Bigger Isn’t Always Better: Debunking Myths About Scale Mega-Wholesalers Want You to Believe
Unlike a bushel of soybeans, business Insurance is not a commodity. Inappropriately crafted coverage can devastate a small company. The intermediary’s knowledge, integrity and commitment to excellence are critical. As anyone who has spent an exasperating hour on a 1-800 customer service call knows, bigger is not always better. There will always be room for a small, responsive intermediary in any link in the insurance distribution chain, as long as the intermediary adds value.
To refute the four common myths about the importance of large scale, I offer the following observations:
- Retailers are paring down their distribution outlets and cutting out independent wholesalers – Well run retailers are relentlessly efficient, and many are choosing to keep an independent wholesaler in their line-up to boost productivity. At a good independent wholesale shop, the focus is on you, rather than the size of the account. You get the first string on everything you send in, not just the big stuff, and you always have immediate access to an owner whose #1 priority is to do right by you and your insured. The whole shop collaborates to help place your challenging accounts quickly, correctly, and affordably. They are a trusted partner who shares your passion to do the best possible job for your client.
- Independent wholesalers can’t afford to hire top talent – Great employees are expensive, but there are a lot of fantastic people out there who are keen to build a long-term reputation for talent and integrity. These people want to provide extraordinary service and build long-term relationships without the intense production pressure prevalent at national wholesalers. Their focus in on you, not the sky-high revenue management demands to meet ROI targets.
- Independent wholesalers can’t offer enough premium volume with their carriers to gain traction – While it is true that carriers want volume, they also want acceptable loss ratios and good hit ratios. Astute underwriters are thrilled to work with a wholesaler who understands the insured and the coverage needs, puts together a good submission, and doesn’t shotgun every account to scores of markets. These submissions go to the top of the pile, regardless of the size the wholesaler. In our case, we have 7 full binding authorities and great relationships with over 100 brokerage markets – ample resources to get the job done.
- Independent wholesalers can’t afford to develop great operating systems – State of the art systems are important, but the cost of computing power drops every year. You don’t need to be huge to afford a great system. Keep in mind too, that the systems are only as good as the people using them.
Finally, independent wholesalers are just that. Independent. By supporting them, you are not funneling profits to a retail parent company that competes with you.
Running a small business has never been easy and the rewards are not always monetary. All entrepreneurs living the American dream know that. Great insureds will seek great retailers, and great retailers will seek great wholesalers. Whether the market is hard or soft, whether mergers are in vogue or not, those who make an unwavering commitment to add value will always thrive and prosper.