So I wanted to write an article for our site that is aimed at brokers who keep wondering whats going to happen to them. Many of them are concerned that they will either lose their books of business or maybe they will end up cleaning toilets in an adult bookstore. Either way, the point is that there is more uncertainty in insurance than there is in British dentistry.
For agents that have built large books of renewal income we have been hearing rumors from the agent reps that there is a solid chance that entire books of business will be dis-enrolled and forced to enroll in new plans either with the same carrier or with a different one. On top of this, there is evidence that many of the larger insurance companies are moving to models that won’t include street level health insurance agents. They will still want to do business with larger call centers like us and of course ehealth, but the truth is they are all working on creating direct to consumer portals.
Blue Cross and United have been very busy growing their consumer direct channel and Coventry is also buying leads like crazy from affiliate websites. Blue Cross and Humana are both acquiring retail space like a fishmonger at a fishery. Whats funny is that the rumor is that these retail spaces are losing money like crazy but they keep them open to prepare for health reform. Our Cigna agent rep yesterday recommended that I use some of my retail space (we own a few local auto and home agencies) to be used as health enrollment centers.
There are some good signs though, just not that many. One good thing is that ehealth’s stock price is through the roof. Click on the one year button to see what I am referring to. However, this is good news for me, the owner of a decent size health insurance call center. It doesn’t mean that the road warrior health agent will be able to survive. However even for larger agencies and call centers, there is no guarantee that we will thrive under these new conditions, though it does seem to favor us over the guy that drives around all day to see clients.
The other big rumor right now is level commissions. Meaning that first year commissions are going to go lower but subsequent years might be slightly higher. This leads to the other good news, which is of course no more underwriting. We lose about 40% of our new clients to underwriting now (though Humana is really opening the flood gates, God Bless you Humana!), so that will about double our revenue if we can eliminate this cost of doing business. In the end they might just decrease first year comp and not even raise the next years.
The other bad news is that premiums are going to go through the roof. The mandate is weak so most people will try to avoid paying for health coverage unless they need it. So yes, if our commission remains a percent of premium our revenue will grow, but there will be less customers to make up for the gap.
Really, there are so many rumors and so much speculation that is impossible to predict the industry in 6 months, must less 12-14. What am I doing about health reform for my agents and agency?
I am of course hiding in my closet and eating a tuna sandwich. Of course my closet is quite large and the rest of my house is very tiny so it is logical to do this.
In all seriousness, I have gotten us into property and casualty to eliminate the uncertainty. In fact we are selling lots of auto and home insurance now and I’m real excited about our future in this business. Most of my agents are prepared to flip over to auto and home if our industry goes away, on the other hand, our health business could become three or four times larger. We just don’t know which is worse than wearing no clothes in a mirror factory.