'Benefits is pretty steady business': Why MGAs are prioritizing growth in unique sector

‘Benefits is pretty steady business’: Why MGAs are prioritizing growth in unique sector | Insurance Business America

Benefits

‘Benefits is pretty steady business’: Why MGAs are prioritizing growth in unique sector

A look at the need for diversification in benefits market

Samuel Fleet (pictured), division president at Amwins Group, believes that Managing General Agents (MGAs) are increasingly prioritizing growth within the employee benefits sector. Speaking to IB, he explained the market dynamics driving this trend and the types of clients they are working with.

“MGAs are focused on the space because traditional P&C carriers have been looking to get into the accident & health space,” he said. “There probably isn’t a week that goes by where I don’t get a call from a traditional P&C carrier looking to get into the benefits world.”

This shift is driven by the need for diversification and the relative ease of underwriting employee benefits compared to other products. Unlike the volatile property and casualty markets, the benefits sector remains steady, offering consistent growth.

“Benefits is pretty steady business. Due to medical trend and other factors, you can always count on low double-digit growth every year,” said Fleet, highlighting the sector’s resilience against hard and soft market cycles. Addressing the type of clients, Fleet said they’re seeing an increasing divide in smaller, mid-market and large employers. Smaller employers tend to need dental plans, life insurance, disability insurance, and limited medical coverage. Larger employers, on the other hand, look towards level-funded or self-funded products, requiring additional coverage like stop loss insurance.

At Amwins, the approach is comprehensive, covering various aspects of employee benefits across different market segments.

“We have a traditional general agency and its fully insured vertical, a self-funded vertical, and an underwriting vertical division with delegated authority for a variety of accident & health products,” said Fleet. This broad scope allows them to cater to the diverse needs of their broker clients, from small group fully-insured to prescription drug management, to medical stop loss and cost containment.

Fleet also touched on the specialized products and services Amwins is developing to meet the evolving needs of their clients.

“A couple of things we’re seeing include specialty pharmacy, gene therapy and cell therapy,” added Fleet.

These areas are particularly critical due to their high costs. For example, Fleet recounted a recent case where their new product covered a $2.2 million gene therapy claim, significantly mitigating the financial impact on the employer and stop-loss carrier.

“We rolled out this product January 1. We got our first claim last year, and the employer was reimbursed $800,000 for their specific deductible and the stop-loss carrier received the balance,” he explained.

Illustrating the value of these specialized products in managing significant risks. Fleet observed a trend in the market towards multiple employer captives and alternative risk products.

“There was a big trend over the past decade around multiple employer captives for health insurance,” he said.

However, Fleet also noted a shift towards premium refund products, which offer similar benefits without the complexities of structuring a captive. These alternative products are gaining traction as employers seek more straightforward solutions to their insurance needs.

Fleet sees cost containment as a major focus area. “It’s all about cost containment in helping brokers in the employer marketplace,” he asserted.

This includes benefit brokers serving both large and small companies, with a particular emphasis on mitigating high-cost risks. “Traditional larger employers did not buy medical stop-loss, but we are starting to see these employers buying one-off coverages, like gene therapy, where they know it’s low frequency, but when it hits, it’s a big number,” he explained.

This trend is partly driven by changes brought about by the Affordable Care Act (ACA), which eliminated the ability for employers to set annual and lifetime maximums for coverage. As a result, large employers are increasingly looking for ways to protect against significant financial risks.