CHANGING INSURANCE POST-ACQUISITION
When it comes to changing insurance, it is very different when you have bought a company versus started one. When you start a company, you grow together and you hear from people within your company, or your spouse, what you need and when you need it. You find out when it is important to add health insurance, disability insurance, key man insurance, buy-sell agreements and insurance, retirement plans, and on and on and on, and when you have the money to do it.
When you buy a company, you don't know the history! You can do a lot of due diligence and figure out the right coverages and where you might save money or consolidate brokers, but it is often hard to figure out what is important to your people, especially your key people, and their families. The benefits package has been assembled over decades and with different brokers because of different requests and needs. You may be the first to do a comprehensive review! Your key people might not even know what is important to them: It is possible that you may only find out that you made a mistake with you benefits when your key employee's wife calls you directly to complain about the increasing premiums or loss of life insurance that she discovered from getting a notice in the mail!
Despite the potential negatives associated with change, there are definitely going to be things that you should change! You are buying a company from someone who “needs” to sell and is retiring and you are young, without a spouse (maybe), and without a family (maybe), or at the very least you simply have different concerns than the previous owner.
When do you change it and how do you decide what to change first?
This is a different challenge for a company with 100+ people because a lot of the benefits will already be in place and your goal will be to optimize them (for the company and yourself as the owner) and bring efficiency where it is lacking. If the company you are buying has less than 50 employees, or maybe even less than 20, every little change is important to your bottom line and also to your employees and the last thing you want is for changes in the benefits package to distract from the work that needs to be done or frustrate otherwise happy employees.
The answer is different for different companies, but would love feedback from the experience of others. Finally, a couple of other comments about important traits as I have found helpful for in helping searchers pick new brokers. Would love to know if there are other things that have made brokers or advisers more helpful than expected.
- It important to have a broker that knows businesses with similar employee counts and median salary levels. It isn’t terribly hard to change brokers once you outgrow them, which you will likely do at some point.
- You want a broker/advisor that can help you weigh the money decisions you make with regards to benefits and retirement plans; and has some understanding of both.
- Last but not least, you want a broker/advisor that is owner-centric, that can help you think through the risks specific to you as the owner and your key people and help set up a plan that serves both you and the key people as well as the general employee population. Keeping in mind that initially the owner's primary concern might be not losing any key employees!