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Getting started in the group insurance business
A recent StatsCan study found that businesses with under 100 employees added 185,000 jobs to the economy in 2006. These jobs were split evenly between businesses with 20 to 99 employees and those with under 20 employees. This growing number of small-to-mid-size businesses represents an expanding group insurance market and a tremendous opportunity for Canadian insurance brokers.
There are five reasons why a new or experienced advisor may want to consider specializing in the group market.
Less competition – Only about 5% of licensed advisors actively market employee benefits. The complexity of group insurance scares off many advisors, but this can benefit those who do decide to sell employee benefit plans. There is a shortage of experienced and qualified employee benefit specialists. Advisors who can successfully market their expertise in this area will find themselves in great demand.
Constant commission stream – Unlike individual insurance products, group insurance generates a reliable commission flow. This allows brokers to minimize income fluctuations and have a steady renewal stream.
Daytime activity – Many insurance brokers find it difficult to fill their daytime hours with productive activity. The group insurance market allows advisors to work 9 to 5 rather than to a schedule filled with evening and weekend work.
You can tailor plans to client needs – Group insurance plans allow the broker to customize plans to fit clients’ personal needs. Potential clients with health concerns may be able to obtain benefits on a group basis that would be unavailable in individual insurance policies.
Individual insurance opportunities – Every new group of 25 employees represents 25 potential individual clients. Advisors can prospect these employees directly or partner with another broker.
Although the group market presents many opportunities, it is not without its challenges. The following are two potential pitfalls.
A longer sales process – It often takes many months and meetings to set up a group plan. The longer sales cycle combined with lower up-front commissions can create a cash crunch for many brokers.
Heavier administration load – Group plans require more ongoing administration than do individual contracts. The quoting process alone can be very time consuming. It’s extremely difficult to run a one-man shop in the employee benefits market.
Whether you decide to dive into the group business on your own or create an alliance with another broker, Canada’s group insurance market presents a golden opportunity to help new clients and increase your bottom line.
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[...] is why I have written an article about five reasons why a new or experienced advisor may want to consider specializing in the group [...]
Hi! Very good insights and big thanks!
About group insurance, would you say that it’s still good to enter for a new advisor? Can it be the sole business without doing much individual insurances? Is it likely to generate more or less income than individual insurances after say 5 years? How many years typically before one gains some inroad into group insurance? What would you say to be the key success factor in succeeding in group insurance? Thanks again and have a great week ahead!!
Anthony from Vancouver
Hi Anthony,
I’m glad you enjoyed the article.
The Canadian group insurance market offers tremendous opportunity. However new advisors may find it difficult to generate sufficient revenue in the early years. The first year commission is lower and sales cycle is longer.
The break even point from a revenue standpoint in comparison to individual insurance is hard to pinpoint. I would estimate closer to 10 years but your income will continue to escalate and will be much more stable than individual insurance producers.
Your success will hinge on being able to find new prospects and your ability to develop those relationships with persistent, relevant follow up and innovative solutions.
All the best! Lorne
Hi Lorne,
Great article! Having worked in group insurance for many years, I definitely see the potential for developing relationships which lead to great cross selling opportunities. Group Insurance can also be a way to reduce the ups and downs in your commissions and provide some stability in your revenue throughout time. But it is true that it can be a difficult market to penetrate at first. I recommend that new advisors team up with a more experienced person at first to learn the particularities of group insurance (even if it means a split in commissions). If you are from Quebec, you require a 2b license to sell group insurance plans – with a 3 course prerequisite. EB Knowledge Centre offers such courses but even with that I see many advisors seeking the help of colleagues to get started.
Good luck to all entering this very fascinating industry!
Hi Gianna,
Thanks for sharing your insights. Regards … Lorne