Meeting Member Needs
By Jodie Slaughter, President
Originally Published in Executive Update
By providing insurance coverage that meets important member needs, an association can create a good membership retention and recruitment tool and generate non-dues income. The keys are examining your options and linking the benefit to your organization's mission.
To drive profitable business, insurance companies focus on minimizing the risk they assume. Associations are a natural solution, because the commonalities in member bases can be used to more accurately assess risk and formulate predictable patterns.
Engineers, for example, tend to have less risky lives than many other professionals. As a result, engineers who participate in life insurance trusts are a safer bet for insurance companies than people in some other professions. Engineering society members can benefit from this - thanks to their association's programs - through lower rates and sometimes even partial premium rebates.
Passing these unique lines and discounts along to members becomes a tangible benefit of membership and, in many cases, can support member retention. Insurance companies, agencies, and brokers also look to associations for marketing efficiencies. Associations are known for updated, accurate membership lists, and they add credibility to marketing messages that otherwise would be lost in the mass of solicitations we all receive daily. Insurance providers learned long ago to maximize these channels to increase member response.
Developing the right insurance program for your association requires priority setting. What is most important to your association - member service? Non-dues revenue? Unique products? The answers to such questions - as well as the level to which potential providers can seamlessly integrate with your existing services, mission, and staff resources - will equip you to address program design choices and vendor selection.
Many options exist in association insurance program management, and it pays to look into them all. Each has distinct advantages and potential disadvantages. Some associations employ a combination of solutions to meet the full range of members' needs. While national third-party administrators (TPAs) have historically provided a large percentage of association insurance programs, many associations choose to work directly with insurance companies, local or online brokers, or even become brokers themselves.
Regardless of program structure, at the top of every association's list should be ensuring a tight fit of product, marketing message, and audience. Offering protection that meets real, perhaps unique needs of members is a true member service, particularly if such coverage is not readily available elsewhere. Couple that with a marketing message that talks to this need specifically, and you'll drive member participation. Associations also should look for a good culture match among their provider, organization, and members. Groups that have tailored insurance lines to fit precisely their members' needs and have integrated competitive pricing and effective marketing have attained very high participation levels.
Here are just a few options to consider when putting together a new insurance partnership:
Option 1: Work with an agency
When the Screenprinting and Graphic Imaging Association (SGIA) was approached by The Hartford for small-business coverage, the organization liked the product but decided it would be best served by working through IAS Risk Management, an agency with which the association has worked for more than 20 years. While SGIA's income was reduced by IAS's involvement, the benefits to the association far outweighed the costs.
According to SGIA Vice President Sondra Fry Benoudiz, the key benefits to working with a firm such as IAS are member support, flexibility, and staffing considerations. "IAS knows and understands our members and will go to bat for them and for us, if needed, " says Benoudiz.
This familiarity was key for SGIA, which wanted a positive member experience from start to finish. Also, by working with an independent agent, SGIA is protected from potential market swings. As Benoudiz explains, "If The Hartford decides it doesn't want to work with us anymore, IAS will find us another provider."
Finally, the reduction in staff time spent administering the plan allows SGIA to remain focused on core competencies. While SGIA could have made more money working directly with The Hartford or another insurance company, by having an agency such as IAS on its side, the association stays more focused on its other association priorities.
Option 2: Take it in-house
The National Rural Electric Cooperative Association (NRECA) has taken a different approach. With 350-plus employees in its Retirement, Safety, and Insurance Department, NRECA runs its own in-house agency and insurance organization. "Keeping it in the family" works for NRECA members, according to Ron Longhurst, director of underwriting.
"Since our members tend to be in rural areas with an average of 50 to 60 employees, they find value in using NRECA as a single-source provider for health and life products, retirement planning, even mutual funds," Longhurst says. "We've worked hard to ensure they think of us first."
As a result, 80 percent of NRECA members use the association's health insurance - with annual premiums totaling almost $300 million - and 95 percent take advantage of the life insurance. This undertaking requires a significant investment, but with 40 years of experience in the association insurance business, NRECA was able to aptly assess the potential benefits. Given these participation rates, NRECA's membership can buy insurance programs at lower rates because NRECA assumes the costs of administration, processing, and risk-taking in certain product lines on a not-for-profit basis.
Option 3: Use industry clout
TPAs can help associations accomplish their goals by using industry clout to identify and negotiate specialized programs from insurance carriers. In addition, third-party administrators typically take charge of marketing, member service, and all administration, freeing associations from extensive staff commitments.
The American Physical Therapy Association's (APTA) comprehensive insurance program includes more than one TPA, and APTA uses them to help negotiate programs to meet specific member needs. The association discovered that members needed options that consider the fact that they might work limited schedules at different career points to fulfill other obligations, including child or elder care. As a result, APTA charged TPA Seabury and Smith with finding a disability plan under which members who worked only 20 hours per week would be eligible to receive income replacement, as opposed to the industry norms of 30 to 35 hours.
Similarly, the TPA for APTA's accident insurance plan, Healthcare Providers Service Organization, negotiated unique coverage with provisions for the loss of the thumb and forefinger on one hand. The unusual coverage is critical to members because such a loss would significantly affect their ability to pursue their chosen profession. By working with TPAs, APTA has been able to customize the insurance coverage it offers, thereby providing concrete reasons for members to choose the association's plans over others available in the general marketplace. This degree of personalization has enabled strong insurance program participation, which means everyone wins - the member, association, TPA, and insurance companies.
Tie the Program to the Mission
How associations create these products, how they're sold to members, and who takes the risk and handles administration are all variables. While the answers can vary considerably depending on the structure, an association should be sure that any insurance program supports and strengthens its primary mission.
The Independent Computer Consultants Association (ICCA) has an insurance program that helps advance the association's mission. It works with MIMS International, an administrator and broker that helps ensure all ICCA goals are met, not just the goal of high participation in the organization's insurance program.
The ICCA program supports central association goals by enabling members to secure profitable assignments in their industry and by maintaining and increasing the ICCA membership base. According to Executive Director Joyce Burkard, the goal of ICCA's program "is to help members on the business end because they have the technology they need. Their clients demand they have insurance, so they can't sign contracts, work, or get paid without E&O [Errors and Omissions] coverage. Our insurance program gives them what they need to work and what we need to attract and retain members."
Membership must be continued to renew the insurance, so MIMS and ICCA work closely together on renewal dates to make sure members are current and keep the coverage they need. The result is a strong insurance client base and growing membership.
The Association Benefit
Associations who function as agencies can typically receive a higher percentage of premiums than those working through local agencies, brokers, or TPAs because they are permitted by law to receive commissions. Other compensation arrangements typically are handled in the form of marketing fees. These can be advertising and list buying arrangements, license fees for use of the name and logo, or sometimes a flat fee for every member inquiry. Almost any association can structure these arrangements, but for a national association to function as an agency means it must employ staff who are licensed in all 50 states. Merely getting those licenses is a considerable undertaking, let alone supporting the programs, but it can be worth it to some groups.
According to Urban Land Institute Senior Vice President of Strategic Development Ann Oliveri, the best member programs solve the problems that keep members up at night. This is particularly true in the insurance arena, where associations that offer programs specifically tied to their missions have a considerable advantage at membership renewal time. Indeed, by meeting these critical member needs, the association creates another reason to keep members and can earn a considerable stream of non-dues income as well.