Ancillary Exchanges: Did You Know They Exist?

I had an interesting opportunity this week to talk to one of a group of elite brokers that put ancillary exchanges on the map in Northern California.

MJ Miller of Pacific Diversified Insurance Services brought in some of the biggest numbers we've seen for the Choice Builder product. We’re talking about the largest ancillary exchange in California so this lady is barbecuing with special sauce.

To be clear here, she’s not letting employees enroll online and then calling it an exchange. MJ is introducing employers to a multi-carrier option for small or large group.

We like to sell stuff so I asked her how she drives so much business.

“The product puts the consumer in the driver's seat. It's like having the freedom of the individual market but in a group setting. Plus one year of premium is less expensive than one dental visit. Why not do it?”, MJ explained.

If only it was that simple, right? Well, apparently it really is.

Prudential published a survey that says only 20% of the companies who are moving to a private exchange are doing it because their broker made the recommendation.

Reread that because it sounds just like opportunity knocking. Employers want this product so much they are going into the market to find it themselves.

Prudential says that 49% are doing it because they want cost savings and 35% are doing it to offer more choice to employees.

Noting that she is a student of industry trends, MJ has her hand in all the latest market opportunities. She’s proven her expertise with self-insuring groups and with teaching them to outsource. In her words, “I’m a valued resource and trusted partner. I only work with carriers who are considered A-rated, offer rate controlled plans and can leverage volumes of scale.

“Choice Builder is on top of their game. They’ve done their research and they understand what works and what doesn’t. Plus, I think it's the only exchange in the country with EyeMed and VSP side by side.”

I’ll admit, hearing that makes me proud.

So Choice Builder or some other ancillary exchange, either way, how do you use it to improve the bottom line?

Employee Benefit Adviser ran an article called 5 Ways to Increase Ancillary Sales on an Exchange. Their take is that ancillary products should run about 10% of the core product, “Typically, the ancillary offers with the highest conversion rates are priced within 5% to 15% of the cost of the core product they are supporting. From a buyer’s perspective, offers made below this range tend to be perceived as not valuable enough. Offers above this range…exceed the price consumers generally consider paying for an additional product.”

The article also speaks to the simplified underwriting that should be offered in an exchange environment.

Once you’ve got the right product, you start marketing. Knowing that only 20% of the groups who want an exchange are hearing about it from their agent, this might be your opener.

If you are focused on retaining your business, don’t get caught flat footed. Bring the solution in as an extension to medical. Many exchange products can offer purely voluntary benefits so the employer doesn’t have to cover the cost but does get to enjoy the FICA savings.

If you see MJ at the next broker council meeting, remember to say hello. She's an active member of the community.

If you've got a unique take on the industry, message me. I'm looking for other insurance professionals that want to share their knowledge and insight for the benefit of our community.

Remember to Connect or Follow to get #InsuranceInspired in your email every week.

For prior articles on Masterminds, Mentorship, or the Abundance Mindset, see my prior posts.