Transition to Wholesale?

[FL P&C Broker]

I have a friend in the southern part of the state that is looking to leverage his retail agency into a MGA, primarily E&S markets.

I know he has a couple lines on some direct markets, but I have been under the impression that is extremely difficult to execute. The management and the backend has to be way more complicated than a retail agency. Underwriters, raters, etc.

Anybody have any experience on the wholesale side of the biz?

 

[cottonland]

It all depends on how he is going to operate. If he is going to "blanket" the state with agents then that is much different than selecting a few agent who are knowledgeable in his target markets. I personally like the latter because it provides some type of franchise value. You still have to be careful so as to not receive adverse selection.

I personally do not think there is much franchise value for a true wholesaler because every agent on the corner will typically have access. I guess it pretty much comes down to his choice to be a "wholesaler" or more of a "program administrator".

Does he have the "pen" for his markets or will he simply be forwarding apps to them for approval?

 

[FL P&C Broker]

I believe he is going to just be forwarding the apps at first, but one of his markets has agreed to give him the pen after a certain benchmark is met. He has a pretty big retail book, with a decent amount of E&S property.

How much more does a regular E&S broker make? They are already giving 10% to the retail agent. What are they making on the backend?

 

[cottonland]

If he is just forwarding applications he will be subject to the carrier's service provided. If he is not able to turn things around in a timely manner or the carrier is not able to issue policies and endorsements correctly, he will have a difficult time in my opinion keeping agents.

He needs to be able to provide a VALUE to his agents that they are not able to get elsewhere. Ease of doing business and product knowledge is a good start. If it were me, I would not want to lose my retail identity.

I operate in a similar fashion but have the pen and only deal with agents that are knowledgeable in my niche. They have direct contracts with carriers that will write the business themselves but send it to us because of our service and value that we provide to them.