Who Gets the Ball
Why you? Why them? Who decides who
gets what in the wholesale world.
How insurers choose to access the marketplace is only one
piece of the plan. Through frequent conversations with members
of The Council representing both wholesalers and carriers, it
is evident that “why them?” and “why
you?” represent separate but equally important elements
of the distribution decision (first “Law and Order”
reference, I won’t promise it will be the last).
Specifically, under what circumstances does the insurer motion
for a wholesaler, and when they do, who gets the ball?
Take William Pitt, marketing chief for Beazley Group.
Beazley established Beazley USA Services and opened an office
in Ponte Vedra, Fla., to underwrite surplus lines risks on
behalf of Beazley’s syndicates at Lloyd’s.
Specializing in high-valued homeowners, commercial property and
transportation risks, Beazley USA distributes 100% of its
business through a small network of wholesalers.
Keeping the network small is an essential part of Beazley
USA’s service initiative. “The Ponte Vedra office
distributes through just a few wholesalers located in different
regions of the country,” Pitt says. “Retailers can
rest assured their access is provided by a wholesaler who
understands risk in their part of the country.”
Ironically, some of the wholesalers working through Beazley
USA have their own binding authority with Lloyd’s.
“They choose to work through us because they value our
underwriting diligence and expertise,” says Pitt.
“They also appreciate our structure, which essentially
gives us complete control of the account including
underwriting, service and claims.”
Beazley USA, Pitt explains, seeks relationships with
wholesalers who are familiar with and communicate the virtues
of the Beazley brand.
“We choose wholesalers we feel give us the opportunity
to achieve a reasonable volume of business that fits our
profile. We know we can’t write everything; we just ask
for a reasonable look at what fits.”
In acknowledging this simple fact, Pitt identifies the
importance of retailers finding a match for their insureds.
Through an experienced wholesaler, he says, the retail agent
can gain access to a range of surplus lines markets, with one
of those markets providing the solution. “We recognize
that Beazley is only one of several alternatives, and we do not
expect to write every attractive risk we are shown.”
Gary Tiepelman, senior vice president of underwriting for
Scottsdale Insurance Co., says the reasons to rely on
wholesalers as a distribution source are simple:
“It’s cost effective. They understand the nuances
of their respective regions, i.e., the legal climate, the areas
where the risks are located, and the retail agents.” He
says, “Wholesalers are like a branch office for
Scottsdale is a large E&S and specialty lines carrier
with annual premium of more than $2 billion. Deciding which
wholesale brokers to use for distributing its product is a
challenge, he says. “Our main goal, of course, is to grow
through our existing agents [and wholesalers], and therefore
appointments are not readily made. When an appointment is made,
it is because it is deemed that a partnership will be mutually
beneficial. We are selective in our appointments to maintain
the value of our franchise. If everyone has us as a market, we
are no longer a differentiating factor.”
Tiepelman cautions that excessive appointments pit valued
agents and wholesalers against each other in a trust- and
relationship-bruising fight for the business.
When it comes to deciding whom to appoint to sell
product—retail and wholesale—past relationships are
paramount, often more important than numbers.
“This is a relationship business,” Tiepelman
explains. “Past relationships from within our
organization and with prospective agents are very influential
in obtaining an appointment.”
Wholesalers rely on a similar approach when deciding which
retailers to serve. One wholesaler told me that he believes the
rationality of using predetermined, statistical
parameters—somewhere between profit-sharing and
“Glengarry Glen Ross”—for selecting and
retaining retail partners in a cyclical marketplace often
becomes an exercise in futility.
“We just don’t know where the market is going to
take us,” he quipped, shoulders shrugging as if to say
“Whaddya gonna do?” in his best Tony Soprano.
It’s those relationships that breed perseverance when
times get tough, he says. “The last thing we want to do
is burn bridges.”
Amrhein is wholesaler editor.