Today’s plan sponsors and administrators are being pursued more aggressively than ever. Some might feel as if they’ve been painted with some sort of target, given the number of phone calls they receive every day from brokers and telemarketing firms. The offers sound too good to ignore, and, in many cases, one might be tempted to give in. But what happens when a plan administrator or sponsor says yes?

The question is, What, exactly, have you approved?

Perhaps you have agreed to grant a sales representative permission to review your plan and make recommendations? Perhaps you granted authority to take over your plan by issuing an agent of record (AOR) letter? Based on the amount of confusion surrounding these two very different letters of engagement, it seems likely many plan sponsors are not aware of the difference and the actions set in motion once either of these letters has been penned.

Plan sponsors must be aware that an AOR letter, if granted, will start the process of moving responsibility to manage the plan to a new advisor. This may eventually lead to additional changes being recommended that were not first anticipated. Permission to review a plan only grants access to the plan’s carriers who will be asked to provide plan design and claims data on receipt of authorization directing them to co-operate. The new broker will make recommendations to the sponsor based on their review in order to establish themselves as a better option than the incumbent broker.

Often, a carrier will contact the incumbent advisor to give them adequate notice that their position as the plan’s advisor is being challenged, offering them the chance to find out what the sponsor’s true intentions are. Their first action will be to contact the sponsor to ask if there are any unresolved issues and make sure the sponsor understands the nature of the letter they signed.

The process may be pre-empted at this point.

The responsibility to manage the client advisor relationship rests principally with the advisor. Advisors must deliver value, but sponsors must communicate their needs and provide feedback. This finely tuned communications balance is what maintains strong and long-lasting business relationships.

But things go wrong and sometimes a change of advisor is warranted.

Read: Business risks and benefits plans

Plan sponsors need to develop a strategy for finding their new advisor and a game plan for the future of their plan. Sponsors need to check references and make sure of the fit between them and the new advisor being considered. A meeting of the minds is vital in both strategy and expectations of service.

A sponsor that demands ongoing contact and the highest levels of service must recognize the costs associated with meeting those expectations. Advisors who willingly accept business on these terms must be prepared to honour their end of the bargain. Advisors should communicate openly whether or not they support only a handful of carriers or if they represent a broader entire market in order to find the right fit. Both marketing approaches may work well for the sponsor, but full disclosure is of key importance and only fair to everyone.

Sponsors must do this work up front and select their champion, much the same way we all select only one real estate agent with whom we list our house for sale. Insurance carriers and benefits providers deal with only one broker to be sure they are dealing with the advisor empowered to act on the sponsor’s behalf. While carriers will support advisors by preparing proposals and quotes to help them win business, the costs are too great to support more than one proposal per sponsor. Only one AOR will be recognized. Only one broker’s quote response should be prepared.

On approval, a new AOR letter will be granted the newly appointed agent. At this time it will be presented to the carrier. Carriers will honour the existing advisor relationship and notify the incumbent broker that responsibility for the plan (and any associated compensation) is about to be moved and provide the incumbent with a period of up to 10 business days to provide them with the chance to retain the business.

Incumbent advisors may elect to waive their rights and simply bid their former clients well in their new relationship. If the business cannot be retained by the incumbent, then the carrier will usually assign responsibilities to the newly appointed agent.

Advisors must bring something of value to the table, beyond promising to save a certain percentage of the billed premium. Business won on deep discounted pricing alone may be more prone to dramatic increases in rates on renewal as carriers move to recoup their losses. Sponsors must be aware of this and be prepared to either accept the premium increases to come or seek yet another move.

Most advisors will not be in a hurry to move any plan unless there is a valid reason. The incumbent carrier will no doubt express willingness to solve any service issues in order to retain the business and seek to forge a working alliance with the new agent hoping to secure any additional new growth opportunities they may bring.

Change is the only guaranteed constant in the universe, along with death and taxes. Ill-considered change is fraught with risk and likely downside. When facing the prospect of change, sponsors should slow down, ask questions and understand their options before granting any written directions they may later regret.

Bob Carter is regional vice-president, sales — specialty programs at Empire Life. These are the views of the author and not necessarily those of Benefits Canada or Empire Life.
Copyright © 2021 Transcontinental Media G.P. Originally published on

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