Are payroll providers the next threat to insurance brokers?

An interesting trend among payroll service providers threatens to usurp broker business. Here’s how to stay in the game.



Several years ago, payroll service providers operated in one arena—providing payroll and human resources support to small businesses. In this regard, they were often seen as partners with insurance producers to improve benefits administration and underwriting information.

Today, however, many payroll providers have entered the insurance market to compete directly with insurance producers. And it isn’t just the traditional “pay-as-you-go” workers’ comp insurance policies that many smaller, regional payroll providers provide.

ADP, for example, now offers workers’ compensation insurance, business owners policies (BOPs), statutory disability, commercial umbrella liability and business automotive. The company has also branched out into benefits including medical, dental, vision, group and short- and long-term disability.

Many employers are tempted away by this comprehensive set of offerings from one provider, leaving insurance brokers in the dust, says Agency Network Exchange (ANE) CEO John Tiene.

“One of the challenges independent agencies have now is competing against payroll companies selling insurance. If ADP is already processing a client’s paychecks and they make an insurance pitch, it’s easy for the client to move in that direction,” Tiene said. “So one day you’re doing pretty well with this client and the next, they’ve been taken over by ADP.”

It’s an issue Tiene has heard from several of ANE’s 40 member independent agencies. To combat the problem, ANE is offering a partnership with a payroll provider—Balance Point Payroll—which enables agents to offer the easy “pay-as-you-go” payment options for workers’ comp clients without surrendering further ground to the payroll provider.

Under terms of the agreement, Balance Point is prohibited from selling insurance or from doing business with a provider who sells insurance.

“That will help clients better manage their cash flow as well as give agents the peace of mind of utilizing a payroll provider without worry about losing their client’s business,” Tiene said.

Payroll services “pay-as-you-go” programs are actually a benefit to agents when they are utilized rather than seen as a competitor. The system automatically deducts insurance payments, which cuts down on the chance of a premium audit.

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