Group insurance can be lucrative, but advisors tempted by volume and commissions should be prepared to provide a high level of service if they expect to succeed.

“Group insurance is a different creature,” says Sharon Gribben, an advisor at Gribben Financial Group Inc. , a Toronto-based family firm specializing in group business.

The prospect of selling a group policy to a company with 500 employees is attractive, but small and medium-sized professional firms can be fruitful, too. A company with a dozen employees may generate only $5,000 in premiums and a $500 trailer, but advisors who work in the right market can make the economics work.

For example, commissions from a few small businesses such as dental offices or accounting practices add up. Senior employees also need individual health and life insurance; perhaps, too, the firm can use key-person insurance.

“Group insurance in any form is a nice long-term paycheque for the [advisor’s] company,” says Tracy Broeze, a financial planner with Cumming and Cumming Wealth Management Inc. in Oakville, Ont. “But you’re also getting your foot in the door with all the top executives and tying yourself even further to the business owner.”

Mark Coutts, an advisor with Toronto-based Benchmark Benefits Solutions Inc. , which specializes in group benefits, agrees. Offering group insurance to a small company can lead to more business through employees’ individual insurance and investment needs, he says.

“Each employee may have individual disability, life, critical illness and long-term care insurance,” says Coutts, who also sells individual insurance and investment products for Sun Life Financial Inc. “And they may have investment accounts in excess of $1 million.”

Both Broeze and Coutts say their practices experienced a natural evolution. They started by offering group insurance to their individual clients who owned businesses as a way to offer full service.

Growing this business, however, is not without its challenges. Large companies on complex plans require a lot of your time if service levels are to be maintained. Questions from employees and managers about coverage and benefits can come by the dozens.

“It took me three years to figure it out,” says Gribben. “A new advi-sor might have to search around for 30 minutes to find the answer to the simplest of questions. For individual advisors, the service level can be a challenge to start.”

A company with several hundred employees, some of whom work abroad occasionally, poses insurance challenges for the benefits provider. Even simple but common questions about issues such as maternity leave and how it affects benefits and premiums will require an investment of time that will be taxing at first.

The group products landscape is dominated by Great-West Lifeco Inc., Manulife Financial Inc. and Sun Life. Other firms that aggressively pursue larger accounts include Standard Life Canada, National Life Assurance Co. and RBC Life Insurance Co. Insurers that compete for medium-sized plans include Empire Life Insurance Co. and Blue Cross Canada.

Compensation — or the “crown scale,” as it’s called — on group deals from the major manufacturers is anywhere from 3% to 10% of annual premiums, depending on the size of the client company, the scope of the plan and the number of employees.

For advisors, prospecting for group insurance business is tough for a number of reasons. Most businesses already have a group plan, so advisors will have to beat out a competitor. Businesses looking to change plans will review several bids. The best way to get into a position in which you can make your pitch is to know someone who can get you in front of the human resources department.

“There are so many people making those calls,” says Broeze. “Trying to get that business is attractive because it’s a nice, steady income. But it’s hard.”

Advisors familiar with the group scene caution that the less experienced can get mired in a policy-pricing game that has each manufacturer competing for new business with low premium rates to start. The up-front commission can be tempting, but it is important to remember that, unlike individual life, group life must be renewed every year, and that requires some finesse as well as product and manufacturer knowledge.

“For insurers, it’s a hugely competitive area,” says Broeze. “They’ll evaluate companies on claims experience and the number of employees. You’ll get competitive quotes, which is good, but the premiums go up substantially in the next year.”

@page_break@That’s why group sales generally require a deeper knowledge of the insurance industry than individual insurance sales. “And, of course, the higher your skill set, the more valuable you become to the employers,” Coutts says.

The more you know about manufacturers, pricing practices and what it costs to service companies, the better. For example, it’s important to understand how just a few claims may affect premium pricing after the first year.

Understanding your client and the demographics of the workforce will help, too. Plans tend to be built from the ground up, starting with basic life and health options, but after that the variables can multiply. You’ll need to match needs with options.

Different companies will have different needs, depending on the makeup of the employee population. Coutts describes a large retail client in Toronto with young employees: “Young people don’t need orthodontics for their children,” he says. “They’d rather have money in hand to cover naturopathy.”

In contrast, employers in blue-collar industries are seeing more benefits in critical illness as part of the group plan, Coutts says.

So, how do you get started in the group sales side of the insurance business? Any advisor in the business long enough will eventually get the opportunity to take on a group plan, perhaps for a client who owns a business. That first group plan may not be profitable, Coutts says, but it may pave the way to more business.

Gribben suggests speaking with an advisor who has experience in group sales. He or she may agree to work with you and share the commission on a group plan with you to start. “For me, that would be a win/win situation,” Gribben says, “because the other advisor gets paid, and I save on marketing.” IE