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A significant number of insurance agents believe several myths and

misconceptions about the selling and managing of large commercial accounts.

As a result, middle-market agents tend to avoid large accounts, and those

clients are often underserved and left at greater risk. The purpose of this

paper is to:

wIlluminate the myths and misconceptions of large commercial insurance

accounts,

wIdentify the risks and lost opportunities arising from these misconceptions,

and

wIllustrate strategies for middle-market agents to compete and win in this

arena.

(Note: For the purposes of this paper, large accounts are defined as either

generating a minimum of $500,000 in Workers’ Compensation premium, or

employing more than 500 employees.)

The Myths

We have asked the following question of thousands of agents from across

the country; “Why don’t you go upstream and sell to larger accounts.” With

few exceptions, responses are strikingly similar. They include:

w“Large accounts have experienced talent on their payroll, so they already

have their risk management and insurance programs effectively managed;

w“We can’t compete with the resources of the “big-brand” agencies; or

w“We don’t have a value proposition that will resonate with large

accounts.”

Admittedly, competing against the largest agencies in the country can

be intimidating. Especially, if middle-market agents are not aware of the

vulnerabilities of large agencies, or don’t have a powerful value proposition to

bring to the table. It’s long past time to set aside mistaken beliefs, and either

ramp up your current commitment to large accounts, or get into this arena

for the first time.

The first step is to dispense with the notion that all is well with large accounts.

Frequently, decision makers at large accounts have been charged with multi-

million dollar responsibilities, but have not been gifted the training necessary

to make effective ones. It is predictable to find a decision maker who has

been overwhelmed with greater complexity, increased risk and probability of

adverse financial outcomes, and lack the capabilities to address them. Risks

are changing and growing at an accelerated pace, and it is difficult to keep up.

Especially, if risk management and insurance is not the only responsibility of

the person or people in charge.

Incumbent large account agents often exacerbate the challenges faced by

their clients. We are all aware of the high retention ratios in our profession.

No different than smaller accounts, there is over a 90% likelihood that large

accounts will stay with their current agent at renewal. Incumbent agents are

well aware that the odds are in their favor to retain the account, so they tend

to avoid “rocking the boat.”

Go Big, or Go Home…Exploit Sales Opportunities in the Large Account ArenaBy Frank Pennachio and Susan Toussaint | Partners | Oceanus Partners

16540 Pointe Village Drive, Suite 206 | Lutz, FL 33558 | 888-496-1117 | www.oceanuspartners.com | ©2015 Oceanus Partners. All Rights Reserved.

Go Big, or Go Home…Exploit Sales Opportunities in the Large Account Arena

Page 2

For example, let’s assume a large workers’ compensation account has

been renewed by the agent year after year without any appreciable

recommendations or changes. Then, the agent is approached by an actuary

at an association function. The actuary points out that their services would

assist the agent’s client to make better informed decisions regarding “loss

picks,” retention or deductible levels, collateral, cash flow and a host of other

critical issues. Instead of welcoming the recommendation, the agent feels

uncomfortable and fearful.

The thoughts racing through the agents mind include:

wWhat do I say if my client asks why I have not previously recommended

an actuarial analysis;

wWhat if I am asked analytical questions that I can’t answer;

wWhy would I want to risk losing this account by introducing something

new, because the account will likely renew, if I don’t.

So, the account renews without much fanfare. But, the client would likely

have been better served with an actuarial assessment. A heightened analytical

approach would likely have precipitated the following risk reduction:

wGreater insight and negotiation leverage arising from an independent

calculation of the “loss pick;”

wRevised or confident affirmation of risk retention and deductible levels;

wEnhanced negotiation leverage to reduce the cost and limitations of

collateral;

wEnhanced cash flow projections resulting in fewer disruptions in

operations; and

wImproved risk management processes and fewer claims due to an

examination of Loss Development Factors.

Exploit Misaligned Incentives

High retention ratios are a usually a boon to incumbent agents, but

vulnerabilities emerge as incumbents are motivated to “play it safe,” and not

to “rock the boat.” Incumbents tend to get complacent, and the status-quo

is their friend. This dynamic creates a huge opening for the middle-market

agent who is prepared to disrupt the current state.

Long standing business relationships create additional weaknesses for

incumbent agents, of which large account agents are not immune. The

process of changing insurance companies or professional service providers,

such as third party claims administration, managed care, and loss control, is

a costly and time consuming endeavor. Even though it is not advisable to

frequently change these relationships, usually it takes a competitive agent to

commence a deep-dive assessment of whether or not these providers are

performing at a high level.

In addition, it is only natural for agents and their team to become cozy and

comfortable with their carrier and service provider cohorts who work with

them to service the account. Usually, many meetings and dinners are shared

among the parties. This coziness, which can bring many benefits, can make

it uncomfortable for agents to challenge an erosion in performance or an

increase or restructuring of fees.

Let’s assume several years have passed since the managed care organization

changed their cost-containment service fees for a large workers

compensation account. The agent was told by the service provider that

their new pricing structure was “standard,” and in alignment with their

competitors. The change was accepted by the agent and the client without

any serious examination or concern.

Years later, the agent reads an article that prompts some anxiety about the

managed care company’s fee structure. Perhaps, the agent did not perform

enough due diligence or push back hard enough at the time of the change

in the fee arrangement. Or, it is possible, the agent’s remuneration may have

been increased due to the new fee structure, so a misaligned incentive was

created between the agent and their client. All parties, for different reasons,

got along by going along.

Now, the incumbent agent is caught in that uncomfortable situation where

approaching the client with this discovery may put the account at risk. Or, by

doing so, the agent’s personal income may take a hit. Again, agents tend to

opt for not “rocking the boat.” As a result, the agent retains the account, and

the client is left paying unnecessarily excessive fees for eroding performance.

No one had stepped forward to disrupt the status-quo.

Opportunities for Benefit Agents

Similar circumstances arise from large group health accounts, as well. For

the purposes of this paper, large group health is defined as a company with

more than 500 employees. This definition could change downward over

time due to a number of changing circumstances in the health insurance

and data analytics arenas.

There has been a dramatic reduction in the cost of health care data

analytical services over the last 5 or 6 years. Again, many incumbent agents

have not kept up. Many are not aware that analytical services, due to

their cost, were previously only available to firms of greater than 10,000

employees. However, due to the reduction in the cost of data storage, and

computer processing power, companies as small of 500 employees can

now access services that were cost prohibitive a handful of years ago.

It is now cost effective for companies, with as few as 500 or more

employees, to identify up to 10% of their medical spend that is lost because

of waste, abuse and fraud. Identification of these lost dollars, through an

electronic process, is the first step to empowering the client to recover

High retention ratios are usually a boon to incumbent agents, but vulnerabilities emerge as incumbents are motivated to “play it safe,” and not to “rock the boat.”

16540 Pointe Village Drive, Suite 206 | Lutz, FL 33558 | 888-496-1117 | www.oceanuspartners.com | ©2015 Oceanus Partners. All Rights Reserved.

Go Big, or Go Home…Exploit Sales Opportunities in the Large Account Arena

Page 3

money already spent, and prevent future, unnecessary health plan costs.

A 5% to 10% recovery may not seem to be a large enough number to

address. But, those relatively small percentage reductions in the medical

spend of a 500 participant health plan equals $250,000 to $500,000 in

savings. You can do the multiples for larger employers.

In addition, not only are substantial dollars being lost and wasted, but

lacking these processes, the fiduciaries of the plan are at significant

risk. Fiduciaries of the health plan are required to behave and act as a

“prudent person” in their management of the plan. Although, “prudent”

is not clearly defined in the law, it is not likely “prudent” to allow an

unnecessary waste of money of that magnitude. What was “prudent”

behavior 5 or 6 years ago, is not necessarily “prudent” today, because of

the emergence of new technologies and methods.

It is no surprise, and it’s understandable, that the incumbent agent will be

hesitant, if not too embarrassed, to introduce the emergence of these

services for all of the reasons already mentioned in this paper. So, once

again the employer and employees suffer unnecessarily, due to the myths

and misconceptions in the large account arena. Millions upon millions of

dollars can be redeployed to a greater good, when middle-market agents

step into the mix.

It’s About Belief and Gumption

Middle-market agents are correct when they assert that “big brand”

national or regional agencies carry clout by their name alone. And, yes

talented and experienced people with capabilities and resources work for

these agencies. However, their reliance on the advantages of their name,

reputation and incumbent status, exposes them on multiple fronts. As

you know, incumbency has its advantages. But, incumbency also creates

numerous weaknesses and risks that can be exploited by the committed

and prepared middle-market agent.

It is long past time for middle-market agents to dispel the myths and

misconceptions of the large account space. Not only is the space rife

with opportunity, but employers and their employees continue to face

unnecessary risks and waste of resources arising out of the status-quo.

Training, resources, and capabilities are readily available to assist you

to get up to speed to compete. But, the first step is to believe the

marketplace is ripe for you to enter, and employers will be better served

if you get prepared and go after large accounts.

About the Authors

Frank Pennachio, Partner

Frank Pennachio has more than 30 years of

experience in the insurance industry as an agency

owner and as a sales and marketing consultant to

independent insurance agents. He has consulted with

agency owners and trained more than 1,000 agents

in the past decade, encouraging them to develop

their expertise in all areas of protecting an employer’s

workforce.

Frank is an accomplished speaker, presenting at national conferences and

seminars to agents, employers and other insurance professionals. In addition,

he frequently writes articles on Self-funded Group Health, Workers’

Compensation, Sales & Selling, and Lead Generation for industry publications

including American Agent & Broker, Risk and Insurance, Professional Insurance

Agent, HR Magazine and Insurance Journal. He is recognized as an expert in

the Workers’ Compensation community.

Susan Toussaint, Partner

Susan Toussaint has been professionally involved in

various aspects of the insurance industry for more than

a decade. Her expertise is in developing repeatable

processes designed to improve an agency’s plan for

attracting, acquiring and retaining profitable business.

Susan has held leadership, sales and operations

positions with Florida’s largest health care system,

where she worked with employers to develop

occupational health and wellness initiatives and improve their injury

management processes. She has also been responsible for leading

multidimensional employer-focused sales teams. In addition, she frequently

writes articles on Marketing, Getting in the Door strategies, Sales & Selling, and

Client Retention for publications such as American Agent & Broker, Professional

Insurance Agent and Property Casualty 360°.

About Oceanus Partners

Oceanus Partners is a consulting and training organization for insurance industry professionals. We believe our clients strive toward two goals—

sustainable growth and profitability. Using a collaborative approach, we lead clients through a process of developing a strategic plan for attracting,

acquiring and retaining profitable business while at the same time assuring that their people, processes and technology can support the initiatives

necessary to win in the marketplace.

To learn more about Oceanus Partners, engagement opportunities and our complimentary assessment, visit www.oceanuspartners.com or

call 888-496-1117 ext 2.