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5 Ways Retail Agents Pay for Their Wholesale Insurance Broker

David Huss - Mar 17, 2014

Retail agents don’t pay anything out of pocket for the service their wholesale insurance broker provides so it’s free, right?  While it is true that commissions and fees are paid by the insured, retail agents actually do pay for their wholesale insurance broker in many ways.

  1. The most obvious way is via retained commission.  Insurance companies typically pay the wholesale insurance broker a fixed commission percentage for the policies they place.  The more commission the wholesale broker retains, the less the retail agent gets.  Every unfair commission split equates to a payment the retail agent makes for their wholesaler broker.  Retail agents should know how much commission their wholesale broker is keeping.
  2. In addition to retaining commission, wholesaler brokers typically charge at least one type of fee to bolster their income.  These fees are often $500 – $1,000 and sometimes much, much more.  The greater the fee charged by the wholesale broker the less able the retail agent is to charge a fee they feel is appropriate.  Worse yet, anything over a reasonable wholesale broker fee will make that client a target for the retail agent’s competition.  Retail agents pay when their wholesale broker’s fees are too high.
  3. Poor service is another way the retail agent pays.  Good service is easy to talk about but difficult to deliver day in and day out.  And yet as the wholesale broker’s customer, consistently good service is exactly what the retail agent should get.  Every time a retail agent does not get the service they need it negatively impacts the relationship with their client.  Retail agents pay.
  4. And how about managing expectations?  In my view one of the most important things I do as a specialty wholesale broker is manage my retail customer’s expectations.  If the retail agent’s expectations are not managed by their wholesale broker they are unable to manage the expectations of their client.  Again, they pay.
  5. Finally, retail agents pay for their wholesale broker’s mistakes.  Just because a wholesale broker has access to a handful of insurance companies that write, for example, medical professional liability, it doesn’t mean they are experts in the product line.  If a wholesale broker is unfamiliar with a complicated product line such as medical professional liability they are going to make mistakes.  When that happens the retail agent will pay by losing a client or, worse yet, by being involved in a costly E&O claim.

A good wholesale insurance broker should be more than an access point to markets the retail agent can’t get to on their own.  They should compensate the retail agent fairly, provide them with solid service, manage their expectations and have expertise in the product they are placing on the retail agent’s behalf.  In short, they should be an expert consultant and dependable business partner.

One way or another retail agents pay for their wholesale insurance broker.  Are you paying too much?

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