Who is in Control of the Insurance Placement? A Case For Using One Retailer and Multiple Wholesalers

As an insurance wholesaler myself, it might be strange for me to make a case for using multiple wholesalers in your property placement, but I actually think it might be a good thing.

The person in control of the placement is going to determine how well it's going to be placed.  There are really five possible scenarios for control of a commercial insurance placement, and that is with the insured, the retail agent, a consultant, a wholesaler or I suppose in very rare cases that I can't think of at the moment, the insurance carrier.  The one with control over the placement, should also be the most knowledgeable and have the power to move any pieces of the placement around at will.  It also may be obvious that the one with the control over the placement should be closest to and trusted by the insured.

The worst case scenario.  The worst thing that can happen is for an insured to employ several insurance agents with the hope that they will scurry around the market to present them with the best possible deal.  I mentioned in this earlier post that the commercial property market is limited in capacity and underwriters (it's a very small world out there), and breaking up the market among many 'shoppers' will lead to a suboptimal placement.  This type of tactic may work with buying life insurance or cell phones, but it doesn't work in commercial insurance (see my post on blocking to find out more).  In the scenario below, there are two different retailers using two different wholesalers who have secured the carriers shown.  Suppose the ideal theoretical placement would be with carriers F, B, L & Q (shown in green).

This would lead to the best possible terms in the market at the best possible price.  Of course, it is extremely rare that we know this because all of the markets are vetted.  Unfortunately, each wholesaler only has the ability put together a placement with the carriers they have and present that to the insured.  In this case suppose the wholesalers present these two placements:

Although each placement would work, neither one is ideal.

A better scenario.  If an insured believes that multiple parties need to be involved to 'keep the others honest' and make sure their placement is the most competitive, then it makes more sense to split up the market at the wholesale level, not the retail level.  Why only one retailer?  Because it would be like trying to build a house with two general contractors in charge; a very confusing mess.  You can however, use more than one wholesaler.  In the house-building analogy, the GC can go out and buy materials from any number of suppliers, but you as the home buyer need to make sure they know how to put it all together effectively.  Of course, your insurance retailer needs to understand how to layer programs effectively and can control gaps that might occur between layers.  A savvy, knowledgeable retailer can direct the traffic in the market and ask for specific parts of the placement with specific terms depending on what others are doing in the market.  If the retailer has chosen the right wholesale partner, then they will offer new ideas on how to structure the placement as well.  In this scenario, Retailer A has the ability to direct traffic and put together the idea placement.

A consultant can also be added between the retailer and insured as long as only one retailer is still involved in larger placements.  Be careful since consultants may try to pit retailers against each other which may yield a suboptimal result.