Two years ago, I wrote about the views of retail brokers on what at THE time seemed like major consolidation among their wholesale distribution partners. Then with 2010 came an even bigger wave of consolidation, restructuring and new players. So what are retailers thinking now?
“There’s no question that wholesalers have grown more efficient over the last two years,” says Skip Counselman, chairman and CEO of RCM&D. “Wholesalers are actively calling on retailers more now than I can remember. There’s definitely an increasing trend of wholesalers bringing products to us. They are bringing more creative products than ever before.”
John Pollock, senior vice president and Florida regional agency manager at BB&T- Oswald Trippe & Co., agrees that changes in wholesale distribution have contributed to what he calls a “significant uptick” in visits and product offerings from wholesalers. “We’re seeing that wholesalers are trying to diversify. They’re talking to us more about products for transportation, healthcare and other areas they are branching into. Some are starting to sound like an admitted market.”
While his Fort Myers, Fla., agency has built relationships with sister BB&T companies involved in wholesale distribution since being acquired by the company late 2009, Pollock says there is no pressure or obligation to use them. “We only place business through a sister BB&T company if they are the best solution.”
Both say consolidation has contributed little to an increase or decrease in placements with specific wholesalers. Counselman says RCM&D continues to tap a large network of more than 200 wholesalers. “If anything we have too many wholesaler relationships,” he says. “Efficiency would certainly dictate using fewer distributors. But coverage needs of our clients are most important.”
Pollock says the number of wholesale placements has diminished for personal and small commercial accounts, but he continues regular use of wholesalers for large commercial business. He quips that while consolidation has brought several new products to his attention, the Florida market is still…well…Florida.
Jim Bailey, president of Atlanta-based Pritchard & Jerden, says his firm has actually expanded its use of wholesalers to support its growth in nonstandard business. He credits an uptick in the firm’s writing of certain classes of business, such as habitational exposures, that standard insurers “still won’t touch.”
“I haven’t noticed any significant disruption due to widespread wholesaler consolidation,” says Bailey. Unlike the others, Bailey says he has not seen a notable increase in sales and marketing efforts from wholesalers. He believes this is because his agency takes a strict approach when considering which wholesalers to work with. “Some agencies like the reach a wholesaler can offer in terms of marketing,” he says. “At our agency, we do most of our own marketing. If I’m going to consider doing business with a wholesaler and share the revenue stream, I need that wholesaler to show me that there’s X amount of deals I’m going to get because of it.”
The retailers hope that the consolidation does not jeopardize what they see as the most important aspect of a wholesaler: the relationship with a specific broker. So far, the news has been good. “We work with wholesalers that have gone through some form of consolidation recently,” Pollock says. “We’re lucky in the sense that we still interact with the same individual brokers, even though his or her business card may look different.”
For Bailey, the relationship is more important than the new markets or products consolidation may offer. “Wholesalers may choose to market themselves by saying they have new tools and products resulting from some type of consolidation or restructuring. But when it comes down to it, we’re most likely going to use the same folks we’ve always used for those tools and products.”
Counselman agrees. “Many wholesalers tout new products when they restructure. We’re more interested in what happens to the people than if, for example, you’re a traditional property wholesaler that now has a stronger casualty unit.”
How does Counselman react when a longtime wholesale partner lets him know consolidation or restructuring is imminent? “My advice to wholesalers when moving around: Just don’t change the people. That’s the variable retailers are most concerned with.”
He believes being a larger agency helps RCM&D maintain individual relationships even if the broker has changed offices or if the wholesaler has restructured. “I fear smaller agencies may not enjoy this benefit and may be forced to work with folks they haven’t worked with before.” There are few circumstances when a disruption in business is justified or acceptable, he says. “If it’s caused by a change in ownership or personnel, it’s not.”