Daly Merritt has long history of benefits excellence
Benefits accounts for 37% of total revenue
By Len Strazewski
Eighty-four years and counting: Daly Merritt Insurance in Wyandotte, Michigan, began its history as a property/casualty insurance specialist in 1928. But years before many other agencies jumped on an employee benefits services bandwagon, the firm found a new business niche that keeps on growing.
President and Chief Executive Officer Martin F. Daly says the agency dived into employee benefits, 26 years ago when Executive Vice President John L. Daly joined the firm, developing new levels of expertise and opportunities for the agency. “John, a licensed attorney with a background in the surgical products industry, launched our life and benefits division to augment our services and take advantage of a growth opportunity,” says Martin.
Today, employee benefits account for 37% of total revenues and grows every year.
“Employee benefits are a perfect way to round out our client accounts,” Martin says. “When we have a large client working with our property/casualty division, it's strong business. But when we can add their employee benefits, we have a much stronger relationship.”
As a result, Daly Merritt has achieved a 95% retention rate and steady growth in both property/casualty insurance and employee benefits, he says. The agency reports its number of group clients is up 6.7% this year and revenue per group is up a whopping 43% as the agency focuses “up market,” increasing the number of large group clients it represents.
“Of course we want to continue to grow our employee benefits revenue. A 60/40 ratio would be a beautiful balance, but our property/casualty keeps growing as well, so we may never really get to that point.”
Daly Merritt Insurance has three offices, including branches in Ann Arbor and Monroe, Michigan, and 40 employees, including eight in its life and benefits division. The life and benefits staff includes three producers and five customer support representatives.
John says depth of service attracts clients—and insurance professionals. The agency invests in technology that supports both the clients and its own employees and makes strategic decisions based on the needs identified by its employees.
“We listen to employees,” he explains. “We recently learned that our customer service representatives were getting bogged down in mundane data entry work rather than providing the higher-value service that our clients deserve. We immediately committed to hire another full-time staff member to be dedicated to the extra data entry work that our full service model requires.”
Sales staff also supports new producers as they join the firm to help build their personal book of business and integrate them into the team. “When a new producer or customer service representative joins our team, all life and benefits team members work together to help them get quickly acclimated and to grow their book,” John says.
Emphasis on growth
The Dalys say the agency prefers to call producers “sales consultants” to emphasize the agency's aggressive marketing approach. The sales consultants are well compensated for growth, they explain, with first-year payouts ranging from 45% to 55% of total commission.
“Based on what we hear from our producers and new hires, we pay better than the competition and that helps us attract the best in our field,” Martin says. The agency continues to recruit new sales consultants for both property/casualty and life/benefits divisions, and executives say the firm has infrastructure to support 25 or more additional employees.
The agency has clients in 20 states and works with more than 150 insurers—including four health plans that lead the Michigan employee benefits business: BlueCross/BlueShield of Michigan, Health Alliance Plan, Priority Health, and Health Plus. Hartford Life also was recently awarded the agency's statewide contract with Michigan Public Sector Consortium (MPSC).
The agency also markets voluntary insurance programs from Cincinnati Life, New York Life and other insurers, including strong term life products from Auto-Owners in Lansing, Michigan.
While the agency works with employers of all sizes, executives say, clients with 50 or more employees provide the best opportunity for plan design and funding creativity. Sales consultants help clients analyze claims history and calculate opportunities for self-funding and alternative risk-funding structures.
Martin notes that the agency is also exploring captive insurance company plans for some larger clients, working with Captive Resources, Inc., in Schaumburg, Illinois.
Rich benefit plans
Jim Schubargo, a benefits sales consultant and client manager, says that Michigan is a unique environment for employee benefits. Benefit plans tend to be richer than in other areas of the country, the result of an industrial and unionized history.
Vision care, dental care and other benefits that have moved to voluntary programs are still part of many group benefit plans in Michigan, he says. Employee assistance programs have also become popular additions to traditional insured benefits.
Health care costs, however, are still an issue for local employers and many have shown interest in self-funding programs and cost reduction techniques, Jim says. Employers are moving toward higher co-pays and coinsurance terms and are taking steps to encourage healthier lifestyles and reduce claims.
Wellness programs are on the rise, he says, but “everyone has their own version of wellness.” Employer programs range from education and fitness education to comprehensive health management and premium incentives for lifestyle changes and progress toward biometric targets. Local public sector employers have been particularly committed to health management programs, he says.
Costs and plan designs, however, have not been the most important issue for benefit plan sponsors, he says. “For the past year and a half, health care reform has been the most pressing issue,” Jim continues. “Employers are very interested in knowing how reform will affect their position on employee benefits.” Many questions remain unanswered as employers wait for the November election and any changes it could bring, he says.
The agency is also asking questions about the future of its own interests. “What will the role of the agent be after 2014? Will we deal directly with insurance exchanges? Should we be seeking retainer compensation from clients if commission income changes?”
The agency continues to educate its clients about health care reform, sending out regular e-mail blasts about updates in the federal and state regulation, he says. The education program targets client human resource professionals and employees with information about regulations as they evolve.
Investing in technology
Technology has been a leading differentiator, John says. The agency budgets 2% of sales each year for technology development and another 2% for capital investment. For its benefits services, the firm uses several technology packages to maintain its distinctive “high touch” client approach.
They include BenefitPoint from Vertafore, Inc., which allows all producers to access data from any location.
“As we've added staff in our new Ann Arbor office, our CSAs can readily share data between offices as necessary,” he says. “Our electronic Request For Proposal submission process is both simple and secure.”
From Zywave in Milwaukee, Wisconsin, the agency uses Broker Briefcase, which includes a professional library of helpful producer management content. The software features “strong, quality graphics—that enables us to promote a consistent Daly Merritt Insurance brand,” John says. “The software also lets the agency access timely legislation and compliance info. This information is now more important than ever to our clients in this era of health care reform,” he says.
The agency also uses the Zywave Decision Master Warehouse, which “helps us pinpoint cost drivers and utilization for our larger clients; benchmarks claims data against 29 million lives nationally and helps us find cost-saving opportunities for our clients. It also helps us offer future claims estimates.”
Daly Merritt also has a technology partnership with Roselawn, New Jersey-based ADP. “Together, we dramatically increase our mutual clients' return on investment through demonstrably better cost control, productivity, efficiency, labor costs and overall employee satisfaction,” John says. “For our prospects and clients interested in a truly paperless open enrollment, Daly Merritt Insurance delivers online annual open enrollment for any group of 100 to 10,000 employees. As a benefit of our broker-partner status, we are also able to reduce technology costs for our clients,” he says.
John adds that “we are currently doing some consulting work for a group of over 2,500 lives in real need of improved data management, enrollment tracking, and claims assistance. These are all areas in which we can add substantial value through our technology and service model.
“By improving technology and allowing our staff to handle many of our clients' more mundane tasks, their HR professionals will be freed up to then deliver more tailored personal service to their own employees. And, this improvement is topped off with lower premiums—sort of the 'icing on the cake' as it relates to an improved benefits package.”
Despite its rapid growth and increased operational sophistication, the agency has retained some of its traditions from its local origins nearly 85 years ago. Martin says the agency continues to “give back” to its communities, supporting more than 100 local nonprofit and charity events. As their agency continues to grow, the Daly family remains committed to serving their clients, employees and their communities.
Len Strazewski is a Chicago-based writer, editor and educator specializing in marketing, management and technology topics. In addition to contributing to Rough Notes, he has written on insurance for Business Insurance, Risk & Insurance, the Chicago Tribune and Human Resource Executive, among other publications.