DIVERSIFICATION OR SPECIALIZATION?

Rough Notes, Dec 2004 by Strazewski, Len

This Omaha agency says "yes" to both and offers clients a menu of consulting services

Every agency or brokerage looking forward to growth has to eventually decide whether to diversify or specialize, but the answer doesn't have to be one or the other. The 60year-old SilverStone Group, Inc., in Omaha, Nebraska, has done both, with a portfolio of special business and personal client services that extend well beyond traditional property/casualty insurance and employee benefits.

In addition to those traditional products and services, the firm also provides retirement plan and actuarial consulting, investment counseling, human resource management consulting, and personal financial management consulting.

By concentrating these services on the diverse set of managementrelated needs presented by their clients, principals say they have built a base of trust and confidence that has led to increased business and cross-selling opportunities.

SilverStone's diversification of services over time has led to expansion of client contact, explains Mark Weber, principal and head of the firm's private client services, which includes executive personal lines and financial consulting. "When you sell property/casualty insurance exclusively, you are most likely to build a relationship with a single individual in the organization who has responsibility for risk management," he explains. "But when you also provide employee benefits, retirement and investment, and human resource consulting services as we do, you develop relationships with employee benefits managers, human resource executives and chief financial officers, if not the chief executive officers. This gives every aspect of the agency an opportunity to demonstrate what they can do for the client. Nearly 25% of our new business referrals come from inside the organization," he says.

SilverStone has been building its diversification strategy almost since it was established. Founded in 1945 as a commercial property/casualty agency, the firm became a pioneer in providing loss control and risk management services. In 1959 the agency began providing employee benefits services, merging with an employee benefits specialty agency in 1994.

Benefits are big business

Today the firm has 160 employees and offices in Council Bluffs and Bettendorf, Iowa, and refers to itself as "an independent consulting, actuarial and insurance brokerage firm." Employee benefits accounts for about 60% of the firm's revenue and is the cornerstone of referrals to other divisions of the agency, including consulting services that are related to the employee benefits concentration.

Employee benefits have evolved to become a critical cost priority for many SilverStone clients, notes principal Grant Matthies, a 15-year veteran of the life, health and benefits administration field. To help clients deal with their employee benefits needs, the agency added a varied group of services focused on benefits management, including benefit plan analysis and evaluation, administration support, and employee communications. The agency also helps clients evaluate alternative funding mechanisms to replace fully insured health plans, including self-insurance, minimum premium plans and various retention accounting structures.

"Health care costs continue to escalate, and employers are looking for more and better information to help them manage those costs," Matthies explains. "The days of simple cost shifting-raising déductibles, coinsurance and employee contributions-arc pretty much gone and the techniques played out. As a result, health care issues have gotten the attention of a broad range of executives, beyond the level of employee benefit managers and human resource managers," he says. "Chief financial officers and, in some cases, chief executive officers are getting directly involved with managing these growing costs."

These executives are demanding more from their agents, he says, and a firm that can supply the resources they want gains a big marketing edge. "Employers are turning to sophisticated data analysis to identify the adverse trends that contribute to their costs and build some awareness within their organizations," Matthies says.

SilverStone prepares and helps evaluate quarterly, semiannual and annual plan experience reports, assists with carrier or health plan provider billing issues, and reviews administrative services agreements and Summary Plan Descriptions (SPDs), among other services.

Managing plan costs

Matthies says the firm helps clients review their medical claims trend data and explore plan options that target the key offenders. Prescription drug costs, for example, are a key component of health care cost inflation, he says, leading employers to restructure pharmaceutical benefits into three or more tiers of co-payments. "Most of our clients or their insurers are now using the services of Pharmacy Benefit Managers (PBMs) to manage their tiered plans and help reduce their costs," he says. Welliiess programs, including health screenings, smoking cessation and weight reduction programs, are also gaining popularity among employers who hope to reduce their costs at the source, Matthies notes.