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Team Player

Boutique firms compete with the bigs when they become part of the retail team and not simply a portal to a market.

By  Kevin Amrhein

Much attention has been focused on the consolidation efforts of brokers hoping to thin their wholesale distributor outlets to the still-softening marketplace. Last month, I discussed the “stay on the short list” successes of one of the largest wholesale brokerages in the country. Now, I’m focusing on the efforts of one wholesaler who insists that standing out as a boutique is the key to surviving—dare I say, thriving—in the battle of the “bigs.”

“We have to stand out as a boutique wholesaler,” says Loti Woods, co-CEO and president of West Palm Beach, Fla.-based McAuley Woods & Associates.

Woods says that retailer consolidation efforts over the past two years have embattled the entire wholesale marketplace. Retail M&A activity has cost her organization a few spots on new entities’ approved lists. Across-the-board declines in insureds’ payrolls and sales exacerbate the threat for weaker players. “It’s no secret that [consolidation] has placed the future of many transactional wholesalers in danger,” she says.

Look at the list of America’s largest wholesalers by volume, and McAuley Woods & Associates isn’t there. But Woods believes her firm is perfectly positioned to bring new revenues and new ideas to retail partners. The reasons for her optimism could be summarized in two words: process and product.

“Our only interest is in serving 50 clients. We know them. Almost all of these relationships have been formed through referral,” she says.

Woods insists that retailers consider her firm as an extension of their operations rather than a separate entity. Market conditions have no effect on a business model that promotes exclusivity to clients in part by limiting distribution to one or two retail partners in different geographic regions across the U.S. “They see us as a part of the team,” she says. “They don’t look at us as simply a portal to a market.”

Maintaining focus on this strategy is imperative for her firm to stay successful in a marketplace that has been gorging itself on the flesh of regional, boutique and smaller transactional wholesalers. She says they’ve tried binding authority and other approaches through the years, but it became clear that was not their passion. “Our passion is brokering deals,” she says.

Woods believes too many intermediaries have lost focus on the fundamental purpose of the wholesale marketplace: making money for retail partners.

“We partner with MGAs in offering and developing new products. We take them to retailers and give them a heads up that the exposure exists and now we have this product you can sell to close the gap,” she says. “We often approach from the angle that, if the retailer can sell a product designed to close a gap, it will help them round the account, helping to pick up the insured’s other p-c products.”

Her firm’s partnership with Renter’s Legal Liability is a good example. The MGA originally contacted Woods about a condo legal liability product designed as a protection for associations in Florida. As the relationship grew, the MGA worked with the wholesaler to distribute a renter’s legal liability product nationally. A side effect of record foreclosures is record highs in tenancy, thus escalating risk exposure for commercial entities with ownership in large habitational risks. “This is designed for apartment owners as the named insured to cover liability caused by renters’ negligence,” she explains. The policy addresses the common problem of renters not having adequate liability insurance.

Woods says the success with these two products has led to the national distribution of a similar product from the same MGA for student housing risks. Products like these make the job fun, she says. “It adds excitement to the sale process when you have something new and different to sell. If you’re warm or cold-calling, it makes the conversation much easier.”

Niche products like these serve another purpose. “Our relationships with carriers allow us to help insureds qualify for discounts on the remainder of the risk’s property coverage if the retailer can sell it,” she says. “Our retail partners are thrilled to have a new product to offer that addresses such a substantial concern, which also serves to qualify the insured for a discount on other coverages.”

In addition to products, Woods says retail partners look to the wholesaler as an extension of their sales force. “Our retail partners love this approach as it gives them instant credibility when they are trying to win the business,” she says. She describes recent successes that arose simply from the wholesaler assisting the retail agent in reviewing existing property placements and uncovering significant gaps between layers. “For example, we often find that certain excess carriers fail to include ‘priority of payments’ wording in their policies—a necessity on any placement with sublimits.”

My conversation with Woods proves to me there is still viability in a wholesale marketplace where knowing your client’s book of business trumps volume. And even though it gets lost in the battle of the bigs, McAuley Woods & Associates is proof there’s still fun in boutique.

Plan today! Come to the Wholesale Insurance Leadership Forum, May 10–12, 2010, at Aviara in North San Diego. Contact Cheryl Matochik at Cheryl.Matochik@CIAB.com .

Amrhein is wholesaler editor.

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