The insurance profession segments agents and brokers into separate categories. Property and casualty (P&C) agents are trained and licensed differently from employee benefits (EB) agents. Insurance agencies foster and maintain this separation as well. And, to add to this, P&C agents and EB agents are likely to mix about as well as oil and water. However, it is becoming clear that risks facing employers are connected and dividing insurance guidance into silos is leaving businesses at risk. This traditional and typical behavior is no longer tenable.
The pandemic illuminated and brought an increased focus on employer risks that demand the cooperation of P&C and EB agents. Put simply, neither side of the house can adequately address these risks without the support of the other side. The risks are not entirely new. But they have increased in complexity and raised the probability of an adverse financial event.
The first step to addressing these risks is to bring all of the parties together. The goal is in removing the emotional barriers to successfully executing an effective strategy. Not many agents will dispute the need for cooperation and assistance from their colleagues across the aisle. However, most fear making the referral because of the risk of an adverse outcome. Agents and agencies must confront the lack of trust, or apprehension among P&C and EB agents. This trepidation is a primary barrier to meeting the needs of their clients.
Another barrier to addressing the full range of risks facing employers is the difference in the P&C and EB agents’ approach. P&C agents have a propensity to approach employers with a risk-based mindset. EB agents typically mention compliance issues with their offering. But the risks arising from their benefit offerings are usually not a major factor in their presentation.
Some of the most significant risks facing employers arise from their employee benefit plans. According to many attorneys, the Employee Retirement Income Security Act of 1974 (ERISA) creates the highest compliance standard employers must meet. Likewise, it carries the greatest liability if not met. However, it is uncommon for these risks to be discussed between the EB agent and the employer. Thus, it is critical for the P&C agent to step in and lead the conversation regarding the risks of which the EB agent is usually unaware.
Adding to the complexity of risks intersecting P&C and EB is a recent announcement by the Department of Labor (DOL) asserting that cyber risks are now perceived as equivalent to fiduciary risks. The DOL issued guidelines to employers on their responsibilities to secure their employee benefits data from breaches. The list of steps to take is daunting.
Again, it is unlikely that EB agents are up to speed on cyber security and cyber risks, yet a new DOL declaration has raised the stakes on the protection of employee benefits data. It is imperative that this new risk is addressed through a team approach.
In addition, there is another paradox present in the overlap between P&C and EB agents. Workers’ compensation insurance is an employee benefit, but it is traditionally sold by P&C agents. Few EB agents are knowledgeable about workers’ compensation, even though an employer’s group health plan must be coordinated with the workers’ compensation policy. Conversely, few P&C agents are aware of the terms and conditions of the group health plan that influence how they must program and manage the workers’ compensation policy.
Adding more fuel to the fire, few P&C agents are well-informed on such federal laws as the Family and Medical Leave Act (FMLA) and the Consolidated Omnibus Budget Reconciliation Act (COBRA). Lacking an understanding of these laws prevents the P&C agents from adequately protecting their clients from adverse financial events during a workplace injury episode. Typically, EB agents are needed to fill the void.
Due to recent laws and regulations, it is no longer defensible for P&C and EB agents to work in silos. They must work through the emotionally driven fear of loss and come together on behalf of their clients. The risks facing all parties are too significant and potentially life changing to continue on the historical path. Plus, those that get out of their comfort zone and act will be well rewarded.
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