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Did you know your insurance broker may be partnering with a wholesale insurance broker to deliver the best coverage for your company? Not familiar with the term wholesale broker? Keep reading to learn more about the role of a wholesale broker.
A wholesale insurance broker is a type of insurance broker who acts as an intermediary between a retail broker and an insurer (such as an insurance carrier), while having no contact with the insured (the client). Simply put, a wholesale broker works with your broker to obtain better rates with the carrier. The wholesale brokers place business brought to them by retail brokers.
For example, if a client asks a retail broker to transfer a specific or specialized risk—such as professional liability—the retail broker can use the services of a wholesale broker to find a better premium or product for their client. The wholesale broker then reaches out to their markets (aka carriers) to obtain a quote. The retail broker is then able to provide the product to their client, even if they do not have direct access to the insurer that writes this type of business.
The advantages of working with a wholesale broker
One of the advantages of working with wholesale brokers is that the majority of these brokers offer specialized insurance policies. They typically work with non-admitted, surplus line carriers not licensed by individual states. Therefore, wholesale brokers have more flexibility to offer specialty products, as well as premium pricing flexibility.
Flexibility and open structure are additional advantages wholesale brokers offer. As a result, they are able to quickly go to market (aka to multiple insurance carriers). They have better access to certain markets, which can be very advantageous when the retail broker is trying to provide insurance for difficult to place risks.
The main disadvantage of working with a wholesale broker
On the other hand, the main disadvantage when working with a wholesale broker is that the retail broker does not have direct contact to the insurance company’s underwriter or its servicing personnel. The wholesaler needs to manage any questions, changes, or disputes. This could result in communication and timing problems, since the retail broker is not considered to be a representative of the insurance carrier writing the policy for the insured.
Ultimately, it’s essential to have access to as many markets as possible. The more carriers your retail broker is able to write insurance with, the better chance your company has at obtaining the best rate!