Target Advice to Minimize Risk
Few brokers today simply place coverages for clients; most offer a range of services, even acting as de facto risk managers. Many are deeply involved in their clients’ purchasing decisions.
But becoming so deeply embedded in an organization may create what courts consider a “special relationship” between client and broker — a gray area legally, which can leave brokers vulnerable to claims of negligence, breach of fiduciary duty and more.
For benefits brokers, the problem can be quite acute. The maze of labor and benefits regulations employers navigate is complex and constantly changing. The right fit saves an employer time, money and improves employee retention. The wrong fit damages morale and even leads to heavy fines for noncompliance.
With COBRA administration, for example, there are numerous notification requirements with which employers comply. If notifications aren’t sent out in accordance with regulations, it can cost employers $300 per day, per violation. If multiple employees are affected, that quickly turns into a significant fine.
Could a broker be held accountable if the systems they helped put in place worked to the detriment of the client? Past rulings signal an openness to consider the changing nature of the broker relationship.
Courts noted that a broker may assume liability when: Fees are received for consulting services in addition to the payment of premiums; the client delegates decision making to a broker; or the broker assumes additional duties by either express agreement or by “holding himself out” as having expertise in a given field.
As far back as the late ’90s, courts noted that unique situations could arise where brokers might assume duties beyond placing insurance, and would thereby be taking on additional liability risk.
These situations are no longer unique. Brokers now routinely offer advice and services beyond placing insurance, permanently altering the level of professional risk they assume.
Less Risk, More Value
The more benefit programs can be streamlined, the less chance of error, and the easier it is for employers to manage.
With multiple third-party systems, the risk lies “in keeping the systems in sync, communicating with one another, interacting with one another and having multiple contacts. It’s very time consuming and a challenge,” said Jessica Brewer, senior VP, account services, Benefitfocus.
Having a single vendor-partner also eliminates the need for brokers to vet multiple vendors and develop expertise in multiple systems.
In addition to minimizing risk, inclusive systems add value for employers. Benefit accounts with a single log-in provide a positive user experience, helping employers boost morale and retention. &