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Channel Check by Kevin Amrhein Creative Types

Ever wonder how many of those innovative programs got started?

By  Kevin Amrhein

Retailers are certainly capable of identifying gaps in coverage and availability. Many conjure creative solutions only to be shown the door by uninterested ears at the carrier office. The resources to turn an idea into a sellable product is where wholesalers can help retailers distinguish themselves in a world dominated by underwriters who’d rather take Monty’s $10 than see what’s behind door number three.

With a broader view of the marketplace, wholesalers help retailers by developing a potentially profitable patch for gaps experienced by an entire spectrum of insureds. Just ask Hank Haldeman, executive vice president of The Sullivan Group in Los Angeles, who believes that the influence wholesalers have in the creation and implementation of insurance products and programs is pivotal.

“Many of the products in today’s insurance marketplace exist largely because of wholesalers,” he says. “D&O, EPLI, technology liability—all examples of pervasive products whose construction was greatly influenced by wholesalers.”

Haldeman believes creating programs is a role played by most members of the wholesale segment and a role he personally knows well. I spoke with him recently of his fascination for the then-emerging biotechnology industry in the early 1980s. Researching the insurance available to these firms produced frightening results. Many were misclassified or self-insured simply because insurance and biotech firms didn’t understand each other. Working for a wholesaler gave him the opportunity to focus tremendous time and effort to create what became a profitable solution. And that is a fundamental element of the wholesaler culture.

“Wholesalers can be one-dimensional, focusing on one product area,” Haldeman says. “Most retailers have to deal with a spectrum of products. Focusing time and energy in a single area is tough.”

Consider EPLI. “It’s just one of the many products a retailer has to worry about for his insured,” he adds. “A wholesaler can focus on that one product without worrying about all of the other elements involved.”

Creating a successful program is not easy. Historically, insureds are bombarded with niche programs ushered in during soft market conditions. This happened as recently as the early 2000s, according to Wayne Carter, president of Target Insurance Services, a program administrator and managing general underwriter headquartered in Avon, Conn. Carter believes that many programs developed during that time fell to pieces because they were focused on rapid growth rather than underwriting profit and stability.

“We saw this and said, ‘If we’re going to have credibility with retailers and carriers, we have to build our company based on underwriting expertise. We want to be here for the long term.’”

Programs developed from within a sales culture often lack underwriting discipline, Carter says, and when this happens, results can be disastrous. Carter believes the level of underwriting and control inherent in its MGU structure positions Target to avoid this pitfall should history repeat itself.

Carter agrees that wholesalers play a significant role in the creation of programs, but he chooses to focus less on the unconventional. Innovative programs, he says, are born when expertise is used to improve traditional products, technology or service. “It’s about creating a better mousetrap.”

“Our programs work because of the ability to bring the expertise that we have to a carrier that would like to be in that line of business but does not have the needed expertise in-house.”

Target’s role as an MGU allows it to maintain a great deal of control over the programs it offers, but Carter admits that his business is an acquired taste. Others, he says, don’t necessarily want that level of control and choose to stick to straight brokerage.

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