The Eyes Have It
Wholesalers serve as carrier's expert
eyes and ears in a vast sea of retailers.
There are just south of half-a-million licensed insurance
producers in the U.S. You would assume providers of products
would chomp at the bit to get their message on the tips of the
tongues of as many sellers as possible. Fortunately for the
masses, the aforementioned “you”—yours
truly—is still struggling to shake loose nagging dreams
of a golf career, not managing the business models of some of
our industry’s most successful—specifically, those
of providers writing billions in net premiums through the use
of a single channel: wholesale brokers.
The wholesale distribution channel was created by carriers
seeking to provide superior products for a universe of insureds
who are anything but universal. Many carriers have invested a
great deal in this channel. Some stake everything on it.
Just ask Jim Carey: “100% of our business comes to us
through independent wholesalers.” Carey is president and
CEO of Admiral Insurance Co., an E&S provider of primary
and excess liability, property, and professional liability for
moderate-to-high-hazard commercial risks. “We’ve
been doing it this way for 35 years and have been very
successful using this distribution model,” he says.
This begs the question: If retail agents are on the front
line, jamming feet in doors and losing hair and sleep while
putting together a program for their insureds, why do some
carriers prefer the intermediary option rather than offer
direct appointments to select retail agents?
“Working exclusively with independent wholesalers
provides reach and access without the expense of a full-time
marketing and sales force,” Carey explains.
Others agree that the sheer number of retail agents is a
major reason to forgo direct agent appointments for the
wholesale distribution channel.
“We don’t do run-of-the-mill business. For some
20,000 or more retailers to know what we do is
impossible,” says E.G. Lassiter, president of RSUI, a
specialty insurance underwriter. Started in 1988, RSUI
underwrites $1.2 billion of both admitted and non-admitted
products exclusively through wholesalers.
“We cover 90% of retailers in the country utilizing
the services of about 150 wholesalers,” he says.
But volume is just the beginning. Carey says a potential
problem that E&S markets face when placing business
directly through a retail agent is surplus lines taxation. This
process, he says, can be complex and risky, particularly when
involving a multistate risk. State law puts the onus on the
retailer/surplus lines licensee, which can be a pain for retail
agents who are not set up to handle it. Wholesale brokers are
familiar with the process. Carey says they can confidently
write the business without the worry of part of the process
Admiral and other E&S markets have the option to go
directly through retail agents as long as they have an excess
and surplus lines license. However, Carey does not believe they
will pursue this option anytime soon.
“We prefer having another E&S expert involved in
the transaction. A retail agent may see the type of risk we
write once a year, whereas a wholesaler sees it 50 to 100 times
Wholesale brokers also provide a level of quality