By Dan Eisner,
Advisor, ZLC Employee Benefits Solutions
The costs related to employee benefits plans continue to cause plan sponsors (aka employers) concerns as annual inflation rates have generally outpaced broader market inflation for other business costs. As well, these annual inflation rates and have generally outpaced many companies’ top-line revenue growth and thus their ability to offset these increases. The challenge for employers is that employee benefits plans continue to generally rank as the second most important component in an employee’s compensation package (behind only salaries), and many employees continue to feel entitled to having employee benefits provided to them.
On top of that, the Canadian marketplace for insurers has seen dramatic consolidation over the last 20 years with the top three insurers now controlling about 65% of the market. Many years ago, a very common strategy to manage benefits plan costs was to regularly market the plan, as there was intense competition – getting 15 to 20 competitive quotes was not unusual. Now, we are often getting only 5 to 7 quotes (and even fewer for smaller employers) when we market the plan. With the more consolidated insurer marketplace, the strategy of marketing the plan regularly just is not an effective cost management strategy on its own.
So, what are employee benefits plan sponsors to do? Our view at ZLC is that we, on behalf of our clients, need to negotiate with insurers at annual renewals on “their grounds”, independent of marketing the plan – negotiate for appropriate risk ratings, negotiate for competitive expense charges, negotiate for sensible renewal rating methodologies, and negotiate for reasonable inflation assumptions. As such, benefits plan sponsors need to partner with an advisor who can negotiate effectively on their behalf.
At ZLC, we are proud to have one of the most experienced employee benefits advisor teams in the local market. More specifically, we have over 130 years of experience working on the insurer side of the employee benefits business, so we truly understand how insurance underwriters work. We also have the unique advantage of having our own internal underwriter, so we can challenge insurer quotes and methodologies rather than simply relying on what they say. Based on this experience, our clients have the confidence that they have the best rates and solutions available in the market without necessarily having to market the plan regularly.
By ensuring the insurance companies properly underwrite and rate their employee benefits plan, plan sponsors can better understand the real cost drivers behind their plans and more effectively manage them going forward. As well, they will have reliable information on future cost trends to incorporate into their budgets and business plans. With that confidence and peace of mind in hand, plan sponsors can get back to ensuring that their employee benefits plans best support their ability to attract, retain and engage the key talent they need to run their businesses.
We would be pleased to discuss your specific situation with you to identify the best strategy with respect to your employee benefits and retirement programs. Should you have any questions on the above, please don’t hesitate to contact me or a member of our team.
ZLC Employee Benefits Solutions is one of the fastest growing advisors for employee benefits and group retirement programs in Vancouver and we are fortunate to have the best people, resources, and clients. We provide value to you by leveraging one of the most skilled benefits teams – collectively almost 400 years of experience within our team of 19 employee benefits specialists. We have been working with businesses ranging from 3 to over 75,000 plan members for over 35 years.