By: Jefferey S. Lejfer, CPCU
Chief Executive Officer
New Day Underwriting Managers LLC

I’ve had the good fortune to be in the property and casualty industry for over 40 years. In that time while I’ve had a limited number of employers I’ve had the experiences of many different positions. Our endeavor at New Day started out with the idea that we’d be “wholesalers” for environmental and construction related professional liability insurance. While I have dealt with wholesalers my entire career – I can say without having stood in their shoes I had an understanding of someone from the outside looking in. While in this role for over 10 years, I cannot speak authoritatively about how “wholesalers” operate or how they may or may not add value to a transaction. I can speak however on what services appear to be important to clients and how making the leap from a “wholesaler” role to one of a “specialty intermediary” appears to be viewed.
To begin with the comments here are not intended to disparage the role of the “typical” wholesaler. In fact, in a large part the wholesale distribution model is a critical component of the insurance sales effort in the United States. For many lines of business and for many carriers it is an effective and efficient method of delivering high quality products to the insuring public.
However, as new ventures begin in this segment (wholesale distribution) of the industry and clients (retail brokers) are approached to begin a relationship, retail agents immediately steer the dialogue towards limiting the number of wholesalers that are utilized. Reasons often given are “lack of product differentiation,” “able to go direct,” “dealing with too many already,” “not enough service provided,” “lack of understanding and knowledge of the exposure or the products being offered.” Many of the responses by the retail broker are legitimate reasons for limiting their relationships with wholesalers.
For specialty lines where the Insured and client need some assistance, additional services are required to provide the comfort level that the appropriate coverage for the exposures has been obtained – the optimal solution. As well, while in most cases the Insured will require a policy to solve their problems, in some cases a risk management solution may in fact address the issue. One example of this might be where administrative programs or protocol are developed to increase internal awareness and response to certain crisis situations (mold liability) and manage the risk to the point where the organization feels they would not need a financing mechanism in place. The specialty intermediary will respond and assist in such scenarios.
There are many different business models employed by retail agents in the United States. And while price/premium is always a variable in the equation for determining the optimal solution for clients, many retailers too often rely on price as the predominant determinant in selecting/recommending coverage for their clients. This, in fact, may work for some and especially for those Insureds who can see nothing else except price in their selection criteria. There are many professional retail agents that are seeking optimal risk management solutions for their Insureds and are less concerned with the “deal” and focused on addressing the Insureds’ risk management issues. These agents, while knowledgeable in many facets of insurance, operate like doctors and bring in specialists to work on certain segments of the Insured’s risk management program. We have traditionally seen this applied in the management liability arena where specialists have sprouted up over the years and as well certain divisions of wholesaler organizations.
The fascinating factor is that these agents may have access to the markets and in fact may have some knowledge on how to solve the Insured’s risk management issues. However, they do not let ego interfere with their need to obtain an optimal solution for their client. They do this by employing technicians who are knowledgeable, professional and responsive to the Insured’s issues.
These specialists transcend the concept of a traditional wholesaler and assume the role of specialty intermediary. The specialty intermediary works in partnership with the client to develop an approach and strategy to address the Insured’s issues. It is not about market access but access to intellectual capital. The relevant question to be answered: Did we solve the Insured’s problem? Not, how many markets were approached or did we make the sale? The contacts database or CRM is not as important as the knowledge to work out the problem in an efficient, effective, economic and collaborative fashion for all parties involved.
The specialty intermediary working in concert with the retail agent opens all lines of communication to all parties involved. This includes the specialty intermediary with the Insured and the Insured and retail agent with the carrier and in some cases reinsurers. The competition to see which party gets the best deal – wholesaler vs. retailer is eliminated and all parties are winners in determining which solution optimally fits the Insureds’ issues and problems. The resources of the specialty intermediary are utilized in developing the appropriate risk management solution. In the areas in which we are familiar, risk profiles are developed that identify the exposures, guidelines are provided for developing risk management protocols (i.e., mold and water intrusion), contract language is discussed, procedures on disposal site selection and the like. Of course, other specialties offer focused risk management services.
The role of the specialty intermediary transcends technology innovation. The driver is not how fast the information is gathered but rather the quality of the information that is provided to the client and Insured. The specialty intermediary is not afraid to make a recommendation based on the facts presented. While the specialty intermediary should not make the decision on which solution is ultimately chosen they should be part of the process in making the selection by imparting their knowledge of the carriers, coverages, terms and conditions and other external factors that go into the decision making process.
When Insureds are presented with a solution that utilizes the services of a specialty intermediary they should embrace the retail agents’ ability to determine a method and a vehicle to obtain the solution to the problems that they are facing. Not all retail agencies, not even the largest can have the expertise and resources readily available to collaborate on an Insured’s problem. The retail agent that leverages the expertise of an expert, just as a general practitioner in the medical profession embraces the specialist is oftentimes the more successful operation. Those that try to do it all themselves many times do themselves and the Insureds a disservice.
In conclusion, obtaining an optimal solution for an Insured’s unique risk management issues requires the knowledge of an expert. Using a specialty intermediary will bring that knowledge to create a solution.