Relationships, Expertise Drive Success in Texas E&S Marketplace

During the past 20 to 30 years typical business dealings between wholesale insurance brokers and retail agents have evolved from being purely transactional experiences to those that are highly dependent upon relationships and expertise, according to professionals on both sides of the excess and surplus insurance industry.

Today, quality relationships and deep expertise are essential for successful working partnerships, but it hasn’t always been that way, said Pat Arthur, a producer and shareholder with retail agency MHBT in Dallas. At one time, if a retail agent had an account that was difficult to place, “we’d throw it out there and see who could get it placed, and keep going down the road,” Arthur said during a panel discussion at the Independent Insurance Agents of Texas’ 2013 Joe Vincent Management Seminar.

Now, both wholesalers and retailers alike are seeking partners that they can trust and are a good fit in terms of markets, experience, philosophy and the needs of their customers. That evolution has occurred alongside changes in the way that E&S insurers do business, said Ron Helveston, with CRC Insurance Services, a wholesale operation based in Birmingham, Ala.

Thirty years ago, E&S insurers offered one umbrella form and wholesalers used one endorsement manual. Now, Helveston said, every company has their own form. The value that wholesalers bring “is that you [the retailer] can’t possibly know all the forms. We probably have 50 GL carriers, 50 umbrella carriers and that many property carriers. I promise you each one of them has a different form, different endorsements and different things that can get you in trouble,” he said.

While retailers may be comfortable with standard company forms, “when they step into our world it’s a completely different world,” Helveston said. “These companies are revising their forms every two years. Do you think they’re revising them to give us extra coverage? I don’t think so.”

A really good wholesaler who truly understands his products can “keep you out of trouble. Because there are a lot of pitfalls in the market today,” he said. Loss situations do happen in the E&S market and when one occurs, “it’s really nice to know there’s a wholesaler standing next to you trying to negotiate to get you out of the situation.”

Arthur said quality wholesalers will look at their retail clients in the same way that a retail agency looks at its clients.

“We want our clients to not only trust us and be our friend, but they expect us to respond when they are in need,” he said.

In the same way, wholesalers must be a resource for retailers.

“I know the hardware for Travelers forms,” Arthur said. “I know how those claims are going to be handled. I don’t necessarily know in detail Westchester’s [forms] or how their claims are going to be handled. … We lean on you [the wholesaler] to do for us what our buyer leans on us to provide them. That’s the biggest change in the last 25 years.”

Less Is More

If the relationship and expertise are there, less is more when it comes to working with insurance wholesalers, according to Martin Yung, area president of Hub International Insurance Services in El Paso.

“What we try to do, just like with any of our relationships on the carrier level, we try to pick our wholesale partners and be very selective, so we don’t have 50 of them, 60 in the shop. We want maybe three or so, four,” Yung said..

Those wholesalers also need to have specialty areas that match up to the retailer’s book of business, he said.

“I’m what you’d call a working broker,” Yung said. “When I’m not managing I’m working on my book. I have the largest book in our office. So what I look for and what our producers look for are people that will have individual expertise for the areas we work in.”

Finding and developing strong relationships with essential wholesalers can take years, Yung said.

“You can look at my wholesale relationships and most of them span 20, 25 years, as long as I’ve been in business,” he said. “If I find someone who’s a really skillful property person or a really skillful person in general liability or professional liability, then I tend to personally favor them because I’ve got experience with them, they’re a known quantity to me. I know I can trust what they’re doing. … I know what I’ll get back from them is something that works for me and my client.”

It’s also not always about size, Yung said. “We need people that have access to certain tools and knowledge base that I might not necessarily have. … Size is not always everything. The biggest isn’t always the best. … I’m looking for a philosophical alignment with the wholesale partner. I want someone who will view the world somewhat in the same way as I am.”

A Two-Way Street

Relationships between retailers and wholesalers also have to work both ways, said Paul Rainey, president of RSI International, a Texas-based managing general agency with offices in Arlington, Texas, and St. Louis, Mo.

“When we look at retailers, that’s what we’re trying to see. We don’t want somebody who’s just going to bring us business, we want somebody who’s going to partner with us through the ups and downs, through the gaps in coverage, through the mistakes we make, through the mistakes they make,” Rainey said. “As long as they see it as a partnership, we have the ability to grow with the retailers and vice versa.”

As an example, Rainey described a situation in which a strong, long-term relationship with an agent led to a contract for a new insurance product.

The agent, he said, “came to us several months ago with an idea [for] coverage that he wanted to put into effect. He looked all over the place and couldn’t find a market for it. Not only couldn’t he find a market for it, he couldn’t find anybody doing it. So he brought the idea to us.”

The idea seemed like a good one, so we “took it to London and actually walked out with a contract,” Rainey said.

The client now has the opportunity to “chase his dream,” Rainey said. The reason he has that opportunity because of that solid relationship, he said.

Similarly, because of the relationship “London had with our company, we were able to say ‘this is a solid individual’ and we walked out with a contract in hand,” Rainey said.

The value of the relationship can’t be overstated, he said.

“Believe me, wholesalers talk,” Rainey said. “And a lot of you do business with several of us. And the [retail agents] that are not necessarily driven by relationships, I’m not sure those are the ones that are going to be successful in the long run.”

This article is based on a panel discussion, “Best Practices Between Wholesalers and Retailers Revisited,” that was moderated by Gil Hine and took place at IIAT’s Joe Vincent Management Seminar.

Topics Texas Agencies Excess Surplus