Opinion Column

Don’t Discount The Value of An Agent, They Discount Your Insurance

Insurance agents have made for popular punching bags in recent weeks. TIME magazine posited that agents may be the first victims of health reform. And in a KHN column last week, Jonathan Cohn took a gratuitous shot at insurance brokers, calling the carriers that employ them “notoriously inefficient.”

But the supposed demise of the insurance agent has been greatly exaggerated.

Millions of individuals and small businesses depend on agents to help them find policies that suit their needs and budget. And with the new health reform law set to make the insurance market even more complicated, consumers will need the expert advice of agents and brokers more than ever.

Professional agents and brokers are trained specifically to help individuals and businesses choose plans that are right for them. They must complete state-mandated courses and pass state licensing exams in order to become licensed.

Most states also require agents and brokers to take continuing education courses to keep their licenses.

But agents do more than just sell policies. Many function as virtual human resources departments for small businesses.

As the Congressional Budget Office put it, agents and brokers often “handle the responsibilities that larger firms generally delegate to their human resources departments — such as finding plans and negotiating premiums, providing information about the selected plans, and processing enrollees.” Small employers rely on agents to help their employees with claims problems, too.

Without the assistance of an insurance agent or broker, many small businesses would spend more on coverage for their employees than necessary.

Individuals and businesses appreciate the high level of service that brokers provide. In a recent survey, IBM found that three-quarters of consumers were very satisfied with their agents’ work and remained committed to working with them. Over half of consumers cited personalized service as the most important thing their agent provided.

Critics of agents claim that they force insurers to spend money on administration that should instead be spent on medical care.

But the facts suggest that worries about administrative costs are over-blown – if not downright incorrect.

According to the Centers for Medicare and Medicaid Services, 86 percent of premium dollars are already spent on medical expenses.

Further, a 2008 RAND Corporation study of California’s insurance market concluded that “administrative costs and profits are not driving premium growth.”

Much of the spending classified as “administrative” actually helps fund fraud-prevention and wellness programs. Such initiatives help keep premium costs down for individuals and businesses.

The new health reform law aims to lower health costs for consumers. Agents have decades of experience doing exactly that for their customers. It’s no wonder that the National Association of Insurance Commissioners has explicitly stated that health reform must “protect the indispensable role that licensed insurance professionals play in serving consumers.”

Categories: Cost and Quality, Insurance, The Health Law