Roadmap to benefits

A finely tuned benefits "engine" delivers high-octane results for this St. Louis agency

By Elisabeth Boone, CPCU

Ask some property/casualty producers how they feel about selling employee benefits, and you may get a response of pained puzzlement. While most P-C producers will readily acknowledge that their commercial clients need benefits products, and that offering benefits is a great way to build revenue and boost retention, they are a lot less certain about actually selling such products.

That’s pretty much the situation that prevailed in the mid-1990s at Welsch, Flatness & Lutz, an independent agency based in St. Louis, Missouri, which serves the eastern third of Missouri and neighboring southern Illinois. Established in 1979 by three bond producers, the agency has a strong focus on construction. Over the years it had tried in various ways to meet its clients’ needs for employee benefits products, but WFL management knew the agency’s benefits operation needed a serious shot in the arm.

Enter Kevin Trokey, an experienced group specialist who joined Welsch, Flatness & Lutz in 1995. Trokey has spent the last 12 years turning a lackluster benefits department into a vigorous, profitable unit that today accounts for some 22% of total agency revenue. He also serves as WFL’s chief operating officer and shares sales management responsibilities.

“I had a lot to prove—with our producers, our markets, and our existing clients,” Trokey says. “There were only two people in the department, and our P-C producers had never sold benefits.”

“Benefits had never really been a focal point, and it had never been targeted specifically for growth,” says Trokey. “When I came on board, we began to focus on growing the benefits operation because it was clear that we were missing out on some great opportunities.”

Confronting the skeptics

His first task, Trokey says, was to show the agency’s P-C producers that the agency was firmly committed to building a solid, successful benefits department.

“They had seen somewhat of a revolving door in the benefits operation, and they had never really seen that department gain any traction,” Trokey says. “They were a little bit skeptical, to say the least, and they certainly weren’t eager to commit to introducing their clients to a department that quite frankly hadn’t proved itself. There wasn’t any hostility; there was just ambivalence,” he recalls, adding wryly, “Apathy can be more painful than hostility.”

Trokey also faced the challenge of persuading markets that WFL was serious about building the business.

“When I joined the agency, the benefits department was generating less than $300,000 in annual revenue, so it was a small operation by anyone’s standard,” he says. “From the carriers’ perspective, there hadn’t been much history. They didn’t think of our agency as a benefits operation, or even as a P-C operation with a benefits focus. We didn’t necessarily have the carriers’ attention, and we had to prove to them that we were serious about benefits and that we deserved their attention.” Among WFL’s key benefits markets today, Trokey says, are Anthem Blue Cross/Blue Shield of Missouri, United Healthcare, GHP, and CIGNA.

Last but by no means least, WFL had to convince its clients that the agency was serious about benefits and that it had the markets, products, knowledge, and commitment to design comprehensive, appropriately priced programs for employees.

“When it comes to earning the confidence of any of those three groups—producers, markets, and clients—you can tell them what you’re going to do, but you don’t gain any credibility until you really do it,” Trokey asserts. “That came over time. From 1995 to 1998 we doubled our book of business, and as we started delivering on our promises, we began to earn the confidence and trust of each group.”

Partners and tools

As a member of The Sitkins 100™, Welsch, Flatness & Lutz is committed to building a network of trusted advisors through which producers can obtain referrals to desirable potential clients. “Roger Sitkins gives the best definition of a trusted advisor I’ve ever heard,” Trokey asserts. “It’s someone you go to for advice before you make an important decision—not after.

“If we aspire to earn that status with our clients, we need to cultivate relationships with people who can refer us to prospects who understand and appreciate our value proposition,” Trokey says. “Our strategic partnerships are focused on those areas where we can work together to meet our mutual clients’ needs. There are other organizations like ours that want to serve their clients’ needs in the way that we do, and rather than trying to reinvent the wheel and trying to do something outside our area of expertise, we try to identify a ‘best of breed’ partner so we can bring the best ideas and solutions to our clients and also help our partner do the same for its clients.”

For example, Trokey explains, “We have a strong relationship with a local labor and employment law firm,” he says. “We also work with CPAs and with a couple of banks that are focused on privately held middle market companies, which are a target for our agency.”

Other strategic partners are Zywave, which offers a comprehensive suite of software and other tools to help agencies manage their employee benefits accounts, and a leading health and employee benefits actuarial consulting firm with which WFL has an exclusive relationship in St. Louis.

“Zywave offers a variety of communication tools that we use to help educate our clients’ employees about relevant topics, such as choosing an appropriate plan and being good stewards of their benefits program,” Trokey explains. “Sometimes we communicate with employees on topics of seasonal interest, like skin cancer awareness in spring.”

Zywave also provides support for compliance issues related to COBRA, HIPAA, FMLA, and flexible spending accounts, Trokey notes. “There’s also an online forum in which HR managers can discuss issues of concern to them. Another tool lets us do claims analysis so we can be more effective consultants for our clients by helping them identify what factors are driving their claims, especially the lifestyle-related claims,” Trokey says. In sum, “Zywave provides a whole platform for us to deliver value-added services to our clients.”

The benefits department also conducts quarterly educational seminars for clients, Trokey says. “We do the seminars in both Missouri and Illinois, and we cover a variety of topics—issues related to COBRA, the Fair Labor Standards Act, minimum wage laws—as well as how to write an effective employee handbook and how to communicate with employees about their benefits. Sometimes we bring in representatives of our carriers to make sure our clients understand all the tools and resources that are available to them through the carrier, such as online tools, wellness initiatives—anything the client can use to its advantage.”

“We’ve been doing these seminars for the last couple of years, and the response has been very positive,” Trokey comments. “When we hold a seminar in Missouri, we tend to have more than 100 people show up.”

Building a winning team

One of Trokey’s challenges has been identifying qualified candidates for an expanded sales team. “We had gone through several years of not being successful in hiring producers who did what we really wanted,” he says. “I think that’s just a reflection of how difficult it is to hire a successful salesperson. We were hiring ‘okay’ salespeople, but we really needed to be hiring exceptional salespeople.

“That’s a challenge, because the average salesperson you interview is confident, articulate, likable, enjoys the interview, and it’s easy to say, ‘Okay, let’s take a chance on him,’” Trokey says. “Sure, you follow up, you check references and so on, but you’re pretty much taking the candidate at his word.

“But it was very expensive to hire that way, because the turnover was higher than what was acceptable for us,” he remarks. “There are the direct costs associated with salary and benefits, but a lot of the costs involved with an unsuccessful hire are costs you never get a chance to measure: lost productivity for the rest of the staff, lost opportunities in the marketplace, damage to the agency’s reputation, morale issues.

“We realized we needed to make sure we were making the best possible hires and giving the individual candidate the best opportunity to succeed,” Trokey says. “We wanted to devise a way of testing candidates in as close to a real-life situation as possible. To do that, we created the Demo Center. We developed a series of case studies that focus on the things producers do—managing time, evaluating opportunities, role playing—and put candidates in a situation where they’re presenting to decision makers in a boardroom setting, as they would be doing when they’re competing for a new client.”

A producer candidate receives the case studies on Thursday. “One of the case studies lists eight prospects and provides background information on each,” Trokey explains. “On Monday, the candidate meets with me, along with the rest of our Executive Committee, and a consultant and makes a three-hour presentation in which he ranks the prospects 1 through 8, giving his rationale for each ranking. For the top two prospects, the candidate presents a marketing plan to convert the prospect to a client. The session ends with a role play of a sales situation.

“Every producer we’ve hired this way is still with us and still successful,” he reports. “We do this as much for the person we’re bringing on as we do for ourselves. If we’re asking somebody to commit to a career with us, we need to be as sure as we can that it’s going to be successful for both sides.”

Managing for results

“Sales management is hard work,” Trokey adds. “The role of an effective sales manager is to hire the right people and then keep the road in front of them clear. Sometimes they clutter the road themselves. Our job is to say, ‘Look, you’re getting distracted, and those distractions may be keeping you from going out and doing the hard sales job. We need to evaluate what’s distracting you, why that’s happening, and how we can prevent that from happening again in the future.’”

As with property/casualty producers, Trokey remarks, a common distraction for benefits producers is service-related issues. “Producers tend to get drawn into service issues because they feel responsible for their client,” he says. “We appreciate the responsibility that they take on, but we want producers to do what they’re uniquely qualified to do, which is managing client relationships and developing new relationships, not getting involved in day-to-day service issues. We have a great support staff here, and our producers need to make sure they’re letting that staff do what they do extremely well: handling those day-to-day issues for our clients.

“Growing the top line isn’t enough,” Trokey adds. “It’s the bottom line that matters. Benefits departments within a P-C agency end up with a lot of small accounts. We found that was holding us back, so in 2007 we increased our minimum account size, in terms of revenue, to $5,000, and may increase it again in the future.

“You can only offer what you can deliver profitably,” Trokey asserts. “We use Digital Insurance to service our small groups, and so far as the client is concerned, it’s our agency that is providing the service. From 2002 to 2006, the revenue of our average benefits account has grown from $7,000 to $40,000.”

Revenue from benefits has grown from $285,000 in 1995 when Trokey joined Welsch, Flatness & Lutz, to over $2 million as of mid-2007. While pleased with this impressive gain, Trokey is anything but complacent. “Change is the one constant,” he asserts. “It will be led either by you or by your competition.”

It’s a safe bet that his benefits team will be setting the pace in the drive to build business. *