Wholesale Insurance
Coverage for employer groups that are too small to qualify for full group coverage is referred to as wholesale insurance. Wholesale insurance is frequently referred to as franchise insurance. Individual insurance is written for each person to be covered, yet it covers an entire group. Non Admitted carriers, or insurance businesses that have not been approved by the state's insurance regulator, provide these policies.
Understanding Wholesale Insurance
Wholesale insurance is sold to groups that are too small to qualify for traditional group coverage. They are primarily provided by businesses with fewer than ten employees. Individual contracts accompany the plans, but they normally include the same provisions for all members of the organization. Some employers let employees purchase policies on their own, while others pay premiums as part of the employee benefits package.Â
Nonadmitted companies typically provide wholesale insurance. These companies are also referred to as surplus line or excess line carriers. These businesses are not required to obey state regulations governing insurance companies. As a result, nonadmitted carrier policies can be hazardous since they may not guarantee payouts if the insurer falls insolvent.
- Wholesale insurance might be dangerous since carriers may be unable to guarantee claims if they go bankrupt.
Wholesale insurance products for small enterprises vary, but often contain the following:
- 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
Except for employee benefit and health plans, insurance distributors rarely have direct contact with insured parties. Nonadmitted carriers have more price flexibility to protect against uncommon conditions such as catastrophic occurrences since they are not governed by state insurance requirements. While there is some risk associated with some nonadmitted carriers, the fact that they operate outside of state insurance laws should not be interpreted as a sign of financial insecurity. These carriers' state licensing, filing, and reporting requirements are simply different. Larger nonadmitted carriers are typically well-capitalized subsidiaries of larger financial services firms.
Special Considerations
Wholesale insurance brokers frequently have specialized experience in a certain line of coverage or in an uncommon line of coverage, and/or have better access to or influence with certain insurance markets, which is especially beneficial when dealing with a difficult-to-place risk.
Wholesale insurance agents place business brought to them by retail agents. Wholesale brokers, unlike retail brokers, have a direct working relationship with the insurer, but the retail agent who originated the transaction does not. Depending on the circumstances, the same broker can act as a retailer or wholesaler.Â
Wholesale brokers are classified into two types: managing general agents and surplus lines brokers. The latter deal with retail agents and insurers to get the insured coverage. A surplus lines broker, unlike a managing general agent, does not have binding authority from the insurer.
Wholesale Insurance vs. Retail Insurance
The wholesale insurance industry differs from the retail insurance sector. Most people are accustomed to purchasing auto, house, and life insurance through the retail insurance market. Policies in this market are typically underwritten by acknowledged carriers or companies licensed in the state where the policy is sold. The state regulates admitted carriers, and the state holds broker-agents to regulatory standards as well.
Â