5 Ways Retailers Pay for Their Wholesale Insurance Broker
Because retail insurance professionals don’t pay anything out of their own pocket for the service their wholesale insurance broker provides it’s free, right? Wrong. While it is true that commissions and fees are paid by the insured, retailers actually do pay for their wholesale insurance broker in many ways.
- The most obvious way is via retained commission. Insurance companies typically pay the wholesale insurance broker a fixed gross commission percentage for the policies they place. The more commission the wholesale broker retains, the less the retailer gets. Every unfair commission split equates to a payment the retailer makes for their wholesaler broker. Retail insurance professionals should know how much commission their wholesale broker is keeping on every placement.
- 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 retailer is to charge a fee they feel is appropriate for the value they add for their clients. Worse yet, anything over a reasonable wholesale broker fee is very visible on the dec page and so will make that client a target for the retailer’s competition. Retailer’s pay when their wholesale broker’s fees are too high.
- Poor service is another way the retail insurance professional 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 retailer should get. Every time a retailer does not get the service they need they are less able to provide good service for their clients. Retailers pay.
- 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 retailer’s expectations are not managed by their wholesale broker they are unable to manage the expectations of their clients. Again, they pay.
- Finally, retail insurance professionals pay when their wholesale broker makes 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 med-mal experts. If a wholesale broker is unfamiliar with such a complicated and volatile product line they are going to make mistakes on those placements. When that happens the retailer 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 insurance professional can’t get to on their own. They should compensate their retail customer 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 retailers pay for their wholesale insurance broker. When it comes to your medical professional liability placements, are you paying too much?