Wholesalers Urge Agents To Stop Making Soft Market Mistakes The key to successfully tapping into the wholesale markets lies is having good, long-term relationships with a few surplus lines brokers, according to officials of a major wholesalers association.
However, retail agents continue to make the same error–seeking to find the lowest price by placing a risk with a large number of brokers, executives of the National Association of Professional Surplus Lines Offices, Ltd. said.
"When working with the surplus market, the biggest mistake [retailers] continually make is taking the risk to several facilities," said Nick Cortezi president of Kansas City, Mo.-based NAPSLO.
The wholesale brokers are not averse to taking on these new accounts, and if they had the time would cultivate new relationships, said Mr. Cortezi, who is also chief operating officer of All Risks, Ltd., headquartered in Baltimore, Md. But in this hard market it is not possible. There is too much business to deal with, he said.
The practice also "ties the hands" of many brokers, because too many of them are trying to place the same risk with the few carriers willing to look at it, said Mr. Cortezi, calling this a "major issue" for the surplus lines brokers.
He stressed that what producers need to do is to make the idea of partnering with a wholesale broker a critical part of their practices.
Another major problem, he noted, is that agents fail to come to the wholesale markets with placement goals, such as pricing targets and necessary coverage terms. Agents "need to say, This is the target–what we want you to do with this risk," Mr. Cortezi said.
These goals would bring focus to the placement of the risk and define how it is to be placed. For carriers, this is key to understanding the outline for the placement and establishing whether a risk is one they are willing to work to write.
Richard Polizzi, NAPSLOs secretary and president of Western Security Surplus based in Pasadena, Calif., advised that agents should "focus on two or three" wholesalers, understand their appetites, and build influence with them. "My biggest clients get my attention," he said, offering the reason for his advice.
Despite the hard market conditions, it is not impossible to find a wholesaler to work with, he said. But it requires a little legwork and research on the part of the retail agent, according to Mr. Polizzi.
"A lot of wholesalers can do a lot of market research for [agents], but they want to get paid," he said. "We do not mind providing what we know, but ultimately we want a business relationship."
He also noted that "beating down the price" is not in the retail agents or the clients best interest. Having a good relationship with a wholesaler can produce a better product at a competitive price, he asserted. "The cheapest price is not always the best deal," he said.
On the other hand, wholesalers and managing general agents must be aware of what their customers–the retail agents–expect, advised Mac Wesson, NAPSLOs treasurer. Wholesalers and MGAs "need to be mindful of the expectations that our customers have of us–that is, to be responsive to their needs and to do the job in a timely fashion," said Mr. Wesson, who is president and chief operating officer of U.S. Risk Insurance Group, based in Dallas.
"We have added pressure on us created by the added flow of business," he said. "But it is an opportunity." While "sometimes it is hard," he said, "delivery of services is paramount in our business. [Wholesale] brokers need to be mindful that there is an increased public eye on our business."
In addition to delivering business in a timely manner, it is incumbent upon the wholesalers and MGAs to be professional and to deal with insurers who are "financially sound and reputable," he said.
Mr. Wesson and the other NAPSLO representatives said they expect hard market pricing to continue through 2003, and maybe into 2004, but with less dramatic price increases than in 2002. "At some point, there will be a leveling off, but not softening," Mr. Wesson said.
No matter what the market condition, soft or hard, wholesalers remain "reactive" to the needs of their customers, according to Mr. Polizzi.
Retailers, he added, "should not just think of the wholesale market as the market of last resort, but as an alternative market. The key [for us] is knowledge and relationships."
"Surplus line brokers are always considering how they are going to position themselves," Mr. Cortezi said. They face two challenges during a hard market, he said: "How to capitalize on the current market and how to position yourself to continue to do well when the market turns back down."
"We focus on the people who continued to support us in the soft market and will require our services in the next market," he added.
Reproduced from National Underwriter Edition, February 24, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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