How to Make Agent-Wholesale Relationships Work

By | July 16, 2010

It’s no secret. Insurance is a relationship business. And the agent-wholesale broker relationship is no exception. The continued soft market hasn’t stifled relationships either. Wholesale brokers are still a much needed asset to retail agents even though the need to access the excess and surplus lines market might be less.

“There’s still a huge need to have a partnership with your wholesale brokers,” says Van Maroevich, president and CEO of MOC Insurance Services, an independent insurance agency in San Francisco, Calif.

Make no mistake about it, says Richard Kerr, president of MarketScout, an insurance exchange based in Dallas, Texas. “Atalented wholesale broker will always be in great demand, be it a hard or a soft market,” Kerr says.

While times are changing in the insurance industry, the attributes that agents have consistently sought out in wholesale broker partners remain the same. Most important is access to the right market for clients, with other key features being experience, service and relationships.

“I think what it comes down to the main reason that an agent or retail broker will go to a wholesaler is to access a marketplace,” says Ben Beazley, managing director and CEO of Chartwell Independent Insurance Brokers LLC. “But far more importantly[is] that they have the relationship and the knowledge in order to best utilize those markets,” Beazley adds.

What Agents Want in Wholesalers

For Maroevich, a 30-year veteran agency owner, when it comes to deciding which wholesaler to access, his first criteria is the wholesale broker’s strength in the line of coverage needed. He might also weigh the wholesaler’s relationship with a soughtafter insurer.

“Perhaps a special relationship the wholesaler might have with a particular market that we might think is great for our prospect or client,” Maroevich says.

Maroevich also says he looks at a wholesaler based on its service capabilities to his agency. “Very importantly, the selection of the wholesaler is based on the level of effort we think the wholesaler will put into this business, and responsiveness,” he adds.

Jacksonville, Fla.’s Kevin VanDyke, says in his 18-month tenure as an independent agency owner he has come to realize just how important wholesale partners can be. While VanDyke ran a successful $130 million wholesale nursery for many years prior to opening the VanDyke Norman Insurance Agency with his partner Andy Norman in late 2008, he had little insurance experience. Norman had served as an insurance producer with a local independent agency, Thompson Baker Agency, for seven years but VanDyke had to learn a few things on his own by trial and error — and some of those lessons were taught by the same wholesale brokers he still uses today.

For example, as a new agent VanDyke said he may have submitted business to his wholesale brokers without necessary underwriting information — a common complaint among wholesale underwriters.

“I would get beat up all the time because I would have certain submissions that may not be perfect,” VanDyke says. But his wholesale brokers helped him learn along the way. “The brokers I deal with tend to help me fill in the blanks or help me get it right, so the next time it goes in good.”

It’s those same wholesalers that VanDyke remains committed to today.

“Back when we were just getting started, some of the people who took the time to help me are the people that I’m loyal to now,” he says.

Speed, market knowledge, and excellent communication are all important factors to VanDyke, plus “just a willingness to go to work and try to help us grow our business.”

“We’re not the largest account on anybody’s book and so the fact that we have some pretty effective, powerful brokers that are willing to work with us and help us” is another reason why he stays committed to his wholesale partners. “They give us the effort.” VanDyke returns the favor with his loyalty.

What Wholesalers Want in Agents

Wholesale brokers are also looking for effort when it comes to their agency partners.

“When we have a submission from an agent, we’re looking for an agency that presents us with what we consider to be complete information, and for that agency to have a good knowledge about their insured,” says Chartwell’s Beazley.

Sometimes if the agent doesn’t feel like he has a really good relationship with the insured, he might go to a wholesale broker to do the legwork, Beazley says. “It really costs them nothing because we don’t get paid unless the deal binds,” he says.

The agent might just send in a short application and say, “Please advise us if you can find us a market for us to do this,” Beazley says. Because of this Beazley admits he has begun to weed out agents unwilling to put forth the effort on certain accounts.

Having said that, Beazley adds that extensively marketing at renewal is a must in today’s competitive market, something he commits to doing daily. “We have to go out and do an extensive marketing job because one market today can be not ready enough to do business, and tomorrow they have changed and they’re suddenly ready enough to do the business.

“If you don’t, if you’re not careful to canvass the marketplace, likewise, if a retailer isn’t careful to canvass all of the wholesale market — the surplus lines markets as well as his other markets — he might miss the plot somewhere.”

As an example, Beazley cites a recent case where a large retail broker — one he wouldn’t name — got cut out of an account because they refused to shop the account in the E&S marketplace. The account met standard market criteria but given market conditions today the E&S market offered opportunity as well.

“Well, another equally large retail broker, managed to get their nose in the door and they said to the insured, ‘We need to take this to the excess and surplus lines market because we think we can get you the same price with much broader coverage.’

“And sure enough, by doing that this retailer took the business away from where it had been,” according to Beazley.

Changing Relationships

From Beazley’s point of view, the agent-wholesaler relationship has changed somewhat in the last few years to include an extended relationship with the insured.

“What I have experienced in the last two or three years is being brought into interviews not only with the retailer but also brought into interviews with the insured,” Beazley says. In today’s market, commercial buyers have become a lot wiser and more knowledgeable about the role of the E&S market and what that entails, he says.

“It was all a bit of a mystery for a long time,” he says. The smaller retailers would present the final insurance product to an insured as something that they had put together, and perhaps not focus on the existence of a wholesale broker, Beazley believes.

But in Beazley’s experience, insureds today want “to understand my role as a wholesaler, and how I access markets, and how I have put together the final program … and how I interacted with the retailer.”

One such insured is Maroevich’s client Wareham Development, a commercial real estate development firm. In a recent renewal process, Wareham’s James Goddard, requested to meet directly with Beazley, the wholesale broker writing a portion of his firm’s insurance program.

“I always want to make sure that I understand everyone on the team if there’s a mission critical person involved,” says Goddard, who handles acquisitions and dispositions for the firm. He admits he may view the wholesale relationship a bit differently. “I look at it from a transaction aspect and transactions are built on relationships. That’s why I said if there’s this wholesaler that is mission critical to us in a transaction, you make sure you know that person.”

Maroevich admits it’s not typical for his insureds to meet the wholesaler, but he encourages it. “When a wholesaler can meet with a client, it strengthens what the retail broker is trying to do with the wholesaler.”

Future Relationships

Standard market carriers may be vying for traditional E&S business today but that doesn’t mean those same carriers will stick around tomorrow, if and when the market takes a turn, brokers say.

MOC Insurance’s Maroevich says agents should take care of their wholesale relationships at all times.

“I would say treat your wholesaler relationship to the same level that you treat your relationship with your great markets,” Maroevich says. “Your wholesale market can be a tremendous asset.”

VanDyke agrees, adding that it’s important to maintain good relationships with wholesale partners, even personal relationships.

“People do business with people they like,” VanDyke says. “Whatever you can do to build the relationships” helps.

MarketScout’s Kerr warns agents to pick their wholesale partners wisely. “I think it’s very important for any agent to look at not necessarily the stability … I think they’re stable. But it’s important to see: who’s the money behind the deal? And that’ll help you see what the future of that particular broker is,” he says.

The market is going to turn, Kerr reminds retailers. “You need to have a good, solid relationship with a wholesale broker going into the future on those types of larger accounts.”

Beazley stresses the importance of maintaining relationships as well, especially given recent natural disasters that could jumpstart a turn in the market.

“We know there have been major floods in Arkansas, major hail storms in Oklahoma, we have seen some quake activity. Not that it caused a major loss yet, but we are definitely reminded every day. … It could be interesting times,” he says. “So we need to maintain our relationships out there.”

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