How Insurance Distribution Is Changing

Insurance distribution is changing and agents and brokers—retailers and wholesalers—have to define the value they offer and what type of relationships they will have with carriers and customers in the years ahead, according to a leading wholesaler.

“[O]ver the last several years, we’ve seen a drastic change in the distribution space, in that the traditional rules have sort of broken down, that the role of a retail agent, the role of a wholesaler, those have all changed,” Glenn Hargrove said in an interview with Insurance Journal at the recent Insurance Industry Roundtable run by the WIAA Education & Research Foundation in Irvine, Calif.

Hargrove is president of MarketScout Wholesale, which is headquartered in Dallas.

“There’s no longer circumstances where a surplus lines company is represented just by a wholesale broker or a surplus lines broker. They can go directly to retail agents,” he said. “You have direct line products that are happening within the space that circumvent retailers and wholesalers, in some cases. So it’s changed the value propositions of the firms in that space.”

Hargrove believes the changes are being driven in part by regulation and by technology, but another major driver is insurers looking to deliver their products and services in the most efficient manner possible.

“I think, consequently… what it leads to is that the companies that are within that space of distribution also have to justify their value and why they’re there. If they’re going to receive compensation or income out of that chain for being part of that distribution source, then they need to explain what value they’re delivering and how they’re facilitating and making that transaction better,” he said.

Hargrove said there are several areas where agents and brokers deliver value, starting with their expertise in products and the industry and the talent they bring to the process.

Agents and brokers also provide access.

“[T]here’s the aggregation effect of those people in the distribution chain being able to access a multitude of markets. Or if you look at it in the reverse sense, from the carrier, their ability to deliver to a carrier, a multitude of clients and customers that that carrier probably couldn’t efficiently reach on their own,” he told Insurance Journal.

Thus agents and brokers bring a combination of expertise, talent and access to the equation.

In addition, agents and brokers provide an opportunity for insurers to outsource services.

“Providing things, whether it’s underwriting services or policy issuance type work or a variety of things that those intermediaries can do that are services that facilitate, either the process of placing insurance for an insured, or the process of securing the coverages for a carrier,” Hargrove said.

He said he believes that going forward there will be distribution businesses that are hybrids and some that are much more tailored towards specific operations “but maybe don’t look, necessarily, like the traditional form of either a retailer or a wholesaler as we’ve known it.”

There are already wholesalers that distribute not only surplus lines products but also admitted market products and some that act as program managers, according to the MarketScout Wholesale executive. Also some retailers have their own wholesale-like operations.

Going forward, distributors are going to have to explain more than that they are in the middle of the equation, but also “why they are there,” he said.

He advises agents and brokers to reshape their own box and own value proposition so that the market is convinced they are an important player in the distribution chain.

To watch the interview with Hargrove, visit IJTV here.

For the full report on the WIAA Insurance Industry Roundtable, click here.

For an Insurance Journal report on the WIAA Roundtable, click here.

For additional coverage by Insurance Journal, watch:

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Topics Carriers Agencies Training Development