Why Most Benefits Brokers Hate RFPs – And Why Employers Should Love Them
It’s been said in business that “where there’s mystery, there’s margin.” In other words, you can make a pretty good profit if your customer really doesn’t understand what he’s buying. Now, there’s nothing wrong with a benefits broker making a healthy margin, as long as there is demonstrable value and return on investment. Given the cost of benefits brokerage services – less than five percent of total benefits cost – it makes far more sense employers to focus on value rather than cost.
The trouble is that most employers have little idea what value they are getting for their money. According to the Elevate Benefits Survey, 92 percent of employers have little idea how to objectively compare options and select the best broker for their firm. However, the right broker can make all the difference to your organization, so it is important that you choose wisely.
Today, it’s possible to gain a greater understanding of what your broker can and can’t do—before you hire them. The time has come for employers to ditch the typical haphazard broker selection process and use a methodical approach that starts with a request for proposal (RFP).
With an RFP you can learn more about your potential brokers and create a scenario in which you’re comparing apples to apples. It’s an opportunity to create greater knowledge for both you and the broker so that you’re ultimately working together more cohesively.
So, then why do benefits brokers hate RFPs?
There are two reasons brokers shudder when they receive an RFP. First, with an RFP process, the buyer drives the process, which means that brokers are pulled out of their comfort zone. It’s hard for them to always be closing if their answers are limited to a set number of characters in an Excel spreadsheet, if the timing of the process is not of their choosing and if–gasp–some other broker might be better than them.
Some brokers will not want to reply to an RFP or even a simple questionnaire if they don’t believe they have a chance to adequately tell their story. The process can be a difficult and time-consuming, and some brokers will decide it isn’t worth their while. Additionally, many RFPs are poorly written and/or poorly thought out. Employers don’t make this hire too often and therefore don’t know what to ask, and end up with an overly long mess. When brokers see a poorly written or overly long RFP, they wonder if the relationship has a chance at being successful.
Here’s why you should love them…
An RFP allows you to effectively communicate your needs and the hiring process to candidates. You are required to think about what you are looking for, and your potential brokers are required to document what they can deliver. Access to written answers for key questions will help you organize both yourself and the brokers who are bidding.
This process will also help you avoid the perception of a breach of fiduciary responsibility. You don’t want your employees wondering if their employer simply chose “their buddy” to sell them insurance!
Additionally, an RFP gives you proof that specific claims were made and makes your position very strong if problems arise. This protection is much stronger when you include the RFP and the successful broker’s response in the final contract.
Ultimately, selecting a benefits broker is about choosing the best partner for your business. It’s about making an informed decision. Given this, go forth with your RFP. But make sure it is just one step in the process, and is relevant and impactful so the best candidates are impressed and excited to have the opportunity to earn your business.