Wholesale brokers and MGAs thrive on delivering unique solutions for complex and hard-to-place risks. As fleet of foot as they come, these companies are quick to react to dynamic market forces and unexpected events like those witnessed over the past year. It’s a tribute to the sector’s ability to find fresh, exciting and innovative solutions that meet the changing needs of customers. And that’s why, despite the COVID-19 pandemic and its associated economic challenges, the wholesale market is booming.
The wholesale, specialty and surplus lines business has experienced a surge in recent years. According to the 2020 annual report from the US surplus lines service and stamping offices, total surplus lines premium reported to the 15 stamping offices across the country was $41.7 billion in 2020, a 14.9% increase over the $37.5 billion reported in 2019. Furthermore, each the 15 stamping offices reported premium growth in 2020, including 11 states that had a double-digit percentage increase.
A confluence of factors is driving growth in the specialty markets, including tightening market conditions (rate increases, stricter coverage terms and conditions, and reduced capacity), a low interest rate environment that’s challenging insurers’ underwriting profitability, social inflation and increased claims costs, more frequent severe weather events, and a COVID-19-shaped question mark over the US economy.
“After several years of inadequate pricing and underperforming results, our market started increasing rates in early 2019,” says Davis Moore, CEO of Worldwide Facilities. “At the same time, carriers really started managing their capacity … This trend continued into 2020, and the pandemic put additional pressure on the market to make certain they’re getting out of it right and managing their capacity.”
As a result, there’s been a significant amount of business coming in from the admitted market – and wholesale brokers and MGAs are ready to help.
“The surplus lines industry is well positioned,” Moore says. “A big part of what we do is solve problems, and there are lots of problems to solve, so I believe our industry will have significant growth opportunities as the economy recovers.”
A push for innovation
This year’s 5-Star Wholesale Brokers and MGAs consistently go above and beyond to solve problems for clients amid increasingly challenging market conditions. But in order to do that successfully, they’ve had to innovate in a couple of key ways. First, many companies had to switch to working remotely as a result of the pandemic. They had to ensure their employees were comfortable using new technology and were able to maintain and grow critical business relationships in a remote setting.
They’ve also engaged in product innovation. Just like after 9/11, when specialty players developed terrorism insurance solutions, there’s plenty of ambition now to create cost-effective pandemic solutions to deal with future ‘black swan’ events. Companies are also increasingly using data and analytics and new technologies like artificial intelligence and machine learning to build cutting-edge solutions.
Ryan Collier, chief digital officer at Risk Placement Services, says there’s an open playing field of opportunity for change and innovation in the E&S marketplace.
“I think the E&S market and the model it has created over the last 50 years has been one of innovation,” he says. “The marketplace has historically been known as more innovative on coverage, on ways to underwrite and on trying to meet the new and changing needs of consumers.”
This creative agility was underscored in 2020, as specialty players showed their ability to flex and offer solutions to help a broad range of industries manage their way through the COVID-19 crisis.
What producers want
So what are retail producers looking for when selecting a wholesale broker or MGA to work with? According to the 1,300-plus producers IBA surveyed about their wholesale partners, the most important aspect of that relationship is responsiveness. “This is HUGE!” one producer said. “Response times need to be quick.”
Overall, wholesalers are delivering in this area: All 28 wholesale brokers and MGAs recognized in this year’s survey received a 5-Star rating for responsiveness. However, producers did still have the occasional complaint about their partners’ response times. “Not sure if it’s the ‘work from home’ issue, but my expected level of customer service is definitely not being met,” said one dissatisfied producer.
Technical expertise and product knowledge was also a top priority for producers when selecting a wholesale partner – which is hardly surprising, considering that producers often turn to MGAs for help with niche or hard-to-place risks. Again, wholesalers scored well in this area (all 28 received a 5-Star rating), and producers largely had positive things to say about their partners. In terms of areas that could use improvement, producers pointed to the need for underwriters to have comprehensive knowledge of all products and be able to explain quote changes and exclusions more clearly.
Relatedly, the ability to place niche or emerging risks also ranked highly on producers’ list of priorities, and it’s another area where wholesale partners are doing an outstanding job: “How do you improve greatness?” one producer commented on their MGA’s service in this area. However, some producers were dismayed at the lack
of market access or coverage for more unusual risks. “Identify and get behind the vertical sooner rather than later,” one producer advised.
Along the same lines, several producers were looking for their wholesale partners to expand the range of products they offer. “More markets” was a common refrain; producers also urged wholesalers to broaden their appetite for “odd risks” and “the most exciting and emerging stuff.” But they also acknowledged that many wholesale brokers and MGAs are already excelling in this area – this was another category where all 28 companies earned a 5-Star rating.
Slightly less important to producers was their wholesale partner’s reputation. While this was another top-scoring area for wholesalers that generated few complaints from producers, a few did point out the need for better branding to help generate interest with prospective clients.
Pricing also wasn’t a top area of concern for producers, most of whom seemed pleased with their wholesale brokers and MGAs’ pricing as it is. However, several noted that while pricing was fair in most cases, they’d be happy with fewer fees.
Marketing support was another relatively low-priority area – while a few companies received positive feedback for their efforts, many producers deemed marketing support from their wholesale
partners unnecessary or were unsure of whether their wholesaler offered any marketing resources at all.
In terms of compensation, while it’s not a top consideration for producers when selecting a wholesale partner, several did comment on the need for certain wholesalers to increase commissions or offer bonuses or profit sharing. One producer suggested that wholesalers should “offer bonuses for certain types of coverage or during special promotional periods during the year.” Another noted that placement is more important than compensation; however, a third producer pointed out that “if I had two quotes from two different brokers that are similar, who pays more might help us to make a decision.”
Technology and automation ranked next to last among producers’ priorities when selecting a wholesale partner; many were either unaware of the technology backing up their wholesaler or not concerned about it. As one producer put it: “I am really not aware of this availability, and it doesn’t hinder the relationship.” However, producers do notice when technology doesn’t work as it should – complaints in this area revolved tech issues leading to slower response times on quotes or other communication problems.
Finally, there’s geographic reach, which most producers said wasn’t important at all. Many pointed out that most wholesale brokers and MGAs write in all 50 states. “With today’s technology,” one producer said, “you can reach a market in an instant, regardless of physical location.”
To find out which wholesale brokers and MGAs are delivering standout service to their partners, IBA surveyed more than 1,300 retail producers, asking them to rate the performance of their wholesale broker or MGA partners on a scale of 1 (poor) to 10 (excellent) in the following areas:
- • Overall responsiveness
- • Technical expertise and product knowledge
- • Pricing
- • Ability to place niche or emerging risks
- • Range of products
- • Reputation
- • Marketing support
- • Compensation (commission, bonuses, profit share, etc.)
- • Technology/automation
- • Geographical reach
The wholesale brokers and MGAs that earned an average score of 8 or higher in at least one category were awarded a 5-Star designation, signifying their exceptional service. In total, 28 wholesale partners earned a 5-Star rating this year. Of those, 18 achieved All-Star status, having earned 5-Star ratings in all 10 categories.
- Appalachian Underwriters
- Breckenridge Insurance Group
- Johnson & Johnson
- Risk Placement Services
- Southern Insurance Underwriters (SIU)
- USG Insurance Services, Inc.
- Worldwide Facilities
- All Risks
- Anderson & Murison
- Bass Underwriters
- Brown & Riding
- Burns & Wilcox
- Genesee General
- Hull & Co.
- Jimcor Agency
- MJ Kelly
- Monarch E&S Insurance Services
- NIF Group
- Risk Innovations
- RT Specialty
- SIS Insurance Services
- Southwest Risk
- Special Risk
- TAPCO Underwriters