This week we look at the major differences between employee group benefits agents, brokers and fee-for-service consultants.
While it may seem like a good idea to pick up the phone and dial the 1-800 number of a well known insurance company to go “direct” when shopping your employee group benefits plan, you should consider alternative channels such as brokers or fee-for-service consultants.
Below is a comparison table to clarify the differences:
Agents
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Brokers
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Fee-for-Service Consultants
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- Compensated on a decreasing, flat or increasing commission scale. The commission scale is a percentage of premiums on all insured benefits.
- Depending on the size of the group, commissions could range anywhere from 4-15% of premium.
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- Fees are charged directly by the consultant to the client.
- Fees are calculated based on estimated number of hours and resources used to maintain full service of your account.
- Fees may also be calculated as a percentage of total premium
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- As the premium on the account rises, so does the agent’s commission.
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- Fees are generally guaranteed for a negotiated term – further reducing the impact of rising insurance costs.
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- There is no incentive for an agent to negotiate a reduction in rates because the higher premiums are, the more commission is paid.
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- Consultants have every incentive to reduce your insurance costs as the compensation is not premium based, but rather service oriented.
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- Most agents are not obligated to disclose how much commission they are taking. The commissions are a direct cost to the client and are generally not addressed in proposals.
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- There is full disclosure and transparency. The client purchases the insurance at cost without the additional expense of an agent or broker’s built-in commission schedule.
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- Most agents have exclusive contracts with their employing insurance company and cannot offer the products of their competitors.
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- Most brokers have access to all insurers and alternative providers.
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- Most consultants work with all insurers and alternative providers. Also, as their block of business is usually substantial in volume, they are able to receive preferred “wholesale” pricing on certain benefits such as Accidental Death and Dismemberment.
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It should be noted that the majority of benefits plans for groups with less than 500 employees are placed through agents or brokers.
Redcliffe Financial Group has offered fee-for-service consulting to the 50+ employee group benefits market with growing success since 2003 and traditional brokerage services since 1976. We believe the fully transparent consulting model will be adopted rapidly by traditional brokers – especially if Federal Regulators in Canada made commission disclosure mandatory for insurance representatives as it is in Australia and the UK.
To learn more about the employee group benefit consulting and brokerage services offered by Redcliffe Financial Group please contact us at 1-888-676-8111 or email info@redcliffefinancial.ca.
Daniel
December 17, 2010 at 11:32 amgreat post, thanks for sharing
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Ryan Joseph
April 15, 2011 at 12:45 amThis is really nice and informative blog. Comparison among Agents, Brokers and fee-for-Service consultant in terms of fee structure is really catching. I really get idea about which agent I should approach for employee benefit plan so that it incurs less cost in terms of fee or commission. Hope to hear next nice and informative blog in recent future. All the best for the next blog.