Retail Agencies Want More Than Just Quotes From Wholesale Brokers

The best wholesalers go the extra mile for their retail 'clients'

You can't talk to retail brokerage executives for long about what they look for in a wholesale broker partner without hearing the term “value added.”

“What that means to me may not be the same thing it means to others,” said Frank Krisanits, president and chief operating officer of Diversified Risk Insurance Brokers in Emeryville, Calif.

Mr. Krisanits, who couldn't quite steer clear of what he believes is an “overused sound bite,” went on to give several clear examples of exactly what “value added” means to him–beginning with an example related to placing directors and officers liability insurance.

At Diversified Risk Insurance Brokers, he said, there are 13 account managers whose “jobs are, on existing business, to go out and when necessary to come back with alternative proposals for [the firm] to present to the client.”

“With 13 people, and multiple D&O markets with different appetites…, you could be looking at two dozen possibilities for a client,” he said, noting that developing a fair comparison of all available coverage options is “incredibly expensive” for his firm. Plus, “if we miss something, it's our [errors and omissions liability] that could be at risk,” he added.

That's where one particular wholesaler dealing in the management liability arena adds value, he said.

“I can visualize the work product that we get” from this wholesaler, he noted, describing a matrix of recommendations specific to the retailer's client. Each row lists coverages and enhancements, and on top of the columns are the names of various markets. Where coverages and markets come together, “you've got a blurb that says, 'This works for your client because of X,' or 'This is something they don't really need. It would simply be dressing.'”

That kind of work product allows a retail broker to sit with a client and zero in on which markets' policies address areas of concern, he said.

Mr. Krisanits said Diversified approaches prospects with the idea of finding out what concerns them with regard to their business operations–and then bringing in resources to help them deal with that, he said, noting that assistance with human resources, disaster planning and other areas might be involved. “Our thrust is to have our producers find clients they think they can build relationships with”–prospects who value relationships “more than a cheap price,” he said. “We don't care what business they're in.”

The result is that the retailer has a generalized book, and there are situations where the business of an individual client, or group, falls outside the appetite of national carriers, he said. A group of automatic fire sprinkler contractors is one that is unattractive to many underwriters, he said. Their companies perceive a catastrophe exposure related to the possibility that the sprinkler system won't work, which could be traced back to the contractor.

“So we need to involve a specialty carrier,” he said, which in terms means going the wholesaler route.

In other areas, like management liability, national or regional carriers might say they want to write some of that business–”and they literally mean some of it,” he said. “There's a significant amount of that business they don't want anything to do with,” he added, explaining his firm's reason for developing a relationship with a wholesaler that has experts devoted to management liability.

Mr. Krisanits and other retail broker representatives interviewed by National Underwriter say they have a core set of wholesalers they deal with regularly.

Mark Nimmo, senior vice president of SullivanCurtisMonroe in Irvine, Calif., said that his firm shortened a rather long list of wholesale partners about four or five years ago. “I think it's probably typical. We have a number of account executives, and they have buddies out there that they like doing business with. We ended up looking at a list [and found] we did business with literally about 100 different wholesalers,” he said.

With such a large number, “they don't know us. We don't know them. We've got no volume with them,” he said, noting that his firm undertook the painstaking process of paring the list down to three.

One characteristic the firm looked at to trim the list was the ability to handle most of its needs in the excess and surplus lines market, selecting Swett & Crawford, a large national wholesaler, as one of the three. “They can get anywhere in the United States, and they've got specialists” in many areas–such as California earthquake, a particular need for SullivanCurtisMonroe.

The list also includes American Wholesale Insurance Group and Lemac & Associates, a Los Angeles-based firm, but Mr. Nimmo said his agency does occasionally stray from the list–for special programs or unusual risks.

Tucker Lounsbury, regional manager and vice president for the Central New York operations of M&T Insurance Agency in Syracuse, agrees that it makes sense to concentrate business with a few wholesalers. “They're flooded with submissions. They've got to somehow pick through and decide what they're going to work on,” he noted.

“You've got to develop relationships with your wholesalers so that they actually will take the time to work on the business you submit to them,” he said.

Like Mr. Nimmo, Mr. Lounsbury said his firm works with one general wholesaler that handles “everyday Main Street business that simply can't be placed in the standard market–like contractors, which are particularly hard to place because of some different laws.” He also relies on wholesalers that focus exclusively on an industry or class, giving the example of one that might only handle product liability for the chemical industry or gas distributors.

Specialized expertise is also something that Mr. Nimmo's firm seeks. “I know a wholesaler that tries to do product liability, professional liability and California earthquake,” he said. “It's like anything–you just can't be very good at all those.”

Asked whether he had any concerns about wholesalers that were owned by large retail operations, Mr. Nimmo said: “We don't care, if they can do the job for us,” noting that Swett & Crawford is owned by Aon. “It's really more about the relationship–the trust that's built up.” (In February, Aon announced that it was “exploring alternatives” relating to its ownership of Swett & Crawford.)

Mr. Nimmo noted, however, that his firm did have one problem with a D&O specialist whose small-retail operation called on one of his firm's clients despite repeated assurances that the retail and wholesale operations were separate. “We don't do business with them anymore,” he said.

“We handle that initially by having conversations or looking one another in the eye. There's got to be a certain trust factor,” added Mr. Krisanits. In addition, he said, when there are changes in wholesale organizations, “contractual agreements are drafted saying, 'This is our business. It doesn't belong on the retail side.'”

The retailers said that not only is mutual trust a central theme of their best wholesaler relationships but ongoing communication is critical. Plus, they typically cited communications' breakdowns as their No. 1 problem with wholesalers.

“Communication and responsiveness–that's really the name of the game with the wholesale market,” Mr. Lounsbury said. “Many times when you're dealing with wholesalers, you've exhausted efforts in the standard market and you're going to a wholesaler late in the ninth inning.”

He said that retailers also have a role to play in being responsive to needs of wholesalers. “It's going to be a much smoother ride and much quicker turnaround time if you give them the information they're looking for upfront as opposed to having them come back with requests for additional information two and three times.”

“They're going to take your application a lot more seriously–that you really need them on the account–as opposed for just fishing for something,” he added. “The key really is to develop relationships with the personnel in the wholesale shop. If you have relationships with them and you know what they expect–and you can provide that information to them upfront” with a completed submission, including a supplemental application–”then you're going to get a lot more attention.”

“It's all about the relationships,” he said.

As for potential problems, Mr. Nimmo said, “You're always worried about some broker overstepping his binding authority–saying that something is done where maybe it isn't done [or] all of a sudden, it's not the deal you thought it was.”

“You don't want any surprises,” he said.

“It's just like a [retail] client. We try to keep clients apprised of what's going on, who we're talking to, and how we think it's going to end up. We like to hear the same things from a wholesaler,” he noted.

He said his firm meets with wholesale partners periodically, who share insights on where they think the marketplace is going and opportunities they think the retailer should go after. “They call us their clients, which I like. We are their clients, and they recognize that their income is dependent on us,” he said.

Mr. Krisanits advocates other types of meetings as well. “There are a couple of wholesalers we would love to have in front of our clients,” he said, noting that some specialists are invaluable partners who can respond to those occasional curveballs that a retailer might face at a client meeting in the form of a question that requires some specific expertise to answer.

He would also like to see relationships in the specialty lines arena move one step further–with wholesalers allowing relationships to develop between specialty underwriters and retail brokers. “No one knows the client and its operation better than the retail broker,” he said, suggesting that there would be a great benefit if retailers could get in front of specialty underwriters to explain the intricacies of certain accounts.

Special Reports /

Retail Agencies Want More Than Just Quotes From Wholesale Brokers

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