Leader's Edge logo Channel Check by Kevin Amrhein Tell the Editor
Channel Check by Kevin AmrheinWho Ya Gonna Call?

Got a problem with a niche market? Big brokers call on wholesalers for many of the same reasons as small brokers: time is money.

By Chris Hann

In late May and early June each year, several hundred brokers and carriers gather at The Greenbrier, a sprawling resort nestled on 6,500 verdant acres of the Allegheny Mountains in southern West Virginia. The occasion this year is the sixth annual Employee Benefits Leadership Forum sponsored by The Council. The Forum is the ultimate networking opportunity. Using private business meetings, cocktail receptions, dinners and rounds of golf at the resort’s three championship courses (Sam Snead was the Greenbrier’s longtime pro), the assembled squeeze in a lot of business in a very short time.

Over these four days at the Greenbrier, much of the emphasis will be on employee benefit trends—like health management, consumerism and government policy—and how they affect clients, which, in The Council’s universe of the best and brightest, tend to be large and mid-sized employers.

But they’ll also be talking about the story on everybody’s mind these days: how to make their business grow. And that’s where the broker’s secret weapon comes into play—benefits wholesalers, commonly known in the life and health insurance arena as general agents.

In the hunger for growth, many brokers—both property-casualty and employee benefits—are looking for ways to reach beyond their traditional large and middle-market sweet spot into the growth engine of the U.S. economy: small businesses. According to a recent report by the U.S. Small Business Administration, nearly 98% of the roughly 26 million businesses in America today employ fewer than 20 people. Taken collectively, these firms account for half of the nation’s non-farm gross domestic product, and over the past decade they’ve generated up to 80% of the net new jobs. As they seek to expand their own businesses, brokers adhere to the notion that today’s small business could be tomorrow’s Microsoft.

The problem is that writing health coverage for small businesses takes a lot of hard work for a relatively small payoff. It’s just not a moneymaker for a large broker to work directly with a business that employs only a few dozen workers.

In the group benefits arena, large brokers routinely call on general agents such as Beere & Purves of Walnut Creek, Calif., to help locate group plans when they have a small-business client. The right general agent will possess small-market expertise and will go on site to discuss plan options with the employer’s workforce.

Peter Cella, president of Beere & Purves, says two-thirds of his company’s business involves employers with fewer than 50 employees. The other third? Businesses with fewer than 200 employees.

“Small group is pretty labor intensive,” Cella says. “Without our help, they can’t effectively, profitably service these customers. They don’t have time to spend the resources to do what we do on each one of those. They just don’t make enough commission. They don’t have the volume to do it. That’s where they outsource it to us.”

So why do large and mid-sized brokers even bother with small business clients? Sometimes, Cella says, large and mid-sized brokers cater to small business clients as a defensive measure—that is, to keep the competition away. A commercial property-casualty broker that is already providing insurance, say, for a small construction company’s buildings, equipment and liability, may want to provide group benefits as well simply to sustain the existing business relationship.

Among the brokers that hire Beere & Purves to help identify and distribute small-group plans is Woodruff-Sawyer & Company of San Francisco. The two companies collaborate to provide insurance to more than three dozen small-business clients in the Bay Area, according to Charles Rosson, the benefits practice leader for Woodruff-Sawyer. Rosson believes the advantage of hiring a wholesaler to handle small-group plans comes down to what he calls “the efficiency thing.”

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The Council Calendar

Wholesale Insurance Leadership Forum, May 10-12 2010

Employee Benefits Leadership Forum, June 1-4 2010

CFO Workshop/Leadership Development Conference, June 16-18


50% Half of contractors needing professional liability don't buy it.

12% Preferred provider and HMO costs are expected to rise allmost 12% in 2007.

10.7% Expected rise in consumer-driven health plan costs in 2007.

$49,500 The maximum annual benefit participants in pension plans terminated in 2007 by the Pension Benefit Guaranty Corp. will recieve -- a 3.9% increase from 2006.