Today, as a wholesale broker, my colleagues, many of whom were at one time retailers, laugh when we think about those days. This was one of the reasons we started our own wholesale brokerage operation five years ago. Since that time, we have seen solid growth year after year, and most importantly, we are viewed by our retailers as “business partners.”

The perception, and unfortunately in some cases reality, is that the wholesale broker is merely a “vendor” used only in the following circumstances:

o To place “impossible business.”

o To access certain otherwise closed markets.

o To block markets in certain competitive situations.

o To file surplus lines taxes.

o To serve as a host for the occasional round of golf.

But the sophistication of today's insureds' exposures, complexity of insurance products, stiff competition, rapidly changing legal environment and overwhelming amount of work in placing accounts all require a true wholesale partnership to be in place to meet insureds' high expectations.

The choice of your wholesale partner is a decision that will either bring added value to the process, allowing the retailer to achieve greater success, or, unfortunately, the opposite can occur and the retailer could lose a client. The importance a retailer places on choosing a wholesale partner is as important as the decision the insured made in choosing the retailer.

We suggest that a good place to start is to assess a prospective wholesaler partner's values and mission. At our firm, for example, our mission is to make our retail partners more successful while acting with the highest degree of integrity and professionalism. We believe that focusing our attention on the retailers' needs at all levels of our organization will bring them success and get us invited back often so that in the end everyone including the retailers' clients succeeds.

The following factors might also be considered in choosing a wholesale partner:

o Generalist or Specialist

For a retail agent or broker, knowing the right specialist is one of the keys to differentiating yourself from the competition and winning the account. Granted, it might be hard to remember which wholesaler is a marine specialist, a directors and officers liability specialist, or an earthquake specialist, but not knowing could cost the account or open up the retailer to potential errors and omissions exposure.

No one person–and no one firm–can be everything to everyone and yet still remain completely focused. Today's financial products (D&O, E&O, employment practices liability, legal malpractice, digital liability, and fiduciary liability) require full-time concentration. Each insurance company has a different underwriting appetite as well as its own policy form, and there are constant legislative changes, all of which require the wholesaler to be on top of his or her game every day.

Since all of these products are underwritten with a high degree of subjectivity, the extent to which a wholesaler has cultivated underwriter relationships among the various insurers can make a substantial difference in the quality of a placement.

o Subsidiary or Independent

An independently owned and operated wholesaler is solely dependent on the success of its clients. There are no mixed loyalties. The wholesaler does not have a sister company, such as a retail or MGA subsidiary whose best interest may be in conflict with those of its clients.

Senior management of a wholesale operation should share the same mission as the front line broker. That is why the wholesaler should not have contingency arrangements nor have in-house underwriting authority nor work both the wholesale and retail side of the industry.

In-house underwriting can easily compromise the fiduciary duty of the wholesaler. The wholesaler's duty is to provide the best proposal and to offer unbiased recommendations, even if it is not necessarily in the wholesaler's financial best interests to do so.

Many wholesalers also operate retail divisions, which sometimes compete with the wholesale division's retail client. We believe strongly that once you cross this line there is no coming back. Instead, we suggest choosing a wholesaler who is independently owned and is committed to honoring the insurance industry's traditional insured-retailer-wholesaler distribution system. Ask your wholesaler if the parent company is 100 percent wholesale.

o Broker Compensation

How your broker is compensated within his or her organization should be of concern in choosing your wholesale partner. Each wholesaler has a different philosophy and each system of compensation has its merits.

We compensate our team members based on how well they fulfill our mission of making our partners more successful. We do this via a complicated formula that is largely founded on our firm's overall success rather than purely upon total commissions earned.

Additional bonuses are granted when individuals exceed their personal goals, such as publishing specific articles on our products.

We do not want personal profit to cloud our overall mission, nor is the largest deal always the most important. Rather, client loyalty and the quality of partnership relationships established and maintained play a primary role in setting priorities.

By not compensating our brokers based on each transaction, we believe they can take a larger view of each relationship and will be motivated to do the best job in the long run, not necessarily bringing the highest short-term profit. This motivates and rewards team success. Therefore, it is appropriate to ask your individual wholesale broker the method by which he or she is compensated.

o Claims Department or Claims Broker

Most large wholesalers have a claims department. But is that really the best way to handle claims?

When we formed our wholesale brokerage firm, our brokers met and decided that based on our experience, there is a better way to deliver high-quality claims advice and support.

Rather than a formal claims department, we have a dedicated claims associate who handles the administrative aspects (including claims acknowledgments, record retention and file construction). In addition, all of our brokers meet bi-weekly to review the claims log, monitor the claims process and act in a role very similar to the one which he or she played when originally placing the business–that is, in a hands-on, client-driven manner.

We feel the individual that is best qualified to manage the claim is the one who negotiated the initial insurance transaction, since this person knows the underwriter, knows the coverage, and has a vested interest in the claim's successful resolution.

Anytime you interview or consider establishing a wholesaler partnership, be wary if the claims aspect is not discussed. We believe that active and expert claims management is one of the best ways to earn the respect and loyalty of our clients.

o Real Expertise or Perceived Expertise

Normally “gray hair” could be the first tip as to whether or not a wholesaler possesses real expertise, but there are numerous additional questions that should be asked and answered. There is no substitute for experience, be it as an underwriter, broker, or depending upon the specific type of coverage involved, investment banker or attorney.

When dealing with financial products, any of these backgrounds are helpful. But in my humble opinion nothing beats the hands-on experience of someone who has actually found an underwriter to write some of the most challenging risks, be it a D&O placement of a major airline shortly after 9/11, or an oil company right after Piper Alpha, an EPL placement after a multimillion-dollar discrimination settlement, or a legal malpractice renewal for a firm practicing Intellectual Property law.

Knowing how to avoid the minefields comes with brokering experience–from great mentors and by sharing “war stories” with knowledgeable colleagues. Each placement is unique and wholesale brokers whose members meet regularly to 'toss around' ideas and exchange successful approaches are positioned to meet the toughest challenges.

The more minds the better.

o One Location or Many Locations

It is very popular for wholesale brokers to open locations all over the country. If size truly matters, then it is the right decision to open as many offices as possible.

However, we are not convinced that multiple offices help to achieve the core mission of making retail partners more successful. In fact, many locations may actually make the goal that much harder to achieve on a consistent basis.

Does a retailer really lose anything in the way of service or expertise by dealing via phone, fax and e-mail rather than in person? Not if its wholesale broker is located near a major airport and is committed to making his or her client successful.

The keys are commitment and passion–not proximity. We live in a world that allows us to travel across the country in five hours and be available for face-to-face meetings on short notice.

Infrastructure, values, mission and know-how will make the difference. We believe that your expectations of a wholesale partner should far exceed being available for a round of golf. The emphasis should be on results.

o Service or Lip Service

The key to success in any service business is bringing value to a transaction.

We have already addressed expertise, which cannot be underestimated. When choosing a preferred wholesale partner, however, there are other important value-added services that retailers should seek, expect and receive.

An obvious but often overlooked requirement is finding a wholesaler who consistently keeps a retailer “in the loop” by providing updates and progress reports.

This is important for two main reasons. First, it's the retailers' accounts that are at stake, so the last thing any retailer wants is not to know what is happening with his or her client. Second, it is better for retailers to know about any bumps in the road before they become sink holes! A valuable lesson every wholesaler should learn early in his or her career is that “bad news only gets worse with time.”

Prompt notification about the status of the submission is important. The more the wholesaler takes off your plate–even if they're little things–the more time you have to produce new opportunities. That includes having binders extended before you must call and follow up, and it includes knowing and working with the claims adjuster before the insured calls asking about the status of the claim submitted last week.

Prompt policy delivery is also an important part of a wholesaler's commitment to quality.

Ask your wholesaler what your expectations should be regarding services that are important to you and your clients. Ask how the wholesaler differentiates itself from competitors. Be sure to get tangible answers so that you can use these answers to confirm your decision in choosing the wholesaler as a partner. We often offer to have potential clients call existing clients as references.

The level of quality you expect should be no different than the level of quality you deliver in running your own book of business.

o Filling in the Gaps or Creating Gaps

The right wholesaler should fill in the gaps that exist in your organization, or at the very least enhance the sales process for your company.

For example, we are often asked to perform risk analyses to determine adequate policy limits for our products. Although most brokers try to avoid this assignment, we know how to do this and have the intellectual capital to make recommendations and to provide “worst case claims scenarios.”

On large accounts, we provide both a “briefing book” for soliciting the account and a presentation book for delivering the final proposal. Ask your wholesaler to show you examples of their work product to help you determine if such services bring value. Ask what other services are provided to make the retailer successful and to enhance the relationship between retailer and insured.

Our greatest success stories–and those of our clients–have come about when we worked together as partners with retailers. Your relationship with the right wholesaler should be no different.

Peter R. Taffae is managing director of ExecutivePerils Inc., a national wholesaler dedicated solely to D&O, EPL, E&O, Legal Malpractice, Cyber/Digital, Crime, Fiduciary Liability, K&R, Partnership Liability, and Intellectual Property insurance. He can be reached at [email protected].

We believe that your expectations of a wholesale partner should far exceed being available for a round of golf. The emphasis should be on results.

Art Caption

Playing On the Same Side Of the Net:

The importance a retailer places on choosing a wholesale partner is as important as the decision the insured made in choosing the retailer.

Flag: More Than Lip Service

Wholesale brokers add value when they:

o Keep retailers “in the loop.”

o Promptly notify retailers about submission status.

o Take tasks off a retailer's plate.

Even doing the “little things” gives retail partners more time to produce new opportunities.

o Have binders extended before retailers call to follow up.

o Work with claims adjusters before an insured calls asking about the status of the claim submitted last week.

o Deliver policies promptly.