Pogo* once famously said, “We have met the enemy and he is us.”And if we didn't know better, we might have thought the author,Walt Kelly, was talking about the broker shakeout in the small andmiddle markets.

In years past, two types of brokers often coexisted in thesecases. The employee benefit brokers (EBBs) handled the medical andemployer-paid products, while the classic worksite brokers handledthe employee-paid products. In general, these two brokers ignoredeach other, sold only their own types of products, and rarely cameinto conflict. They came from different backgrounds in terms of thetypes of carriers they represented, the products they sold, thefiling platform of those products, their compensation, etc.

Over the last 15 years, things have been changing, and employeebenefit brokers began adding more and more employee-paid productsto their portfolios. In 2000, roughly 40 percent of EBBs soldvoluntary/worksite products. That percentage has not dipped below90 percent in the last several years.

Each group had variations in the ways the members did business,and each should be thought of as a spectrum. For example, some EBBsroutinely cross-sold voluntary coverages, while others only soldthem defensively (in response to a classic worksite broker cominginto the case, for example). The two were distinct in terms oftheir focus and priorities. But the distinctions have beendisappearing.

Most recently, classic worksite brokers have been addingemployer-paid products, and almost 50 percent of these brokers nowsell traditional group benefits. In addition, 25 percent say theynow also offer pension and retirement benefits.

While the two groups are still quite different at the extremes,there is now significant overlap where the two meet. In otherwords, there is now a sizable group that sell both types ofproducts at a similar rate, and whose backgrounds could be eithertraditional group or worksite. The most sold employee-paidproducts for each group are almost identical.

The result of this merging of segments is that casesincreasingly have no need for two types of benefit brokers, and theshakeout is underway. More and more, the difference between thesebrokers isn't the products they offer, but the value-added servicesand expertise they bring. These parts of the broker's valueproposition (i.e., services) do not lend themselves to a commissionstructure, resulting in increasing use of fees and PEPM types ofstructures.

The winners in the future will probably not come from eithertraditional camp, but will emerge from that center, where the twoworlds meet. And as they fight it out in the marketplace, theultimate competitive weapons will not be benefit products, butbenefit services. Because on products, we all look the same.

*For younger readers, a generation ago, the comic strip“Pogo” was renowned for political and social satire.