The State of the Insurance Industry: An Interview with Michael Lujan
If you haven’t heard of Michael Lujan, you’ll be glad you came across this article. If you have, you probably know that he’s a health insurance innovator. He has 30 years of experience working in many roles: insurance agent, underwriter, general agent, carrier sales director, marketer, and strategist.
As President of The California Association of Health Underwriters (CAHU), and Co-Founder and Chief Strategy Officer for Limelight Health, a cloud-based health insurance quoting platform, Michael has his finger on the pulse of the insurance industry.
As president of CAHU, Michael juggles many public speaking engagements. He’s had the opportunity to interview both the former and current CEOs of Zenefits, Conrad Parker and David Sacks. We were fortunate enough to catch up with him to hear his insights and advice for brokers as they face a promising, yet uncertain future.
- What do you see happening in the next 2-5 years?
Lujan: I think the insurance industry will continue to evolve and adopt technology to help automate a system weighed down by paper and manual processes.
Carriers and brokers will continue to merge to find efficiencies and economies of scale, while brokers continue to prove to be their most efficient distribution channel.
Price transparency will finally begin to help consumers make informed decisions about their healthcare and technology tools will help empower consumers.
- What other market disruptions do you see on the horizon?
Lujan: Brokers will consolidate and create networks or clusters to pool resources and share costs of technology and other resources like ACA compliance and HR.
New product concepts will be introduced as deductibles have reached their peak and consumers supplement with other plan designs or products.
The individual market will evolve and brokers will continue to serve the individual segment but online and automated due to lower compensation.
Provider reimbursement will change how doctors and hospitals are reimbursed; pay-for-performance and outcomes will help level rising premiums.
- Zenefits is an interesting company that experienced great success before getting derailed by licensing and compliance issues. What did you learn from your interview with former CEO Parker Conrad?
Lujan: Conrad’s model was flawed because he considered too much of the insurance process to be transactional and served by technology instead of people. He also did not appreciate the value of experience and insurance experts; they did not do enough to train their new brokers and cut too many corners.
That said, he also had an aggressive sales process which created 8-10 times the revenue vs. traditional agencies. Their focus was on HR and onboarding, not benefits administration, which is what many small employers really wanted and what made them successful, albeit limited.
- Should brokers (at least in the New Jersey/New York market) feel threatened by Zenefits, or ADP Total Source and PEOs? Why?
Lujan: Threatened? No. But the market is changing and any broker who is not staying aware of, and adapting to changes will be left behind. There are many companies doing the same Zenefits-like model, like Namely, Gusto, and more sprouting up each month. More than $2 billion was invested in 2015 alone to disrupt insurance and these companies will work hard to be successful and grow market share.
- Do you feel that brokers need partners in technology in order to effectively compete against Zenefits, ADP, PEOs, and others who have it?
Lujan: Yes, when they can and when it makes sense. Zenefits currently does not partner with brokers and most other firms like them won’t either.
So if your clients are interested in technology and you can leverage tech to be more efficient and automate manual processes, it makes sense.
Not everything is solved by technology. Our business is still very high-touch and personal. Tech is a complementary tool to help with the transactional parts of our business. I think traditional brokers have always known this and simply need to consider the new tools and partnerships available to them. Tech does not replace relationships and expertise.
The good news is that there are plenty of technology solutions for agents to compete with Zenefits and partners, like Balance Point Payroll who understands the right balance between people and technology.
- Now that there is new leadership at Zenefits, do you think that Zenefits is on the rise? Or have they bottomed out? What is their five year plan?
Lujan: Unlike Parker Conrad, Sacks comes from a strong background and successful track record with PayPal and sold his other startup company to Microsoft for $1.2 billion. Many brokers interpreted Conrad’s departure as failure. It’s wrong and brokers should take Sacks seriously and expect more market disruption.
- If you could have the ear of every broker in the New York, New Jersey, and Connecticut area, what advice would you give them?
Lujan: Consider how much banking and finance have changed over the past decade. That is what insurance is going through and brokers should decide to be part of the future, not the past.
Don’t deny “progress.” Consumers are actually fed up with the old ways of insurance and want something else. Show them you support modern solutions and progress.
If you buy a new technology solution, don’t sign multi-year contracts. Tech evolves too fast and you should keep your options open and be nimble.
On September 20th Michael sat down with Zenefit’s current CEO David Sacks at SVAHU, the Silicon Valley chapter of NAHU. You can read about it here. We will be following up with Michael soon to shed more light on what he learned.
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