The wholesale insurance market continues to raise premiums while providing value to retail agents and important options to their clients, according to a report commissioned by the Wholesale and Specialty Insurance Association (WSIA).
But the segment faces the challenge of sustaining that growth by filling the ever-growing talent shortage, says association executive director Brady Kelley.
Although the wholesale industry saw a slight drop in premiums last year, mainly due to lost premiums due to the closure of small businesses during the COVID-19 pandemic, other lines of business insurance compensated for this with a strong economy, Kelley said.
The WSIA 2021 mid-year report from the US Surplus Line Service and Stamping Offices showed a 21.9% increase in the excess line premium and a 7.2% increase in transactions per compared to the same period in 2020.
Surplus lines report: mostly good news
“With economic growth comes insurable risk and opportunity… and you have the standard market whose appetite for certain levels of risk changes and wanes,” Kelley said. “This is obviously where our market comes in and serves as a pipeline and sort of a safety valve for risks that can no longer be written down on a standard basis.”
The association held its annual convention in San Diego in November for the first time in two years.
WSIA presented information at the event that it will use to educate retailers and risk managers on the value of using wholesale brokers. Agents should not be dissuaded from using wholesalers because of fears it will increase costs for their policyholders, Kelley said, stressing a recent Conning analysis, Inc.’s Insurance Research Division which shows the opposite to be true.
The analysis, commissioned by the WSIA, compared distribution costs, cost structure, and ratios between wholesale and retail channels from 2016 to 2020. It found that the total disaster-free cost ratio of distribution Commercial insurance policies through wholesalers was 1.8% lower than through the retail side.
Kelley said the WSIA first asked Conning to conduct the study in 2016 to debunk the myth that using a wholesaler makes the transaction more expensive.
“Great value is coming from this wholesale distribution partner and at no additional cost,” he said. “So that’s kind of our bottom line – if there’s a retailer that doesn’t have a wholesale relationship, there are a lot of reasons why they should. “
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Kelley said the wholesale industry is also focused on finding ways to deal with what he called “evolutionary” risks when the standard market reduces capacity. Currently, these risks include cybersecurity, new construction, and the commercial automobile.
State insurance regulators are engaging more than ever in the wholesale and surplus and surplus line market as they seek to remove barriers to coverage for people in their states, Kelley said. For example, at least 18 states have flood insurance on their export lists or have removed some of the diligent effort requirements to place flood risk so that consumers can access the private market. -he declares.
“They see it as the market that provides them with solutions,” he said.
The recent consolidations in the wholesale market are an indicator of the capital interest in the segment because it is performing very well, Kelly said. But to support this growth, the wholesale industry has a very big hurdle to overcome – the lack of talent – and that’s a big challenge right now.
“Everyone is talking about talent and the need for talent is greater than ever,” he said.
The association is launching new diversity initiatives, such as the WSIA Diversity Foundation, designed to help attract new people to careers in insurance, especially young people who are exploring college programs.
Getting young people to consider working in insurance can be a tough sell, he said, so the association is highlighting the different career paths available and the unique things people can do. And, educating them that selling insurance is more than just selling a piece of paper, he said.
“They’re selling a promise, and that promise is to protect things and people, and that’s what this company does,” he said. “As soon as the students hear that stuff and hear the stories of our members who have successful careers in this space, they’re addicted, and that’s how we get most of it.”
Top photo: Wholesale brokerage executives at the 2021 WSIA Annual Conference.
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