Carriers & TPAs Compete For Broker Loyalty
By Bill Rusteberg
Years ago when I was a commission driven insurance whore a TPA dropped by my office. “Bill, how many self-funded lives do you have on how many groups?” he asked. “Move 2,000 lives to us and we will not only pay you the same commissions you’re getting now but I will personally deliver a $250,000 check as our way of saying THANK YOU for the business!!”
Such is the world of health insurance brokerage…………………..
Competition for broker loyalty among health insurers and TPA’s is nothing new and continues to this day. Brokers and consultants hold the key to market distribution and the carriers / TPAs know that.
Health insurance brokers are in the business of selling relationships to the highest bidder, nothing more and nothing less. It’s a lucrative business.
There are two methods to building broker loyalty. First, pay them often and pay them well. Second, tie their loyalty to a contract wherein the carrier can terminate the broker’s contract at any time with a 30-day notice, with or without cause, ending all residual commissions immediately and forever.
Carriers often pay bonuses on top of commissions, a practice generally unknown to the public. Fee based insurance consultants have been known to accept bonuses from carrier’s they recommend. I can attest to that.
As a fee-based insurance consultant for many years there have been three occasions where a BUCA has offered me under the table compensation in return for placing business with them. Three of the four BUCAs made these offers which should persuade the reader the practice is systemic. Each of these episodes deserves a story worth writing about including my method of response and the results it produced.
A former BUCA sales representative once told us he often distributed quarterly loyalty checks in person, some of which were in the hundreds of thousands of dollars. “Bill, I used to drive over to San Antonio once a quarter to have lunch with one of our top producers and handed him a quarterly bonus check averaging $250,000. And I paid for lunch too!
And that’s the way it is.
