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“Where do you add value? How does your firm define its value proposition?”
Kevin Westrope, a NAPSLO board member and co-chair of NAPSLO’s Communications & Technology Committee, provides an answer that’s becoming more and more common among NAPSLO members.
“From our company’s perspective, we’ve never traded on market access,” said Mr. Westrope, president and CEO of Westrope, a wholesale brokerage in Kansas City, Mo. Mr. Westrope used the phrase “traded on” in the sense of an operating philosophy or sales message that a company might build a business around.
“The lines are blurring between wholesale and retail, which means that retailers have access to a number of markets. But that doesn’t mean they have the best relationship, or the ability to field the best product for an insured,” Mr. Westrope said.
“So we have always, from Day 1, from the beginning of our business stressed…that we’re not bringing access,” he said. “In fact, a fairly substantial portion of our business is written through markets that retailers could access, but they either don’t have the relationship or they don’t have the expertise to do that,” Mr. Westrope explained.
“Oftentimes what wholesalers try to sell is [the idea that they] are only going to do business with [insurance company] markets that only do business through wholesalers.” In contrast, what his firm has “tried to stress is excellence in our product…and having some of the best technicians, and then having very strong relationships with markets so we can bring some things to the table,” he said.
Mr. Westrope said concerns have arisen in recent years for a subset of wholesalers whose market message and reason for being hinged only on their ability to get quotes from insurance companies that were out of reach for retail brokers.
NAPSLO board members Robert Sargent, president of Mercator Risks in Hartford, Conn., and Matt Nichols, president of All Risks, Ltd. in Hunt Valley, Md., are in the same camp as Mr. Westrope.
“The wholesale system is providing value to retail insurance brokers by solving their clients’ specialty insurance needs through expertise and experience,” said Mr. Sargent, who is also NAPSLO treasurer.
“We have a whole industry of specialty wholesale brokers and insurers, represented by NAPSLO, which is built to solve coverage challenges. The individuals involved are experts, adding value by knowing about types of risks, about the exposures presented and the coverages needed, and about underwriting the coverages,” he said.
“If our only value-add is that we can access markets because others are simply restricted, I think that would be a pretty short livelihood,” Mr. Nichols said.
Referring to his own firm, Mr. Sargent said Mercator’s team of professional liability experts knows “the exposures that a particular type of professional liability organization might have, the coverage it will need, and the markets that will competitively provide the coverage.”
“Because of their expertise and their underwriter relationships, these experts can quickly provide specialty solutions,” he said.
The wholesaler needs to “go out there and explain to the retailer why we think we add value,” Mr. Nichols said.
“We do have access to a group of markets that they don’t have access to, but we also have access to some of the similar markets that they can access.” The added value, he said, comes from “our ability to understand coverage, our ability to deliver from a service standpoint—getting a quote on time, figuring out how to resolve an issue, having a more significant relationship with a carrier and figuring out how to get everything back to them, whether that’s a quote, that’s a binder, that’s an endorsement, it’s a policy [or] a simple response on a coverage issue.”
Wholesalers that deliver value from a service standpoint—at the same level or better than retailers can deliver service internally—add significant value to the process because they allow retailers to be “going out and simply finding additional new business to grow their books and their agencies on an overall basis,” Mr. Nichols said.
“Our discussion internally is very simple right now—it’s all about the client. You’ve got to get out there, you’ve got to get out in front of the retailer, you’ve got to give them a reason to send the business, and I don’t think that ultimately is driven by compensation….At the end of the day, it’s us having relationships—us being visible.”
“For All Risks, as a whole—from providing the quote to what we do on the back-end service—it’s about doing it better than anybody else out there, whether it’s a carrier we’re competing against or another wholesaler,” Mr. Nichols said.
Alan Jay Kaufman, chairman, president and CEO of Burns & Wilcox in Farmington Hills, Mich., noting a trend of increasing consolidation that is occurring in the retail broker sector, suggested that wholesalers can show increased value to retailers as they struggle to control costs in this environment.
“They can outsource the high-touch transactions to Burns & Wilcox, and concentrate on the transactions that are within their own core competency,” he said.
NAPSLO carrier executives said they appreciate the value that wholesalers bring—and they seek out the best-of-breed among these specialized producers.
“The wholesale distribution system offers us the opportunity to have a much larger service footprint nationwide, delivered by qualified professionals at a cost much lower than we could ever hope to deliver ourselves,” said Christopher Timm, president of Century Insurance.
“In soft market times, it does seem like the wholesaler's value proposition may be diminished, but I would contend it is increased,” he added. “It is worth more to us as a carrier, since they are still providing the local knowledge and touch at roughly the same unit cost, and worth even more to a retail agent who has to go outside its agency plant of direct appointments to make a placement in an efficient manner.”
“The knowledge base and the physical plant of the wholesale distribution system is a great asset to both E&S carriers and retail agents that I believe cannot be duplicated in terms of quality or cost,” he concluded.
Jonathan E. Michael, CEO of RLI Corp. in Peoria, Ill., said, “I think the wholesale broker is the lifeblood of the E&S industry.”
“If that wholesale broker were not there to bring the expertise, to know what market to turn to for an individual risk, we would have a lot of uninsured risks in the country, I believe,” Mr. Michael said.
At Admiral Insurance Company, President Jim Carey offered the following assessment of his company’s dealings with the wholesale broker segment. “We seek out the producers that have the acumen and ethics to be the best at our type of business, and we remain wholesale dedicated,” he said. Our experience is that ease, efficiency and expertise is the value proposition that works for us, and for our best producers.”
“Not all producers are able to invest in their people and, in this business, the best people are the advantage,” he continued. “Sometimes that only gets you a few more inches ahead of the competition, such as, in a soft market cycle. However, in a robust market, it is the difference between maximizing the opportunity and missing it completely,” he said.
“With that long-term view, we continue to invest in the best—both in our own people and in the wholesale community, which represents us.”