How Consultants & Brokers Choose Benefits

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Part
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How Consultants & Brokers Choose Benefits

Insurance Consultants cannot sell insurance without being licensed as an insurance agent or broker. Brokers are allowed to sell benefits and are paid a percentage of the premium.

DISCREPANCY ON INSURANCE CONSULTANT SELLING POLICIES

  • According to New York’s Department of Financial Services, insurance consultants are not allowed to sell insurance without being licensed as an insurance agent or broker.
  • According to an article published by Parker, Smith & Feek, consultants are also brokers because both recommend the right insurance products.
  • However, consultants are considered more reliable as they are bound to contractual agreement, while brokers may or may not collaborate with an insurance company while choosing the right plan for the buyer.

HOW CONSULTANTS CHOOSE WHICH BENEFITS TO SELL TO EMPLOYERS

  • Benefits consultants are hired by the company with a contractual agreement to choose the best insurance plan and remain unbiased while choosing them.
  • They are only responsible for recommending the perfect insurance plan to the company (buyer) but do not sell it on behalf of the insurance company.
  • Benefits consultants analyze the structure of the company and choose the perfect competitive benefits program that helps to retain employees.
  • Companies use benefits consultants to bridge the gap between skills and knowledge of the company in a cost-effective way.
  • Other services that consultants provide include health and wellness consulting, insurer claim audits, taxation support, vendor service monitoring, benefit plan financial management, financial accounting audits, and plan design development.
  • Benefits consultants know how to negotiate with insurers and leverage their resources to provide their clients with the best possible value.

HOW BROKERS CHOOSE WHICH BENEFITS TO SELL TO EMPLOYERS

  • In general, insurance brokers sell insurance products by comparing multiple products and recommending the right one for the company in an unbiased manner based on a thorough knowledge of the whole industry.
  • However, some insurance brokers might have tie-ups with insurance companies and recommend products from a specific insurer.
  • Thus, companies must conduct due diligence before accepting the broker’s recommendation.
  • Some brokers may not be tied exclusively to the company providing the benefit or specialize in only one type of benefit.
  • A commission is paid by insurers to brokers for every employer they sign up.
  • The brokers search for the right insurance by comparing the coverage of various insurers to get the best conditions and rates.
  • The fee is usually 3 to 6 percent of the total premium but can also reach 40 to 50 percent of the premium.
Sources
Sources

Quotes
  • "Does not sell insurance. Represents and works on a fee that is paid by you. Is hired to provide advice and guidance that will uniquely benefit you."
  • "Has a contractual agreement with you. Can unbiasedly help ensure that you have or will select the right insurance plan for your medical needs."
Quotes
  • "What’s missing here is the consulting on how to best structure the program, what carriers will work best for where your employees live and work, and what will help create a competitive benefits program to aid in attracting and retaining top-notch employees. "
  • "In employee benefits, a consultant is always a broker, but not every broker is necessarily a consultant."
Quotes
  • "Businesses often hire benefit consultants as a cost-effective way to bridge a gap in the skills and knowledge within their company"
Quotes
  • "An insurance broker will compare the coverage of various insurers to get you the best conditions and rates. A broker will also search for opportunities to combine different types of insurances to obtain discounts or reduce premiums."
  • " As brokers do not work for the insurance companies, their recommendations are unbiased and in favor of the insurance buyer."
Quotes
  • "Brokers typically sell insurance products belonging to different companies in the market. They do not have any allegiance to a particular company and sell products based on the requirements of customers."
  • "Brokers sell multiple products, and commissions are based on the sale they make. Brokers must advise their clients about the products they sell and charge a fee from the companies. Based on the type of policies sold, brokers could experience variations in their income."
Quotes
  • "Brokers may work for or have contracts with specific insurers. The employer should ask what carriers the broker evaluates before making recommendations. It’s not necessarily a problem if the broker works with a specific insurer—it may mean you get greater discounts. But know what you’re getting and what trade-offs you’re making."
  • "While some people may use the terms interchangeably, an employee benefits broker is not necessarily the same thing as an employee benefits consultant. Some would argue that an employee benefits consultant goes beyond what a broker does by providing even more in-depth consulting and decision-making assistance to the employer and the employees."
  • " A benefits consultant may be more likely to be able to assist with multiple types of benefits beyond just insurance. Consider which option you need. Note that fee structures may also differ for consultants versus brokers."
Quotes
  • "Here's how it typically works: Insurers pay brokers a commission for the employers they sign up. That fee is usually a healthy 3 to 6 percent of the total premium. "
  • "Commissions can be even higher, up to 40 or 50 percent of the premium, on supplemental plans that employers can buy to cover employees' dental costs, cancer care or long-term hospitalization."
Quotes
  • "The benefits consultant will eliminate practices that are doing more harm than good in an organization and find solutions to solve key concerns. "
  • "With hundreds of different benefits providers and varying levels of coverage and cost—both to the company and regarding copays, coverage limits, deductibles, etc—the process of picking and choosing a benefits plan that is both cost-effective and high quality has become an incredibly specialized field"
  • "Benefits consultants have a wide knowledge of industry standards and benefits products—from health insurance, paid time off, retirement plans, and more—and will be able to work within a business’s budget to find the perfect product from a reputable company in an oversaturated and competitive market."
Quotes
  • " No. Such insurance consultant may not sell insurance, without being separately licensed as an insurance agent or broker."