A natural and healthy conflict exists between underwriting and sales. It’s easier to manage when the underwriting and sales (producers) are separate entities. However, many stop-loss carriers/MGUs (carriers) compensate their sales (marketing) staff in a similar manner to producers (i.e., brokers, consultants, TPAs, etc.). Such incentives can cause conflict within the organization primarily due to opposing departmental objectives – risk selection versus production.
This article will primarily focus on the relationship with the respective functions working for different entities.
Underwriters need to recognize that producers are measured and compensated by their production. Underwriters, however, receive a salary and potentially a bonus based on the portfolio’s outcome (loss ratio). Therefore, producers must recognize that to get the best price and coverage terms possible; they must provide the underwriter with all the required information and as much lead time as possible as well as sell the carrier’s value so that the lowest rate isn’t the sole requirement.
Mutual appreciation between underwriters and producers is vital to each other’s success. In addition to a strong underwriting/sales, a strong partnership with a TPA is also crucial to the success formula and will ensure that the employer’s interests are best served. All parties must be navigating towards the same objective. However, when a carrier, producer, or TPA act in their own individual interests, the employer generally loses.
A carrier with internal sales teams compensated via commissions often polarizes against Underwriting, which may speak to the carrier’s service or lack thereof or its objective to provide the producer and employer with the best possible outcome. This formula often leads to low premiums initially only to “buy” the account, which is not necessarily reflective of the risk’s exposures. The employer suffers when the renewal reflects the corrective rate action and terms in the following policy periods. Another consideration, is the low price reflective of the compromised service by the carrier? That is, possibly the “processing” as opposed to “managing” of claims.
Producers and employers must view that the stop loss carrier is not only a part of the risk management equation but shares the vision in the employer’s best interest. At USBenefits, our goal is your goal – to provide the best possible outcome for the employer. We invite you to have a conversation with us as to why USBenefits is different.