For retailers, there’s no shortage of portals to the specialty carrier marketplace, especially not now. Last year was one of positioning, as stalwart wholesalers and new national firms made big moves with hopes of seizing market share when conditions improve. As conditions change and the demand for access to specialty carriers grows, retailers will have to decide which portal offers the best solution.
For many, those solutions will be found within the traditional wholesale marketplace.
But last year a different choice emerged. Wholesale Trading Co-op Insurance Services (WTCI) is not structured like a traditional wholesaler but rather as a co-op owned jointly by its retail insurance broker members, WTCI executives, sponsors and select financial partners. The long-term blueprint is to serve about 30 large, privately held retail brokers in the U.S.
There’s no question it’s different. But is a co-op arrangement appealing to retail brokers accustomed to the current distribution channel? I asked John Jennings, former president of Crump Insurance Services, who now serves as WTCI president and CEO. He believes that a shared ownership approach more appropriately aligns the interests of the buyer, retailer, wholesaler and specialty carrier, “especially given today’s environment where so many wholesalers are struggling to meet financial demands and continue to provide adequate client service.”
“We do not have the same financial pressures and are free to focus on the needs of our retail members without their wondering if the firm will be around for the long term,” he adds. “In fact, the firm can only be sold if a super-majority of the retail members decides it is in their best interests to do so. The financial investors have no say if or when WTCI is sold.”
Jennings believes the co-op will be a welcome respite for members who do business with too many wholesalers, many of which are going through consolidation that he describes as “confusing” to retail brokers, clients and markets.
Jennings says the co-op provides members with a stable wholesale platform and experienced brokers who work directly with members to develop comprehensive placement strategies. The firm aggregates data on a member’s complete book of wholesale business to develop “proprietary underwriting facilities and products that could not be possible from any individual firm,” he says. “It’s a powerful model and is completely transparent because of our ownership structure.”
WTCI was originally conceived by John Hahn and Dan Francis as they tried to rationalize the wholesale book of business at Edgewood Partners Insurance Center (EPIC), the firm they co-founded. “They were looking at significant volume in the specialty market through a large number of intermediaries,” Jennings says. They met with other large, privately held retailers and found they were not alone.
“They all face similar challenges with a fragmented book of wholesale business and too many intermediaries,” he says. “From those discussions, the idea of WTCI got started.”
Though its co-founders came up with the idea for WTCI, EPIC is just one of the co-op’s retail members. “Our management is entirely independent of EPIC or any other retail member.”
By the end of 2010, WTCI had reached its initial goal of five to seven retail members. The firm expects to add one or two additional members per quarter over the next few years. There is no defined selection process other than obtaining the retailer’s commitment to working with WTCI.
Initially, the business will center on transactional brokerage. Jennings expects the firm to move into both binding authority and program business during 2011. “Our initial members have significant numbers of accounts in those areas, and we expect to build proprietary programs as we refine the data aggregation and analysis process.”
How would the co-op arrangement be received by traditional wholesalers? “Once the ‘traditional’ wholesaler understands how we work with our retail members, we are confident most of them will realize we are not a threat to their client relationships,” Jennings says. “We are not looking to be the largest wholesaler.”
Those select retailers who choose to become members will appreciate the alternative to the traditional way of doing business. “The retailer receives inconsistent service and wonders who will be around next week,” he says. “At the same time, specialty markets are experiencing submit-to-bind ratios that are impossible to sustain. We look to bring improved client service, stability and aligned interests throughout the transaction process.”
Is the wholesale segment strong enough in the current market to support WTCI? Jennings believes the success of WTCI is more strategy than timing. “A hard market would be a wonderful thing for any wholesaler, but our business model does not depend on it. We are about client service, stability and transparency, which in our minds will win the day regardless of market conditions.”