I had a chance recently to talk with Dave Nelson (CEO) and Bill Aspinwall (COO) of iKnack, a benefits administration company (www.iKnack.com). They provided background on benefits business opportunities for agencies generally, the application of the ASP (application service provider) concept as an administrative solution, Employease as their benefits ASP of choice, and iKnack's potential role in helping agencies provide self-service benefits administration services to their customers. Here's what I found out.
Selling and servicing commercial lines P&C policies isn't getting any easier and commission rates aren't improving. Some agencies are pursuing specialization with some success. Others are broadening the services they offer their customers, thus generating more revenue per account and strengthening the bond between agency and insured.
One of the most attractive add-ons is benefits - a perennial problem for businesses and a sources of better margin and growth opportunities for agencies. In fact some agencies report that much of their recent growth and most of their new profit comes from the benefits area. Increasingly, agencies are leading with benefits as they seek entry into a new account, and once established, through benefits secure the P&C business as well.
Traditionally agencies interested in benefits would establish a benefits department and work with the customer's Human Resources department. The agency value-add was in its ability to assemble benefits packages and provide some level of administrative help. The process did not change the way either the customer or agency did business and did not provide substantial cost savings for either.
iKnack has a better idea.
In the iKnack process, the agency provides some of its customers with Internet-based benefits administration tools, which the customer, in turn, extends (some of these tools directly) to its employees. The employees then administer their own accounts - from changing elections to consulting an on-line employee manual for vacation policy to downloading departmental forms.
Employees are happier because they have more direct control over their own benefits situation. The HR department is happier because it can pay more attention to substantive HR issues and less to administrative trivia. The employer is happier because the HR department can be smaller, or do more with the same funding. And the agency is happier because its tie to the customer/employer is significantly strengthened.
According to iKnack, an employer typically spends $1,200 a year per employee managing HR related matters. By letting the employees do much of their own HR administration tasks, the employer can reduce their HR administrative expense by 30%. And the agency can provide the solution.
iKnack and Employease
iKnack was formed by Tegner-Miller Insurance Brokers, a Santa Monica, California agency with many years of benefits experience. With the rise of the Internet, they observed the formation of a number of benefits ASPs; that is, vendors that provided benefits administration software systems through the Internet. Because the software was being provided through the Internet, employers no longer needed to install and manage the software on their own systems. And because these systems were accessible through browsers and designed for employee use, it made sense to think of benefits administration as potentially being employee self-directed. The opportunity lay in an agency being the facilitator of this new ASP-type benefits administration solution.
iKnack studied each of the benefits ASPs, concluded that the best was Employease, and established a value-added resellers arrangement with the firm. iKnack then went on to implement Employease for its agency and some of its benefits accounts. With the Employease relationship and implementation experience under its belt, iKnack could begin to offer other agencies help in providing Employease implementation help to their customers.
Appropriateness
Internet-based, self-administered benefits systems aren't appropriate for all businesses, according to iKnack. They are most useful to professional services concerns and other white-collar businesses in which all (or most) of the employees have computers and know how to use them. Prospective customers most likely have 25 to perhaps 2,500 employees. Larger employers probably already have an enterprise HR administration software solution. Smaller employers may be largely manual and ill-equipped to move to automated solutions. An ASP solution is particularly attractive for employers with multiple locations. Though the home office may provide adequate or substantial benefits administration attention, branch office employees may find themselves frustrated. Having access to self-service administrative tools through the Internet can solve the problem.
Potential services to employers
What might be part of a benefits administration solution iKnack could help an agency put together for an agency customer? iKnack identifies ten major categories:
The iKnack value proposition
Assuming an agency has some benefits background and wants to expand its benefits service offering to select customers, what help does iKnack provide? Why should an agency work with iKnack rather than Employease directly or someone like them?
iKnack has worked with Employease since late 1999 and is equipped to train agency and employers in its use. It also has experience in customizing the Employease implementations to specifically benefit both the agency and the agency's customer. And for smaller agencies without a benefits background and staff, iKnack can become a knowledgeable partner and background benefits department. As iKnack describes itself, it is a provider of human resources management, benefits administration, employee communication, and payroll solutions to small and medium-sized businesses and their employees. The iKnack employee management system, powered by Employease, is comparable to those used by Fortune 500 companies, but substantially less expensive. iKnack staffs a professional services group that customizes Employease to the specific needs of the employer. And hrKnack, a division of iKnack, combines the employee systems with professional consulting services to form a complete HR solution.
What does it cost?
As a rule of thumb, iKnack says that it normally costs $2,500 to $5,000 and 30 to 60 days to get an employer up and running on Employease. The time and cost depend on the quality of the employer's current records and ability to spend time assisting the implementation. Typically, ongoing charges are in the neighborhood $6 to $7 per employee per month.
What are the risks?
Depending on Employease brings with it all the advantages and disadvantages of ASPs generally. If an agency and its employer/customer come to depend on Employease (or any other ASP or vendor generally) and the vendor fails, that could be bad news for the employer and the agency.
According to Dave Nelson at iKnack, Employease is currently the most successful benefits ASP around. The service hosts 200,000 employees currently and expects to reach 220,000 shortly, an important milestone, since that's the point at which the vendor will become profitable.
Because the benefits ASP concept is such a good idea and advantage to everyone involved, Nelson is convinced it will be the dominant way of doing benefits administration in a few years. As he points out, the upfront cost to the employer is small and a healthy return on investment almost immediate.
Take a look To get some idea of how the standard version of Employease works, go to the vendor's Web site, www.employease.com, and check out the demo. The demo consists of a general overview and detail presentations on six major sections: applicant tracking, new hire event, employee self-service, employee access, employee life event, and manager life event. Note that each of the detail sections take several minutes to download on a dial-up line. Employease provides a rich environment that handles all elements of the HR/benefits process from the hiring process through on-going benefits administration. The HR and management group in a company using Employease has a great detail of control over and monitoring of employee interaction with the system, while at the same time allowing the employees to do a great deal of the primary administrative/clerical work themselves.
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