The terms “wholesale” and “retail” mean something specific in the insurance industry. In general, “retail insurance” means direct sales to policyholders, but “wholesale insurance” are typically specialized brokers that assist retail brokers in finding the right policies for a specific situation. Keep in mind that independent insurance brokers work for you – not the insurance companies.
Wholesale Insurance Agencies
Wholesale insurance brokers typically deal with insurance brokers/agents directly and have little to no interaction with the insured person or company. Wholesale agents usually specialize in one of two areas: insurance as a general managing agent or as a surplus lines broker. Because of their more comprehensive relationships with insurance providers, wholesale insurance agents sell more customized insurance in certain insurance markets than retail brokers.
For example, suppose a client requests that a retail broker cover a particular or specialized risk, such as intellectual property insurance. Most retail brokers are not experts in intellectual property insurance, so they will call a wholesale insurance broker to find the right policies for their client. The wholesale broker then contacts their markets (also known as insurance carriers) to obtain a quote from an insurance company. Even if the retail broker does not have direct access to the insurer that writes this form of business, they can still provide the product to their customer. In some cases, you might interact with your local, retail broker, and you may never have direct contact with the wholesale insurance broker.
Wholesale Brokers Have Deep Knowledge
A wholesale insurance broker typically knows much more about insurance solutions for their specialized niche than the retail broker. These experts help identify the needs of the policyholder, then find the right coverage amongst many different providers.
BlueIron, for example, is both a wholesale and retail broker for intellectual property insurance. Because we are patent attorneys with deep expertise in intellectual property, we know that niche of the market. BlueIron has relationships with a dozen or more specialized insurers who offer IP insurance, and we help your retail broker navigate the IP insurance landscape. When acting as a retail broker, BlueIron offers policies directly to policyholders who might not have their own insurance agent.
Reasons To Work With Wholesale Insurance Broker
- Increased Market Access: When an agent or broker refers to a wholesale broker, it typically involves assistance with a risk or specialty insurance that is hard to find in the retail insurance market. Wholesale insurance brokers possess specialized experience with carriers and insurance companies to provide retail agents access to these markets.
- Speed and efficiency: Wholesalers can enter the market with their versatility more quickly than someone with less experience. Sometimes these brokers have better access to some insurance markets, and access can prove to be very advantageous in the face of the possibility of difficulty.
- Strong relationships: Wholesalers rely on partnerships between retail brokers and carriers. Retail brokers look to wholesalers who are familiar with specialized coverage, and the wholesaler/retailer work together to provide the requisite services. In their turn, wholesalers want to maintain close ties with carriers who can offer the best coverage at an attractive rate. Since wholesalers are able to support businesses both in soft and hard markets, they are an essential element of the excess and surplus insurance equation.
- Expertise: Wholesale brokers know their specialty very well, and they often know the market better than the individual insurance carriers, since they see every offering in their market. Also, since the wholesale brokers place many policies in their niche, they know what the market is seeking. All of this expertise helps the policyholder find the right offering, but it also helps the retail broker meet the needs of their clients with expert advice.
The wholesale brokers have experience in both the soft and hard wholesale insurance markets. These experts understand consumer appetites, can navigate new threats and can account for particular types of risks.
Retail Insurance Agencies
Most people purchase insurance through a retail insurance agent for their business policies. Retail insurance agents handle your insurance needs and help you navigate the insurance industry. They are a policyholder’s first contact when there is a problem or claim, and they call in wholesale brokers to help in specialized situations.
A retail insurance brokerage would typically:
➢ Conduct insurance policy analysis
➢ Negotiate better terms with insurance companies
➢ Obtain insurance rates
➢ Compile information for insurance underwriters
➢ Renew or revise current client policies
➢ Collect premiums from the client
Top Considerations between Wholesale and Retail Broker
Wholesale insurance brokers often have extensive experience in a specific line of coverage or a unique line of coverage and have greater access to or leverage with specialty insurance products, which is particularly important when dealing with difficult-to-place risk management. These brokers possess specialized expertise in their niche of difficult to place risks.
Wholesale brokers, unlike retail brokers, have a clear working relationship with the insurer, while the retail agent that originated the business often does not. Depending on the circumstances, the same broker may act as both a retailer and a wholesaler.
Wholesale brokers are classified into two types: managing general agents and surplus lines brokers. The latter collaborate with retail brokers and insurers to secure coverage for the insured. Surplus lines brokers, unlike a general managing agent, is not bound by the insurer. A managing general agent often has underwriting authority.
Critical Advantages of Wholesale and Retail insurance
Both retail and wholesale insurance providers offer specific advantages to different customers. A significant benefit of retail insurance brokers for customers is their accessibility; most insurance policy purchasers may deal with a retail broker, while wholesalers are mostly behind the scenes, working just in their specialty.