To avoid getting left out, offer a wider variety of coverages and connections.

By  Kevin Amrhein

As all signs point to turbulent air through 2009, members of the wholesale community are organizing to avoid Dear Johns from large and mid-sized brokers attempting to consolidate distribution. If the day arrives where brokers’ redistribution efforts award the spoils to a shrinking pool of victors, wholesalers are devising strategies to increase the likelihood of life on the short list.

Some believe the day of reckoning has already arrived. One member told me of a national broker that was in the process of evaluating its wholesalers in an effort to trim contracts from “over a hundred down to the teens.”

Joel Cavaness, president of Risk Placement Services (RPS), believes acquisitions will help RPS maintain its position on the distribution lists of its retail partners. “When larger brokers begin consolidating their wholesale listings as we are already seeing,” he says, “acquisitions…will help keep RPS at the forefront of the wholesaler segment.”

In December, RPS announced its acquisitions of the Garden City, N.Y.-based Treiber Group and the Treiber Agency Group. The latter serves as a wholesaler for Treiber’s network of independent retail agency clients throughout the Northeast and reports to Cavaness.

Treiber provides multiple products and services for personal and commercial insureds through retail agents, many of whom lack the capacity to obtain their own contract with large carriers. What makes this acquisition unique for RPS, Cavaness says, is the ability to also provide standard line products to commercial insureds, a practice which until this acquisition was only a personal lines option for the wholesaler. Cavaness believes a standard lines option will provide a welcomed benefit to RPS’s traditional E&S model.

Acquisitions are not new to RPS’s growth strategy; Treiber was the company’s third in 2008. Cavaness says when it comes to expansion opportunities one eye is always open.

Philip J. Harvey, president of Venture Programs in West Chester, Pa., estimates that over the last 24 months, he and other program administrators have been forced by highly competitive insurers into case after case of large premium cuts—often 25% to 35%—just to keep existing business on the books.

In some specific cases it’s much worse. “With the national brokers suffering constraints, we’ve seen regional brokers jumping in and slashing prices. In some cases, a $250,000 account may be priced as low as $100,000,” he says.

Harvey, whose operation serves as an administrator of specialty programs ranging from golf clubs and resorts to military housing, plans to weather the storm through enhancements he collectively calls “deliverables.”

“The secret to success in niche underwriting is understanding the market you’re serving and providing more and more extras and deliverables,” he says. “These deliverables take a lot of pressure off retailers.”

One example is found within Venture’s Preferred Club Program. Venture formed a joint venture with CardioReady, a provider of training and certification in the use of automated external defibrillators (AED), the ubiquitous portable devices used to prevent death from sudden cardiac arrest. “We saw this as an excellent deliverable as it serves to help our clients attract business as well as reduce liability that comes from the improper placement or use of AED equipment.”

Harvey says the enhancement gets retailers to consider Venture’s program over aggressive competitors who may offer lower prices but offer far less expertise. “We don’t make money off it. We just hope our efforts generate enough goodwill to increase retention and referrals.”

To enhance its professional liability services, Venture also offers retail partners access to consulting services designed to assist them with the proper structure of complex professional liability risks. This is designed to address what Harvey describes as overwhelming frustration he’s heard agents express about the lack of assistance from others offering similar products and very little knowledge. “We found that around 90% of the agents we asked could use some consultancy to help their clients understand complex professional liability coverage,” Harvey says. “This became a deliverable we offer to agents whom we wholesale these products to.” Often, he says, a retailer will take a risk to a wholesaler who “spreadsheets” it for them across 10 markets. “What we’re trying to do is make sure the agent has the opportunity to learn and explain the coverage to the client.”

There’s no question that times are difficult for many retail and wholesale agents and brokers. But the good ones don’t despair. They inspiringly insist that faith in their respective growth strategies will deliver them to port, even if it means arriving tied to the mast.

Amrhein is wholesale editor.

The Council's Wholesale Insurance Leadership Forum

WHO: Key executives from The Council’s wholesale distributors and market leaders.
WHAT: Three days of exclusive networking. Relationships are forged and critical business contacts made to serve you all year. WHERE: Four Seasons Aviara, San Diego, Calif. WHEN: April 5–8, 2009 WHAT: High-level networking—executive to executive—equals unparalleled business opportunities and strategy sessions.
TO REGISTER: www.ciab.com/wholesale09