Retail-Wholesale Conflicts DebatedInternational Editor

While industry practitioners say there is an inherent conflictof interest in a retail broker owning a wholesale broker, otherssay, with strong firewalls, it isnt an issue.

“An independent agent is competing with Marsh retail and Aonretail every day,” said one independent wholesale broker, who didntwant to be identified. “So why would somebody want to send theirbusiness and divulge all that information to a competitor?”

Jeremy Cooke, president of Markel International in London, theinternational arm of Markel Corporation, takes a different view,suggesting that “Chinese walls” can respond to that issue.

“Ultimately, retail clients are concerned about performance andgetting the job done in what is still a very difficult marketplace,rather than the ownership of any particular concern,” he said.

Mr. Cooke will soon be joining Marsh Inc. to take up the newlyformed post of president and CEO of the companys wholesalebrokerage and underwriting management group. (See related story,page 29.)

“As an independent insurance wholesaler, our clients, who areindependent insurance agents, like dealing with somebody who isneutral and gives unbiased recommendations and is not supporting acompetitor,” said Peter Taffae, president and CEO of e-perils.comInsurance Services, an independent wholesale broker in SantaMonica, Calif.

Some agents fear that a retailer will obtain business throughits wholesale subsidiarys connections and dont want to financiallysupport their competitors, i.e., the retail parents of wholesalers,he said.

Joseph Timmons, president of Midwestern General Agency, a KansasCity, Mo.-based wholesale broker, said the issue of a conflict ofinterest is more perception than reality and would not be thegeneral practice of reputable retailers.

It would be very unethical for retailers to use their wholesalearms as a source of business, he said, noting that, as a result,strong firewalls exist between retailers and their wholesaleunits.

Mr. Timmons said, in general, his agent and broker clients donot seek out his agency because they have “an aversion to thenational wholesalers that are owned by retailers.”

“Its usually because weve got a particular expertise in acertain area,” he said, adding that wholesalers with retail parentsalso will have expertise in given classes of business.

One of the biggest problems facing wholesalers is retaining goodproducers, he said. “With the marketplace being what it is rightnow, its very tempting for employees of successful wholesalebrokers to jump ship and set up with another firm or set up theirown firm,” he added.

While keeping good people has always been an issue forwholesalers, its even more of a problem in the current market, hesaid.

Reproduced from National Underwriter Edition, April 28, 2003.Copyright 2003 by The National Underwriter Company in the serialpublication. All rights reserved. Copyright in this article as anindependent work may be held by the author.