Top Reasons to NOT use a Co-Op

4 Top Reasons to NOT use a Co-Op for Insurance

With today’s ever changing Insurance market, how does a company decide whether to use a Co-op or take control yourself with an independent agent? Here are 4 top reasons to NOT hire a Co-op and maximize your dollars and benefits!

1. The long term benefits may not make up for the short term upside. Most cooperatives work because they take many small companies and put them under one big umbrella to get lower rates. This sometimes provides a nice short term price that agents can sell. However, many small groups can require very high payouts due to high risk members. Since Cooperatives can’t ‘not’ accept these small groups, they need more and more members to ‘average out the claim payouts’ to keep lower rates. In the end, most cooperatives raise rates and can’t sustain providing good benefits for a lower cost. Your plan rises and falls to the level of the high claims experience clients.
2. Cooperatives are easy to start and there is a low ‘work load’ for agents to bring on new clients. A professional agent always takes each new client and shops the market place to look for the best combination of benefits and rates. Each business has individual needs they look to provide to their employees. This takes a lot of work, knowledge and expertise to effectively shop the market and develop the best specialized company plan. Cooperatives usually offer a general ‘cookie cutter’ plan to every business in the cooperative. That way they can keep their costs low and everyone is treated to the same general benefits. Companies who really care about their employees and want them to have special employee benefits are left out.
3. Cooperatives can tend to stay with one carrier and service provider. The benefit to only being with one company are the ‘group benefits’ from the company. One or two group benefits may be given to the collective whole as a promotion but another winner of the benefits are the owners and agents. Some insurance companies reward cooperative owners and agents for their loyalty with incentive bonus trips to Hawaii and other exotic locations. Why would a cooperative agent shop around when he is rewarded for volume sales with one company exclusively? The money going into the incentive rewards comes straight out of the pockets of the insured companies. And yes, in some measure your company is paying for the agent trips and bonuses that are not transparent to you.
4. Unfortunately, once you commit you are locked into the plan. This is the proverbial “tail wagging the dog”. You lose control once you commit to a plan with other companies. Companies have a smaller voice in the process. If an insurance product is not popular to your company you are stuck because the other companies may like it. As well, billings and claims breakout experience may be harder to decipher and/or get for your company.

When looking for the best insurance plans for your company, be sure to shop around! Make sure that you find a reputable agent that will design, shop for and put in place the best plan for your company needs where you can remain in control. In the insurance industry, you truly get what you pay for. Make sure you find that special agent that will treat you and your company like family.