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Channel Check by Kevin Amrhein Who Gets the Ball

Why you? Why them? Who decides who gets what in the wholesale world.

By  Kevin Amrhein

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 us.”

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.

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