Agencies throughout the country are profiting from group programs.

Some independent agents once viewed group sales as a threat. They feared these programs would lure their customers away. But agents' attitudes have changed dramatically. Now, many see group programs as one of the most attractive growth opportunities in the personal-lines market. Almost any agent can participate because more insurers are providing the infrastructure needed to service group accounts.

Group auto and homeowner programs enable agents to compete more effectively with direct writers and companies that market their products and services over the telephone, through direct mail or on the Internet in the increasingly crowded personal-lines market. These lower-cost distribution-and-service models are gaining market share because they often offer lower premiums.

Group programs are one of the best competitive weapons available to independent agents, allowing them to take advantage of efficient, low-cost distribution methods and powerful marketing alliances.

And the good news is this market is growing. All types of voluntary benefits--optional benefits paid for by participating employees--are gaining favor, but auto and homeowners insurance are among the most popular as more employers of all sizes embrace the concept. Hewitt Associates has predicted that 35% of employers will offer auto insurance at the workplace in 2000, up from 14% in 1997, and 31% of employers will offer homeowners insurance at work next year, up from 12% in 1997.

Employers are driving this growth as they seek to broaden their benefit offerings to attract and retain employees in an intensely competitive employment market, without increasing their benefit costs. Voluntary benefits have been well received by employees, who value the convenience of purchasing them at work, often at discount, and generally through payroll deduction.

Affinity groups are also potentially important. More people are buying personal insurance through plans sponsored by affinity groups like associations, professional organizations and credit unions, which also benefit by adding more valuable services for their members.

Group programs offer agents the advantages of being able to grow personal-lines revenues faster and achieve critical mass by writing a greater volume of business. While commission rates are lower than on retail business, agents can profit because volume is greater and sales expenses are lower. With a group, the agency can market many policies at once, instead of one at a time.

Agent marketing programs are enhanced by the employer's or affinity group's strong endorsement. In employer groups, the closing ratio for employee quotes is often about 40%. In affinity groups, it's often about 25%. Therefore, acquisition costs--for the agency and insurer--are lower in a group. And since retention is usually higher in a group program, the lower acquisition costs can be amortized over a longer period.

While almost any agent can market group personal lines and other voluntary benefits, the agents who already market employee-benefits or commercial-lines coverages tend to be most involved in this. Group programs enable them to leverage these relationships and sell current clients additional products and services.

Group plans also can help agents win other new business; once agents have signed a new group account, commercial lines opportunities may follow.

Recently, Allmerica has witnessed the growing flexibility of voluntary-benefits programs that offer agents more service choices. It used to be that insurers had one sales-and-service model for group accounts. Now, some insurers are structuring their relationships with agents to suit the agent's selling and service preferences. Some larger agencies with their own customer-service infrastructure prefer to handle enrollment and ongoing services themselves. Other agents prefer to free themselves of customer-service responsibilities and want turnkey service while they focus on sales And still others prefer to share sales and servicing responsibilities with insurers.

With more support available from insurers, the potential for agents to capitalize on this growing opportunity is greater than ever.

Edward Ruhl is vice president of Allmerica Voluntary Benefits, a division of Allmerica Financial, Worcester; Mass.
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Author:Ruhl, Edward
Publication:Best's Review
Article Type:Brief Article
Geographic Code:1USA
Date:Jan 1, 2000
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