Match-making: What Retail Agents Want From Wholesalers and MGAs

Exclusive Insurance Journal survey: successful relationships depend on markets and service in soft or hard cycle

Like the love-lorn users of match.com, independent agents hunting for business partners among surplus lines wholesalers and managing general agents are thinking long-term, not short.

They are looking for partners who will stick by them in good business times and bad.

They are willing to date for a while before settling down with preferred mates but they are not afraid to call an end to relationships if their expectations are not met.

They are also accepting of long distance relationships.

Agents value MGAs and wholesalers because they can provide expertise and help move business in both soft and hard markets.

Retail agents know what they want from their excess and surplus lines partners. They want market access, service, response time and expertise. According to an online survey conducted by Insurance Journal, about 75 percent of retailers rate these criteria as the most important when selecting a wholesaler or MGA.

Relationships, price, reputation and commissions are some of the other factors retail agents cite as influencing their thinking.

“There is not one item that determines whether to work with [wholesalers] or not. Access to markets, expertise, specialty programs, service, and the obvious item — commissions — [are important,]” said one agent.

The same agent explained why relationships are important. “Some [wholesalers] have better relationships with certain markets and are therefore able to ‘get things done.’ Personal relationships that are established between the retail agent and wholesaler is another factor that does affect whether business is sent to a particular wholesaler. Good business people want to work with other good business people, as long as they help close the deal.”

The Insurance Journal survey of about 550 agents and brokers nationwide asked respondents to rate criteria they consider when selecting an E&S broker or MGA on a scale of “least important” to “very important.”

Price is an important criteria for 40 percent of respondents. However, access to markets and response time rank higher, with 79 percent considering market access very important, and 77 percent considering response time very important. Seventy-three percent believe service is very important.

Other criteria ranked very important by agents include expertise (69 percent), variety of markets (62 percent), professionalism (58 percent), and relationships (48 percent).

Less than half of all agents taking the survey (34 percent) view the commission structure, reputation (31 percent) and financial strength (30 percent) as very important criteria when selecting a broker.

Location plays virtually no role in the selection process, with only 3 percent indicating it is a very important criteria. In fact, the bulk of survey respondents indicate face-to-face calls from wholesalers or MGAs are “not that important” (34.5 percent) or just “somewhat important” (32.4 percent).

“While we are not geographically close to each broker, we maintain contact with them,” an agent explained in the survey. “We begin doing business because of a referral or reputation. We continue doing business because of relationship and response to our clients’ needs.”

Number of Wholesale Partners

The majority of agents (70 percent) said that up to 25 percent of their business was written through the surplus lines market in 2007, with the majority of agencies placing more than 100 policies in the surplus lines market in the past year.

Most agencies (48 percent) said they choose a handful — up to five — of MGAs and wholesalers to work with, regardless of the market cycle.

The number of wholesalers agents report using in 2008 in the current soft market is not that different from the number in the hard market three years ago. In Insurance Journal‘s 2005 survey, 39 percent said they used five or fewer excess and surplus brokers. Today, 56 percent of respondents said their use of wholesalers and MGAs remains the same.

A few agents said they have been consolidating the number of wholesalers they’re using, although this is not widespread. These agents maintain that they look to a broker’s proven track record as a guiding factor in choosing which brokers to keep.

“We currently feel that we have too many wholesalers and are interviewing several of them to determine how we might move some present relationships to those wholesalers who have demonstrated over time their ability to go above and beyond the norm in servicing our needs,” one retail agent said.

“Our agency is doing a consolidation to limit the number of wholesale brokers we use,” another respondent said. “The ones that we determined we would go forward with were chosen based on market expertise, response time, market penetration, access to programs we needed and reputation.”

Some retail agents retain contracts with multiple wholesalers but use only a few regularly. As one agent explained, “Although our agency has contracts with a good number of wholesalers, we consistently use the same three or four brokers with whom we have good relationships and who have demonstrated their commitment to our agency, their access to markets and their expertise in insurance coverage issues.”

Delivering on Promises, Service

Ultimately, respondents (39 percent) rate service the most important factor. Yet while this may be obvious, agents feel that in practice this ingredient is too often missing from the mix.

“When we submit a quote, it is very important to hear back in a timely manner,” said one agent. “I have submitted business and never heard a word back, [which is] unbelievable.”

“I had one [wholesaler] that I was dealing with in the past that would take more than eight weeks to get a quote,” another agent lamented. “They would never respond to voicemails or e-mails in that time to keep me informed as to the status of my quote. It was very frustrating. I began working with a different MGA and have not had a problem since.”

Retail agents maintain that the best wholesalers are the ones who respond immediately, without having to be “chased.”

“Why would I work with someone who always takes you down to the wire?” questioned one respondent.

Retail agents caution wholesalers against not following through on what they promise.

“Response time and getting quotes in a timely manner is No. 1,” summarized an agent. “There are many wholesalers who will promise and not deliver — and that is the best way to ruin a relationship. If [a wholesaler] cannot do something, tell me upfront and I will move on for that particular risk, but call you back for the next one. But burn me once by not delivering and I will move on permanently.”

“We as retail agents pride ourselves on providing top-notch service,” said another. “Then when you need to go wholesale, it could take forever to get a quote, which ends up being a direct reflection on us. … we move accounts if the service is not to our standard.”

The ability to submit business online does not appear to significantly affect a retailer’s opinion of a wholesaler, however, online capabilities could improve workflow and response times that are important to agents. Slightly less than half (46 percent) said they could sometimes submit business to wholesalers online.

Some agents also want their wholesalers to provide a bit of exclusivity. “If the MGA is going to physically visit us, shower us with Koozies, pens and scratchpads, then go down the street and do the same with all our competitors, I’m less likely to do business with that kind of MGA,” one respondent said. “I like to think of an MGA as an arm to our business, not a potential competitor to our business …”

Responses in the survey suggest that agents want value-added services from wholesalers such as staff training. But, according to the survey, only 36 percent of agents say they are receiving training opportunities from their E&S partners for their agency staff.

The quality of the training is also a concern. Of those receiving training, 32 percent are satisfied with it, but approximately 21 percent are only “somewhat satisfied” or “not that satisfied.”

Agents in the Insurance Journal survey report they locate wholesale and MGA markets primarily through word of mouth (47.5 percent). Other ways agents find out about markets are through agent associations (34.9 percent), print advertising (26.6 percent), online advertising (24.9 percent), or other marketing efforts (14.3 percent).

Whenever or however E&S brokers and MGAs spred the news about their services, they need to back up their marketing with action, according to agents in the survey.

As one agent said, it is “counterproductive” if a wholesaler spends a lot of time and effort on marketing, but quote requests “die on their desks.” For this agent, it is most important that the wholesaler actually work on the account.

Topics Agencies Excess Surplus Training Development Insurance Wholesale