Leader's Edge logo Channel Check by Kevin Amrhein Tell the Editor
Channel Check by Kevin Amrhein Soft Isn't Hard

How hard it is to take advantage of a soft market? Cycles come and go. Relationships should last for a lifetime.

By  Kevin Amrhein

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.

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 pharmaceuticals.

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 before.

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 cautions.

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 conditions harden.”

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. Kevin.Amrhein@LeadersEdgeMagazine.com

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