John Head of RPS: 'Wholesale brokerage is a relationship-driven business'

John Head of RPS: 'Wholesale brokerage is a relationship-driven business' | Insurance Business

John Head of RPS:

The US wholesale insurance brokerage market is “in a state of flux,” according to John Head (pictured), president of national brokerage at Risk Placement Services (RPS), a managing general agent / underwriting manager and nationally focused wholesale insurance broker.

As the London market tightens up, bigger brokers with meaningful capacity are looking for rate increase, higher retentions, and additional terms that might benefit them. On the flip side, second-tier brokers who can’t offer as much capacity are looking for something different. They’re in the hunt for market share and so their rate increases aren’t nearly as high, according to Head. The market’s “in a state of flux right now more than anything,” he commented.

While catastrophe risk is a clear and obvious challenge for wholesale brokers in the US right now, a silent struggle under the surface is the increase in attritional risk, or non-catastrophe losses - the cause of which is often very hard to pinpoint.

Head commented: “I think carriers and wholesalers are having a hard time figuring out why there’s more attritional risk in the market. The industry doesn’t really model as much for the attritional risk. We want to look at the 1/100, the 1/250 or the 1/500 risk for things happening, but the attritional is much harder to do.”

On the casualty lines side, jurisdictional issues are “certainly driving rates up” and causing more attritional loss, explained Head. The plaintiff’s bar today is reaching settlements with one or two additional zeros than they would have five or 10 years ago, he added. Attritional losses can also be triggered by price deterioration in competitive markets – something suffered by the Lloyd’s market of late.

Alongside these market challenges, brokers are under pressure to increase and reinforce their value propositions as disruptive sources like technology and innovation drive industry-wide evolution. While the digital world is transforming the industry and is making the brokerage segment more efficient, relationships remain the key driver of the business, according to Head.

“Wholesale brokerage is a relationship-driven business,” he told Insurance Business. “Without question, the relationship you have with your retailer and the end-insured is crucially important. At RPS, our retailers do a great job of bringing us to meet the end-insured. We think it’s important that everybody knows each other so that we’re all focused on one common goal.

“While our phones and emails are great, seeing people face-to-face, looking them in the eye, and having open and honest conversations – that goes a long way. When you have the insured, the retailer, the wholesaler, and the carrier all in a room together talking about risk, that goes an enormously long way in forging relationships. If a claim later occurs, or something goes wrong, we’re all there, we’re all on the same page, and we all know what we’re trying to accomplish.”

Head started his career in the claims space in the early 90s. This gave him insight into the importance of personal relationships, which is something he’s passed on to his colleagues at RPS. He said: “You don’t want your first introduction to a claims professional to be when they come in to handle a multi-million dollar claim at your facility or our resort. That’s not a situation where you want to meet a person for the first time. We want to build those personal relationships from the offset, even in this digital era, so that the trust is there if something goes wrong.”