Consolidation continues to change the economic landscape in the U.S., requiring brokers to respond in innovative ways to continue to meet client needs for efficiency and flexibility. Consolidation can challenge brokers to find ways to ensure their clients maintain the same experience across all products, while also offering solutions to improve efficiency for employers who need to do more with less or product solutions for employers who may be forced to rethink their offerings.

Brokers are seeing industry consolidation in three principal ways:

1. Broker consolidation – Firms are merging and increasing in size, taking advantage of cost efficiencies and economies of scale.

2. Business consolidation – Companies are merging, reducing the universe of possible clients.

3. Carrier consolidation – Carriers are experiencing mergers, acquisitions, and spinoffs that could affect customer experience and processes, making day to day business more difficult.

Competing in this environment requires new strategies. Relying on traditional business models—albeit tried-and-true ones—may not be enough to keep your firm successful. One emerging trend to help is a block strategy.

This is not the same as traditional block transfers. Most brokers and agents have done block transfers at some point, usually driven by carriers (exiting a market) or customers (looking for change due to poor service or claims issues). A block strategy, though, is an innovative way of thinking about your book of business—one that you control to propel your firm forward.

It starts with a different way to look at your book: Find commonalities in different parts of your book and view them as building blocks that make up the total. Then ask, how can they help you to grow?

In a classic block-transfer scenario, the commonality is driven by the carrier, who is soliciting the business to grow its business in certain lines in certain locations, such as growing dental business in Illinois or small business disability in Nevada. The broker then works with the clients to move the business through BOR letters. When it's your strategy, however, it's about what will help you grow your business.

According to Jeff Stoppel of Benefits Direct, a TPA, enrollment and service firm located in Kansas City, a block strategy isn't just good for the broker; it also has tangible benefits for the clients. "We know when a client is part of a block, so our staff knows exactly what to do when they have a client inquiry. It provides for faster service and is easier on staff."

Questions to ask yourself when reviewing your book to identify blocks:

Are there pieces of my book that take a long time to administer, even though they cannot grow?

Think of closed blocks from carriers who no longer write in state X, or blocks of business that have become stagnant due to departed carrier relationships. You're spending a lot of time and resources to administer them, but they have no growth prospects. Could these clients be served just as well by another carrier, one with whom you already do business, so they could become part of a dynamic and growing block? It's important to keep in mind that there would need to be a valid basis for treating multiple clients as a block.

Are pieces of my book potential jumping-off points for further expansion?

In today's consolidating marketplace, large brokerage firms have scale economies. If you have business in a growing state, or specialize in specific industries, you can expand your footprint and grow in that space by combining existing business with one carrier and utilizing a block strategy to bring in new clients.

Could the pieces of my book add up to a greater whole?

If you have small blocks of business with several or many different carriers, you're not maximizing the relationship with any of them. By placing more business with one or two preferred carriers, you may be able to take advantage of a streamlined experience, including efficiencies in operations and dedicated service reps.

Thinking about taking that first step? Talk to your carrier representative. Just make sure they understand what you're trying to accomplish. Some carriers have dedicated in-house teams that specialize in blocks so they can make the whole process seamless, from servicing to forms to filing teams. Such teams can give you the support you need to set the stage for future growth, especially as you execute a block strategy in the future to deal with additional consolidation. And be sure to ask how their portfolio can support the employers' needs. Seek carriers with broad product portfolios to enable you to meet current needs and provide for future holistic solutions for your clients.

Stoppel knows that there are real benefits when applying this strategy to an industry that is consolidating; especially when it's repeatable."You have speed to market when working on M&As; you can hit the 'repeat' button from a product delivery standpoint."

For brokers who want to face the consolidation trend head on, a block strategy can be an effective way to compete.

Cynthia Coverson is senior vice president and segment head, Regional Business, in MetLife's group benefits business.

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Adapting to industry consolidation with a block strategy

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