Wholesale Brokers Look to Continue Offering Value While Addressing Talent Gap

The wholesale insurance market continues to grow premiums while providing value to retail agents and important options to their customers, according to a report commissioned by the Wholesale and Specialty Insurance Association (WSIA).

But the segment must face the challenge of sustaining that growth by addressing the ever-growing talent gap, says the association’s executive director Brady Kelley.

Though the wholesale industry experienced a slight dip in premium last year, mostly due to lost premium from small business shutdowns during the COVID-19 pandemic, other insurance lines made up for it, thanks to a strong economy, Kelley said.

The WSIA 2021 Midyear Report of the U.S. Surplus Lines Service and Stamping Offices showed a 21.9% increase in surplus lines premium, and a 7.2% increase in transactions compared with the same period in 2020.

“With economic growth comes insurable risks and opportunities … and you’ve got the standard market whose appetite for certain levels of risk is changing and reducing,” Kelley said. “That’s obviously where our market comes in and serves as a pipeline and somewhat of a safety valve for those risks that can’t be written on the standard basis anymore.”

The association held its annual convention in San Diego in November for the first time in two years.

WSIA presented information at the event that it will use to educate retailers and risk managers on the value of utilizing wholesale brokers.

Agents shouldn’t be deterred from using wholesalers because of concerns that doing so increases the cost for their insureds, Kelley said, pointing to a recent analysis by Conning Inc.’s Insurance Research Division that shows the opposite is true.

The analysis, which WSIA commissioned, compared the distribution costs, cost structure and ratios between the wholesale and retail channels from 2016 to 2020. It found that the total non-loss cost ratio of distributing commercial insurance policies through wholesalers was 1.8% points lower than the retail side.

Kelley said WSIA first asked Conning to do the study back in 2016 to debunk the myth that using a wholesaler makes the transaction more expensive.

“A lot of value comes from that wholesale distribution partner and at no extra cost,” he said. “So that’s kind of our bottom line — if there’s a retailer out there that doesn’t have a wholesale relationship, there are a lot of reasons they should.”

Kelley said the wholesale industry is also focused on finding ways to address what he called “evolving” risks where the standard market is pulling back capacity. Right now, these risks include cyber, new construction and commercial auto.

State insurance regulators are engaging the wholesale and excess and surplus lines market more than ever, as they seek to eliminate barriers to coverage for people in their states, Kelley said.

For example, at least 18 states have put flood insurance on their export lists or removed some of the diligent efforts requirements for placing flood risk so consumers can access the private market, he said.

“They see it as the market that provides solutions for them,” he said.

Recent consolidations in the wholesale market are an indicator of capital interest in the segment because it is so high performing, Kelly said. But to sustain that growth, the wholesale industry has one very important hurdle to overcome — the talent gap — and that’s a big challenge at the moment.

“Everybody’s talking about talent and the need for talent is higher right now than ever,” he said.

The association is launching new diversity initiatives, such as the WSIA Diversity Foundation, designed to help attract new people to insurance careers, particularly young people exploring college degree programs.

Getting young people to consider working in insurance can be a hard sell, he said, so the association is highlighting the different career paths available and the unique things people can do. And, educating them on the fact that selling insurance is about more than just selling a piece of paper, he said.

“They’re selling a promise, and that promise is to protect things and protect people, and that’s what this business does,” he said. “As soon as students hear that kind of stuff … they’re hooked.”