Point of View
It starts with reminding retail
partners that the wholesale function does not add to the cost
of doing business but provides a mechanism to support company
Some retailers see reducing business with wholesalers as a
way to increase their margins. How does the wholesaler change
This question, hurled from the stage a half-hour into a
session at The Council’s annual Wholesale Insurance
Leadership Forum in April, describes a key challenge for
wholesale brokers today. As I broached the issue with
attendees, I found them confident in the notion that wholesale
intermediaries are well positioned to help retail and carrier
partners improve the profitability of their business.
How, you say?
It starts with reminding retail partners that the wholesale
function does not add to the cost of doing business; rather, it
provides a mechanism to support agency growth.
“Retailers should ask, ‘Why should we chase 20
carriers when the wholesaler could identify competitive markets
for us?” says Dan Real, president of ECC Insurance
Brokers. From this point of view, using a wholesaler is
imperative to the retail broker hoping to outsource variable
costs associated with marketing and placing a risk.
Other members emphasized the other side of the equation:
Wholesalers help carriers save money by helping them market
their products efficiently. Carriers that distribute through a
wholesaler can reduce the processing and personnel expenses
associated with maintaining a vast retail-marketing network.
Carriers pass along the savings, ultimately keeping the cost of
doing business down.
Wholesalers are also trying to educate retail agents and
brokers that the wholesale distribution channel is more than a
series of portals connecting brokers and carriers. In addition
to the transactional brokerage function, many wholesale brokers
act as decision maker. Carriers are willing to extend the vital
underwriting function and binding authority to trusted
wholesaler partners, even in turbulent markets.
When they have more authority over risk selection and
placement, wholesalers can reduce the workload of carrier staff
while providing faster turnarounds for retail agents and their
“Maintaining credibility prevents decisions on
authority from being market driven,” says Wayne Carter
III, president of Target Capital Partners, a managing general
underwriter. “Credibility in audits, performance and
other issues is what preserves and expands binding
For other Council members, the key issue is how to alleviate
the commonly expressed fear of retail brokers who are skeptical
of filtering risks through a wholesaler owned by a competitor.
Terry Moore, principal and director of the Small Business
Division and Program Group for B&B Programs, a division of
Barney & Barney, says his firm took specific steps to allay
those concerns. Program operations are stationed in a separate
workspace, walled off and on a separate floor from retail.
Program operations are also performed on separate management
software. “We were judicious in making sure we kept the
wholesale operation completely separate,’’ Moore
says. “We treat B&B like everyone else.”
Wholesalers operate as a lifeline for smaller retailers
struggling to maintain viability. “For smaller retailers,
wholesalers can play the role of equalizer in markets favoring
larger brokers,” says Christopher Day, president of
E&S Primary Casualty Division for Navigators Group. Many
accomplish this through their pre-screening capability, he
says. This helps smaller retailers with limited resources in
collecting and transmitting all the necessary information to
bind the risk. In Day’s case, this function is essential
to his carrier’s goal of getting policies out
In terms of retailers gaining a better understanding of the
importance of wholesale distribution, there are few resources
more beneficial than the perspective of the carriers that
absorb the risk.