Wholesale markets are invaluable – treat them as your business partners.
As a 20-year independent agency veteran and a General Manager – Agency Development at Superior Access, most agents will need to access markets at some point in their careers to satisfy client needs.
Limit the agency Wholesaler trial and error by researching the E&S edition of Insurance Journal to help narrow the search.
As standard markets continue into the E&S world; the true wholesaler will become less important. While quality MGA’s and wholesale market aggregators will thrive to service the small independent agents, traditional wholesale brokers will see less and less business.
There is a fundamental market shift happening and this will continue. The fact is, the admitted carriers who are writing non-standard business are making money. As a result — all carriers (Standards and E&S) are seeing this as a way to manage expenses more carefully. Wholesale markets going to retail agents and retail carriers going direct to customers…and why not — when they each save 5% to 15% or more.
The cost of a wholesaler distribution model can very expensive and so much so, that some E&S markets have already started to change. Yes — Lexington (Charits) made this there operating model for 30 years; but some traditional non-admitted markets now have a “select” retail partner network and still others have initiated a direct marketing department. The new E&S laws will only open these doors wider.
The reality is – the smaller agents will eventually find an ‘agency’ contract carrier to support them, and thus – that special wholesaler will be forgotten. As this happens – the wholesaler will be relegated to the old days – of writing the worst of the worst business. And while that is probably the right spot for E&S business, there is a problem as to the longevity.
In years past, a wholesaler would write a ‘sub-standard’ risk for about 3-4 years…but consider this:
A business renews there insurance program and buys E&S policy which doubles it’s insurance costs (because of a ‘bad’ claim year); usually, they will manage the higher expense until they leave the ‘non-admitted’ market. However — the admitted carriers (who used to wait 3-4 years for the account) are now getting on risk a year later. Smart move for the admitted carrier – they are now getting maximum debit on an account, and they look like hero’s to the client! The beauty for them, making there value proposition come true, telling the client — if you work with us on managing your claims, we’ll help reduce your insurance costs. Nice spin and most business owners who just had a ‘bad’ claim, will listen and act positively on that. The admitted carrier rides the rate down to what they would usually charge in that original 3-4 year time frame.
The other issue in this economy — most business owners won’t accept a 2x cost increase and they will go out of business.
Either scenario means a bad to worse retention for wholesaler and E&S markets, so attrition of the business will continue.
Also – the insurance market cycles traditionally driven by CAT events will still happen, but not to the extremes we’ve historically seen. Certainly, when the market does change, it won’t be for any extended period of time.
Technology is the final glitch in the wholesaler model — information tech will only improve and an effective technology platform works (look at GEICO or Chartis small biz WC), the cost much less to administer. Tell me why an E&S carrier would not enhance there effectiveness to write more business, direct and on-line, to put another 5% to 10% (the intermediary commission) in to there income?
The internet, admitted markets and a declining economy have pushed many wholesalers to the brink (Swett, Colemont, etc). The fact is, unless the E&S carriers adapt with there wholesale partners, they will continue to be stressed.
Times have changed and may not change back- although this IJ article is warm and comforting to wholesalers; it is far from the truth of what is happening.
Wholesalers need to modernize and build out there services or they will become extinct.
You guys could be partly correct. I think:
1.) The insurance carrier will allow the MGA or wholesaleBroker to grow to a certain point before acquiring it (or having it’s partner MGA acquire it).
2.) The wholesale broker is aware that it runs the risk of only being used for x time (after which the Retail Agent will prefer direct access). The wholesale broker makes money through other methods as well.
3.) The wholesale broker has a separate general agency which does all the direct selling (as opposed to strictly selling to brokers/retail agents), which I fear could be used to take the broker/retail agent’s clientele.
4.) The MGA also has access to the independent agents clientele so we’re screwed either way…
5.) The MGA charges an ugly start fee or/and monthly fee or/and a really ugly exit fee (up to 30% of your book in some cases).
6.) The most logical would be a wholesale broker to start, so aggregators, clusters/netoworks, are just advertising with greater force.
Wholesale markets are invaluable – treat them as your business partners.
As a 20-year independent agency veteran and a General Manager – Agency Development at Superior Access, most agents will need to access markets at some point in their careers to satisfy client needs.
Limit the agency Wholesaler trial and error by researching the E&S edition of Insurance Journal to help narrow the search.
As standard markets continue into the E&S world; the true wholesaler will become less important. While quality MGA’s and wholesale market aggregators will thrive to service the small independent agents, traditional wholesale brokers will see less and less business.
There is a fundamental market shift happening and this will continue. The fact is, the admitted carriers who are writing non-standard business are making money. As a result — all carriers (Standards and E&S) are seeing this as a way to manage expenses more carefully. Wholesale markets going to retail agents and retail carriers going direct to customers…and why not — when they each save 5% to 15% or more.
The cost of a wholesaler distribution model can very expensive and so much so, that some E&S markets have already started to change. Yes — Lexington (Charits) made this there operating model for 30 years; but some traditional non-admitted markets now have a “select” retail partner network and still others have initiated a direct marketing department. The new E&S laws will only open these doors wider.
The reality is – the smaller agents will eventually find an ‘agency’ contract carrier to support them, and thus – that special wholesaler will be forgotten. As this happens – the wholesaler will be relegated to the old days – of writing the worst of the worst business. And while that is probably the right spot for E&S business, there is a problem as to the longevity.
In years past, a wholesaler would write a ‘sub-standard’ risk for about 3-4 years…but consider this:
A business renews there insurance program and buys E&S policy which doubles it’s insurance costs (because of a ‘bad’ claim year); usually, they will manage the higher expense until they leave the ‘non-admitted’ market. However — the admitted carriers (who used to wait 3-4 years for the account) are now getting on risk a year later. Smart move for the admitted carrier – they are now getting maximum debit on an account, and they look like hero’s to the client! The beauty for them, making there value proposition come true, telling the client — if you work with us on managing your claims, we’ll help reduce your insurance costs. Nice spin and most business owners who just had a ‘bad’ claim, will listen and act positively on that. The admitted carrier rides the rate down to what they would usually charge in that original 3-4 year time frame.
The other issue in this economy — most business owners won’t accept a 2x cost increase and they will go out of business.
Either scenario means a bad to worse retention for wholesaler and E&S markets, so attrition of the business will continue.
Also – the insurance market cycles traditionally driven by CAT events will still happen, but not to the extremes we’ve historically seen. Certainly, when the market does change, it won’t be for any extended period of time.
Technology is the final glitch in the wholesaler model — information tech will only improve and an effective technology platform works (look at GEICO or Chartis small biz WC), the cost much less to administer. Tell me why an E&S carrier would not enhance there effectiveness to write more business, direct and on-line, to put another 5% to 10% (the intermediary commission) in to there income?
The internet, admitted markets and a declining economy have pushed many wholesalers to the brink (Swett, Colemont, etc). The fact is, unless the E&S carriers adapt with there wholesale partners, they will continue to be stressed.
Times have changed and may not change back- although this IJ article is warm and comforting to wholesalers; it is far from the truth of what is happening.
Wholesalers need to modernize and build out there services or they will become extinct.
Spoken like a true retail agent….
Give me a break.Pure dribble
You guys could be partly correct. I think:
1.) The insurance carrier will allow the MGA or wholesaleBroker to grow to a certain point before acquiring it (or having it’s partner MGA acquire it).
2.) The wholesale broker is aware that it runs the risk of only being used for x time (after which the Retail Agent will prefer direct access). The wholesale broker makes money through other methods as well.
3.) The wholesale broker has a separate general agency which does all the direct selling (as opposed to strictly selling to brokers/retail agents), which I fear could be used to take the broker/retail agent’s clientele.
4.) The MGA also has access to the independent agents clientele so we’re screwed either way…
5.) The MGA charges an ugly start fee or/and monthly fee or/and a really ugly exit fee (up to 30% of your book in some cases).
6.) The most logical would be a wholesale broker to start, so aggregators, clusters/netoworks, are just advertising with greater force.