Soft Isn't Hard
How hard it is to take advantage of a
soft market? Cycles come and go. Relationships should last for
Supply is abundant, but you already knew that. Your research
outfit of choice (hardcore stat wonks should try MarketScout or
Standard & Poor’s) will gladly inform you that this
isn’t expected to change through the second quarter of
this year or beyond, but you already knew that, too.
What retailers may not know is that, among the masses that
see current and future conditions spawning a price-slashing,
coverage-swelling bloodbath certain to leave the intermediary
insurance community in the dust, many wholesalers see
Opportunity—as in the ability to better oneself by
adding value in a marketplace gone mad. It is now that the
inquisitive among us must put on our brain-picker badges and
fire away with a collective “How?”
“A soft market is an opportunity to branch out into
more products, whether it is more binding authority, MGA-type
products, anything that grows expertise in a specific
area,” says John Jennings, president of Tri-City
Brokerage and Crump Insurance Services’ brokerage
operations. “We’ve been selling expertise for a
long time. Regardless of conditions, if you truly are an
expert, you will continue to lead the pack.” Softening
conditions, he says, allow the brokers he works with greater
access to specialty markets resulting directly from their
expertise, such as life science risks like medical products and
A product that is more accessible to retail agents
direct—or less expensive due to increased competition for
market share—does not always make it the best solution
for the insured. Stated differently, retailers shopping
historically difficult-to-place or less understood products
direct—just because they can—could prove a disaster
for all involved, particularly the insured.
Joel Cavaness, president of Risk Placement Services, agrees
that at the end of the day price is only one factor. A
softening market, he says, does not translate into growing
knowledge of products, especially those that retailers
don’t touch every day. For example, he argues, many
retailers lack expertise in D&O and its constantly evolving
forms and changes. Other sophisticated products, such as
E&O for architects and engineers, demand expertise.
Cavaness believes that soft market conditions require
wholesalers to escalate efforts to add value to their service.
For example, RPS producers and insureds have access to the
wholesaler’s pre- and post-loss claims advocacy,
something, he says, wholesalers have not been known for.
“It’s something we’ve started and are sure
others will as well.”
Cat modeling is a service that Cavaness believes adds
tremendous value to the transaction—one that is likely
absent when retailers buy direct. “We take the
insured’s schedule of values and information and look for
cat loss potential for earthquake or windstorm,” he says.
“We can provide these reports to the retailer to pass on
to insured so he can see his exposure.” He believes it is
efforts such as these that remind retailers of value-added
services they can get from wholesalers.
Expertise is certainly the brand of many wholesalers that
were formed to ease the burden that generalist retailers place
on underwriters. Years of perfecting this brand has forged
relationships that thrive because this has all happened
Wholesalers deal directly with markets on a daily basis,
explains Paul Lyons, executive vice president of Halcyon
Underwriters, a standard/preferred market wholesaler in
Maitland, Fla. This relationship allows the wholesaler to
perform pre-underwriting and other tasks that simplify the
process, completing a timelier, less rocky
transaction—adding exceptional value to both retail
partner and underwriter. He says a smooth transaction is
essential, considering these underwriters are the people
retailers will need most of all when conditions harden.
“Company underwriters have long memories,” he
Wayne Carter is president and CEO of Target Insurance
Services, a managing general underwriter (MGU) headquartered in
Avon, Conn. He believes the very structure of his business adds
value regardless of market conditions. As an MGU, Target is
built not only around expertise but a significant level of
underwriting authority. “We’re not a model of
choice but a model of marriage,” he says, in words
reflective of the MGU’s intent to provide retail partners
with a place where specialty risks can live indefinitely.
“Retailers know I can’t control price. I can
control hustle and opportunity,” says AmWINS President
and CEO Steve DeCarlo. “Now is a time [for wholesalers]
to get things done, to grow business, to market ourselves.
There’s so much we can do now, more so than when
It could be brewing in the bellies of some of the
world’s largest financial institutions. It could be
waiting patiently in the atmosphere until summer to unleash a
swirling fury on the East Coast. It could be any other looming
threat. If history has taught us anything, it’s that
conditions will change.
When they do, wholesalers want their retail partners to know
their efforts are not in vain. As DeCarlo says, the
wholesaler’s brand is to provide the best product for the
insured today, tomorrow, and 20 years from now. The goal is a
relationship that, unlike market conditions, will last.
Amrhein is a contributing writer.