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WSIA analysis shows wholesale distribution does not spike transaction costs for insureds


A recent study by the Wholesale & Specialty Insurance Association (WSIA) has shown wholesale-insurance distribution does not increase the cost of the transaction to the insured.

The WSIA retained Conning to perform an analysis of the distribution costs, cost structure and ratios between the wholesale and retail channels.

The report by Conning Insurance Research, titled “Analysis of non-loss costs”, found the total non-loss cost ratio for the wholesale composite was lower than the retail composite by 1.8 percentage points.

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Two composites were defined and analyzed: a wholesale composite, which included 99 individual companies with $38bn in premium, and a retail composite, which included 205 companies with $69bn in premium.

Examining data from 2016 to 2020, Conning found that wholesale non-loss cost ratios were lower in each year of the study.

When comparing both composites, the study found the wholesale-channel commission ratio was consistently three points higher than the retail channel.

This was offset, however, by the wholesale composite’s non-commission cost ratios, which are nearly four points lower than the retail composite on average.

Further, the wholesale composite non-commission cost ratio has also improved each year, while that of the retail composite increased in 2018 before improving in 2019 and 2020.

Conning found that, in each of the years measured, the annual growth rate in direct premium written for insurers in wholesale surpassed the rate for insurers in the retail channel.

Davis Moore, WSIA president and vice chairman of brokerage at Amwins, said: “We first examined this data five years ago to better understand any cost differential between wholesale and retail distribution.

“We were not surprised to learn wholesale distribution comes with no additional transaction cost at the time, and we’re obviously pleased that, five years later, that remains true.”

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