What Is Wholesale Insurance?
Let me explain wholesale insurance to you directly—it's coverage for employer groups that are too small to qualify for true group coverage. You might also hear it called franchise insurance. This type of policy covers an entire group, but we write individual policies for each person insured. These policies come from nonadmitted carriers, which are insurance companies not approved by the state's insurance department.
Key Takeaways
Wholesale insurance is specifically for employer groups too small for standard group coverage, often those with fewer than 10 employees. We sell it to these groups at individual rates, but the policies usually have the same provisions for everyone. It's normally offered by nonadmitted carriers, also known as surplus line or excess line carriers.
Understanding Wholesale Insurance
If you're running a small business with fewer than 10 employees, wholesale insurance might be your option since these groups don't qualify for typical group coverage. We provide plans with individual contracts, but they generally include the same provisions for all group members. Some companies let employees buy the policy themselves, while others cover premiums as part of benefits.
These policies come from nonadmitted carriers, or surplus line/excess line providers. They don't have to follow state regulations for insurance companies, which means their policies can be risky—you might not get claims paid if the insurer goes insolvent.
Important Risks
Keep in mind that wholesale insurance can be risky because carriers may not guarantee claims if they become insolvent.
Products for Small Businesses
- Environmental liability products
- High-risk products for chemical and flammable incidents
- Pharmaceutical and medical products against product failure
- Privacy protection products against identity theft
- Products that are critical to safety for transportation
- Construction-related structural integrity products
How It Works with Wholesalers
Insurance wholesalers rarely deal directly with insured parties, except in employee benefit and health plans. Since nonadmitted carriers aren't bound by state laws, they have more pricing flexibility for unusual risks like catastrophic events. There's some risk with these carriers, but operating outside state laws isn't automatically a sign of instability—state requirements are just different. Larger ones are often well-capitalized subsidiaries of major financial services companies.
Special Considerations
Wholesale insurance brokers bring specialized expertise to particular or unusual lines of coverage, and they have better access or influence in certain markets, which is key for hard-to-place risks.
These wholesale agents handle business from retail agents. Unlike retail brokers, they have a direct relationship with the insurer. A broker can act as retail or wholesale depending on the situation.
There are two main types: managing general agents and surplus lines brokers. Surplus lines brokers work with retail agents and insurers to get coverage, but unlike managing general agents, they lack binding authority from the insurer.
Wholesale Insurance vs. Retail Insurance
Wholesale insurance differs from the retail market you're probably familiar with, where people buy auto, home, or life insurance. Retail policies are underwritten by admitted carriers licensed in the state, regulated by the state along with their broker-agents.
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