Excess and surplus lines brokers promote cost-effective imageReprints
SAN DIEGO — A Conning Inc. report that documents that the cost of commercial insurance policies distributed through wholesalers is, in fact, less than those distributed through retail brokerage channels should help shatter a false myth, say excess and surplus lines executives.
The report by Hartford, Connecticut-based Conning was the focus of a session at the Wholesale & Specialty Insurance Association’s 2017 Annual Marketplace being held this week in San Diego.
The report, which was first issued in September 2016 and is based on statutory data, concluded that the total median non-loss cost ratio for a composite group of wholesalers was lower than the ratio for a composite of retail brokers by a 0.9 percentage point. Non-loss costs include commissions, taxes, licenses and fees, other acquisition expenses and general expenses.
The report was commissioned by WSIA’s predecessor organization, the National Association of Professional Surplus Lines Offices Ltd. The WSIA was formed by the merger of the NAPSLO and the American Association of Managing General Agents, effective Aug. 1.
Hank Haldeman, president of Anaheim, California-based excess and surplus lines broker G.J. Sullivan Co. and a past NAPSLO president, said the idea that working with wholesalers is more expensive than working with retail brokers has been a “persistent misstatement that suggests we are not cost-effective.” This led him to encourage NAPSLO’s board of directors to commission the report, he said.
David E. Leonard, chairman and CEO of Atlanta-based RSUI Group Inc. and a former NAPSLO president, said, “The intent was not to have a marketing device that said, ‘We’re cheaper.’ The intent was simply to say there is minimal to no cost differential,” between wholesalers and retail brokers, said Mr. Leonard.
The report’s findings mean “we have a quantitative counterargument to a misconception that many in our business, particularly in the retail community, have had,” said Mr. Haldeman.
“We have an argument that we’re adding value and we’re adding experience and we’re doing so at no additional cost, so which retailer is the smarter one, the one who bypasses that” or the one who works with the wholesaler, Mr. Haldeman said.
The session, which was hosted by WSIA’s U40 group of under-40 members, was moderated by Erin Dolan, assistant vice president, business analysis and communications manager at RSUI in Atlanta.