Because retail insurance agents don’t pay anything out of their own pocket for their wholesaler the service is free, right? Wrong. While it is true that commissions and fees are paid by the insured, the reality is that retailers do pay for their wholesale insurance brokers in various ways. The irony is that a great wholesaler ultimately costs you a whole lot less than a bad one.
The most obvious way you pay for your wholesaler 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 you get. Every unfair commission split equates to a payment you make to your wholesaler broker. You deserve to know how much commission your 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 you are to charge a fee you feel is appropriate for the value you add for your 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 your competition. You pay when your wholesale broker’s fees are too high.
Poor service might not be something you’re paying for directly, but it certainly costs you something. Good service is easy to talk about but difficult to deliver day in and day out. As the wholesaler’s customer, consistently good service is exactly what you should get. Every time you do not get the service you need you are less able to provide good service for your clients. Everyone’s stress level rises, and everyone but the wholesaler pays for it.
One of the most important things I do as a specialty wholesale broker is managing my retail customer’s expectations. The same is true for you when working with an insured. It all comes from upstream: If the retailer’s expectations are not managed by their wholesale broker, then the retailer is unable to manage the expectations of their clients. A wholesaler should never make you look bad to your clients, and when they do, it costs you.
Finally, you pay when your wholesale broker makes mistakes, and as medical professional liability specialists, we see the same thing happen time and time again. Just because a wholesale broker has access to insurance companies that write 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, you 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 insurance companies you can’t get to on your own. They should compensate you fairly, provide you with solid service, manage your expectations, and have expertise in the product they are placing on your behalf. In short, they should be an expert consultant and dependable business partner.
One thing is for sure – a great wholesaler will ultimately cost you a whole lot less than a bad one. When it comes to your medical professional liability placements, are you paying too much?
Retail Brokers!
If you're sick and tired of paying too much for your medical professional liability broker it's time to find someone better. Book some time with Jason today and learn how partnering with Ethos cuts your costs.
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