PO B OX 899, P INE , C OLORADO 80470 P HONE : 720.208.0844 F AX : 720.208.0845 Who Pays When Your Agent Uses An Outside Wholesale Insurance Broker? Is your non-aviation insurance agent using a wholesale insurance broker for your aviation insurance placement? While it is true that commissions and fees are ultimately paid by the retail agent, insureds do pay for their agent’s wholesale insurance broker in many ways. Those costs must be borne by someone and ultimately that falls to the insured. 1. The most obvious cost of your agent using a wholesale broker is via retained commission. Insurance companies typically pay the wholesale insurance broker a fixed commission percentage for the policies they place. The more commission the wholesale broker retains, the less the retail agent gets. Every unfair commission split equates to a payment the retail agent makes for their wholesale broker which originated of course with you, the insured. 2. In addition to retaining commission, wholesale brokers typically charge at least one type of fee to bolster their income. These fees are often $500 – $1,000 and sometimes much, much more. The greater the fee charged by the wholesale broker the higher the fee the retail agent must charge the insured to ensure profitability. Retail agents pay when their wholesale broker’s fees are too high and ultimately, so does the insured. 3. Poor service is another way the retail agent and their insureds pay. Good service is easy to talk about but difficult to deliver day in and day out. And yet as the wholesale broker’s customer, consistently good service is exactly what the retail agent should get. Every time a retail agent does not get the service they need it negatively impacts the relationship with their client. Retail agents pay and ultimately, so do their insureds. 4. And how about managing expectations? One of the most important things we do as specialty aviation insurance brokers is managing our client’s expectations. If the retail agent’s expectations are not managed by their wholesale broker they are unable to manage the expectations of their client. Again, the insured pays. 5. Finally, retail agents pay for their wholesale broker’s mistakes. Just because a wholesale broker has access to a handful of insurance companies that write, for example, aviation and unmanned aircraft liability insurance, it doesn’t mean they are experts in the product line. If a wholesale broker is unfamiliar with a complicated product line such as aviation and aerospace liability, they are going to make mistakes. When that happens the retail agent will pay by losing a client or, worse yet, by being involved in a costly E&O claim. The insured may end up paying the ultimate price, the cost of an uncovered loss. A good aviation insurance broker should be more than an access point to markets. They should treat the insured fairly, provide them with solid service, manage their expectations and have expertise in the product they are placing on the client’s behalf. In short, they should be an expert consultant and dependable business partner. One way or another you pay for your agent to use a wholesale insurance broker. Are you paying too much?

Who Pays When Your Agent Uses An Outside Wholesale Insurance Broker?

Download PDF Report

Upload
unmanned-risk-management-tm
View
46
Download
0

Embed Size (px)

Citation preview

Page 1: Who Pays When Your Agent Uses An Outside Wholesale Insurance Broker?

PO BOX 899, PINE, COLORADO 80470 PHONE: 720.208.0844 FAX: 720.208.0845

Who Pays When Your Agent Uses An Outside Wholesale Insurance Broker? Is your non-aviation insurance agent using a wholesale insurance broker for your aviation insurance placement? While it is true that commissions and fees are ultimately paid by the retail agent, insureds do pay for their agent’s wholesale insurance broker in many ways. Those costs must be borne by someone and ultimately that falls to the insured.

1. The most obvious cost of your agent using a wholesale broker is via retained commission. Insurance companies typically pay the wholesale insurance broker a fixed commission percentage for the policies they place. The more commission the wholesale broker retains, the less the retail agent gets. Every unfair commission split equates to a payment the retail agent makes for their wholesale broker which originated of course with you, the insured.

2. In addition to retaining commission, wholesale brokers typically charge at least one type of fee to bolster their income. These fees are often $500 – $1,000 and sometimes much, much more. The greater the fee charged by the wholesale broker the higher the fee the retail agent must charge the insured to ensure profitability. Retail agents pay when their wholesale broker’s fees are too high and ultimately, so does the insured.

3. Poor service is another way the retail agent and their insureds pay. Good service is easy to talk about but difficult to deliver day in and day out. And yet as the wholesale broker’s customer, consistently good service is exactly what the retail agent should get. Every time a retail agent does not get the service they need it negatively impacts the relationship with their client. Retail agents pay and ultimately, so do their insureds.

4. And how about managing expectations? One of the most important things we do as specialty aviation insurance brokers is managing our client’s expectations. If the retail agent’s expectations are not managed by their wholesale broker they are unable to manage the expectations of their client. Again, the insured pays.

5. Finally, retail agents pay for their wholesale broker’s mistakes. Just because a wholesale broker has access to a handful of insurance companies that write, for example, aviation and unmanned aircraft liability insurance, it doesn’t mean they are experts in the product line. If a wholesale broker is unfamiliar with a complicated product line such as aviation and aerospace liability, they are going to make mistakes. When that happens the retail agent will pay by losing a client or, worse yet, by being involved in a costly E&O claim. The insured may end up paying the ultimate price, the cost of an uncovered loss.

A good aviation insurance broker should be more than an access point to markets. They should treat the insured fairly, provide them with solid service, manage their expectations and have expertise in the product they are placing on the client’s behalf. In short, they should be an expert consultant and dependable business partner.

One way or another you pay for your agent to use a wholesale insurance broker. Are you paying too much?