The Importance of Due-Diligence in Selecting an Insurance Company

Dan Piggot

Mar 9, 2010

Insurance companies have created brands that strive to inspire trust and represent stability in the market place. These organizations rely heavily on brand equity to promote their voluntary benefits programs. There is, however, much more to consider than a company’s corporate identity when deciding to do business with a particular carrier. The decision should be based on how well a company can actually implement and administer its voluntary benefits program. Every provider in the marketplace has its own inherent strengths and weaknesses. Invest the time upfront to learn about a company’s capabilities—and it will pay off later. In other words, be diligent about due diligence. 
Closely examine the following key elements offered by a carrier before making a decision to place business with the company:

• Plan Design, Benefit Features and Pricing
• Communications
• Enrollment Capabilities
• Billing and Payroll Administration
• Account Management
• Claims Processing

Plan Design, Benefit Features and Pricing

There is not one single insurance carrier in today’s market that can always produce the best plan design or the right product solution for every case. Work with companies that are willing to customize plans for the unique needs of specific employee groups. For example, some carriers offer plans for part-time employees or for employers that have a large concentration of the same occupations, such as nurses, attorneys and truckers. Also, take the time to find out if a carrier is flexible in its underwriting process. Determine whether the company is willing to lower or waive participation requirements in certain circumstances. Also, negotiate for guarantee issue policies whenever possible and or multi-year premium rate guarantees.

Enrollment Capabilities

Carriers offer several different options for enrollment, including face-to-face, telephone and online. Or, in, some cases, a combination of all three methods are used. Each option has its own merit based on the makeup of the group. For example, a face-to-face enrollment may be the best option when it is a new enrollment, which requires provide more education and counseling of employees regarding the benefits offered. Be sure to interview the enrollment company if one will be used. Find out if the counselors are compensated on a salary or commission basis; determining which compensation model will be used can have an impact on the interaction between the enroller and enrollee.

An online enrollment may be the best fit for a group that has multiple locations, which makes a face-to-face enrollment impractical. An online enrollment solution can also be used when access to employees may disrupt the company’s operation or not fit the company’s corporate culture. Request a demonstration of the enrollment system to understand the employee experience. Then get access to a test system and navigate through the site to determine how long it will take for a typical enrollment. Not all online enrollments systems are created equal. Some are definitely more user friendly than others. Some systems can be customized, while others must be used “as is,” and therefore do not always meet the needs of the client. Also, be sure to find out if there are any additional fees or a charge back to use the system. Occasionally, these added expenses could make the use on a particular system cost-prohibitive and reason to interview other vendors.

Communications Capabilities

A comprehensive awareness campaign regarding the voluntary benefits program is essential. If employees are not properly educated and informed about the specific benefits offered and the enrollment process, there will likely be confusion and employee participation will suffer. Get a timeline from the vendor that clearly outlines the awareness campaign for the program. Next, review samples of the company’s communications materials. The materials should be clear, concise, and educational—and fully demonstrate the value of the benefits to employees.

In addition, ask whether the insurance company has the resources to support benefits fairs and group meetings. These in-person sessions raise awareness of the program, help to educate employees and, most importantly, tend to raise the confidence level of employees regarding the decision making process. Also, consider sending enrollment kits and information to employees’ homes, which increases the chances that the information will be shared with others in the household, such as a spouse or domestic partner.

Billing and Payroll Administration

There is an unwritten rule when it comes to payroll deductions: Never mess with an employee’s paycheck. That is why it is vital to learn about a company’s payroll deduction and billing processes. Find out if there will be a dedicated billing coordinator assigned to an account. Determine how much information is going to be required on the billing file. Also, find out if the carrier can accommodate single source billing, which reduces administration on the part of the client. Furthermore, ask the carrier for sample file layouts of the data required to process the billing.  Additionally, ask for a sample project plan that includes an outline of the billing process to help the client visualize what to expect.

Account Management

The implementation of a voluntary benefits program is considered an enrollment process for good reason. What happens after the enrollment is just as important as the enrollment itself. While it is inevitable that there will be a few bumps in the road related to billing or claims—it is imperative to know who will be responsible to resolve these issues. Inquire if there will be a transition of the account to a service team after implementation. Then meet with the team or teams that will dedicated to the account. Usually the group includes an account manager, a billing coordinator and a claims representative. Interview these resources to determine their level of competency. Also, always get the contact information for those who will be involved on an ongoing basis with case management and the contact information for their supervisors.

Claims Processing

Yes, unfortunately there will be claims filed. Of course consumers have extremely high expectations that when they do make a claim—it will be taking care of quickly. That is why it especially important to do business with companies that have an excellent track record of paying claims in a timely and efficient manner. Take the time to visit the claims processing area to get a comprehensive understanding of how claims are filed and how long it usually takes for processing. Consider only those companies that offer a process that is straightforward. Obtain a record of the company’s turnaround times on claims. And, finally, ask the percentage of claims that are denied and the reasons for denial.

Check References

Lastly, don’t hesitate to ask carriers to provide references from current clients about their experience before deciding to do business with that company. After all, how well the program runs, is a direct reflection on your organization.  Whenever possible visit the company headquarters and assess the operation first hand. While visiting, request meetings with company executives who are in charge of the departments that are critical to the success of the program, including Marketing and Communications, Payroll and Billing, I.T. Systems, Customer Service and Claims. Get on a first name basis with these important company personnel. Remember, do more than “kick the tires” of a provider. After all, the name of the game is due-diligence when it comes to selecting a voluntary benefits insurer.

Author and Company Bio

Dan Piggot is President and CEO of Dynastar Benefits Group. He is an award-winning voluntary benefits expert. Dan’s particular areas of expertise include: strategic planning, benefits design, comprehensive needs analysis, carrier due diligence, client relationship management and product development.
Prior to founding Dynastar Financial Services, Dan held various executive leadership positions in the insurance industry, including seven years as vice president of sales for national voluntary benefits broker and four years as a regional vice president for an international insurance group. With over 20 years of insurance industry experience, he has consulted several Fortune 500 companies and large employers on employee benefit plans, and implemented voluntary benefit programs for over 90 companies with 1000 or more employees.

Dan founded Dynastar with a strong commitment to provide superior client service. The company continues to fulfill his commitment every day by finding innovative solutions that meet the needs of clients in today’s rapidly changing employee benefits landscape.

Dynastar Benefits Group specializes in the following four areas:

• Voluntary Benefits Programs
  
• Limited Medical Plans
  
• Retiree Medical Plans
  
• Benefits Communication, Implementation, and Administration
  

Dynastar offers its clients an extremely high level of expertise in employee voluntary benefits because these programs are the primary focus of its business. The company has learned the strengths and weaknesses of the carriers in this marketplace by conducting due diligence tours, including personal meetings with each company’s respective top-level management teams. It is as a result of it due-diligence, Dynastar has a better understanding of carriers’ business models, product designs, service standards, and presence in the market.