Wholesale insurance brokers are individuals who act as a form of intermediary between an insurer and retail brokers without maintaining any form of contact with the insured. The role of these agents is to place business brought to them by retail agents. They have direct contact with the insurer unlike the retail agent who maintains contact with the insured and produces business for the wholesale agent. Depending on whatever situation the agent is in, they can function both as a wholesaler or retailer. It's very hard for an independent agency to function without personal lines insurance brokerage as it is a crucial part of insurance.
Independent agents, commonly referred to as retailers, find it hard to access single insurance companies out there. This is because there are some commitments that require to be made such as premium volume and withheld for the sake of agency appointments. The services offered by wholesale insurance brokers enable retailers to gain access to plenty of insurers most of which the consumer wouldn't be able to access through their agents. As a result, consumers have a wider range of options to choose from when it comes to purchasing insurance policies.
Hard to place property risks, aviation risks, professional liability or products liability coverage require the expertise of a wholesale insurance broker. There are those brokers who specialize in a specific field such that they offer a single product. They prefer to do so since they gain the skills to be really good at it. It is important to note that not all insured products offered by these brokers are placed with companies that are non-admitted. However, one should see stamping fees and surplus line taxes as part and parcel of the policy premium in the market place.
A huge percentage of the coverage produced by the personal lines insurance broker is in the non-admitted market place. Once one hires a wholesale broker, they are charged a service fee. This is their main source of payment. Once a retailer places insurance in place of the insured, the commissions earned by the wholesaler from the insurer are split between the retailer and wholesaler. The retailer often gets the bigger share. In order for the wholesale broker to make profit, they add a broker fee to one's policy. This guarantees them extra earnings for the services they offer out to consumers.
There are two types of wholesale brokers; surplus line brokers and managing general agents. The latter works hand in hand with a retailer and the insurer while the former has no binding authority from the insurer.