INSURANCE PROGRAMS: HOW TO TELL WHEN A WHOLESALER IS FAKING ONE

How many times have you seen or heard the term ‘insurance program’ used in the med-mal industry and scratched your head wondering what it really meant?

I received an email recently that was advertising for a “new insurance program for dentists’ malpractice coverage”.  I couldn’t tell by that email alone if this ‘program’ possessed any unique qualities, so I called the person who sent the email.  It turns out the large brokerage firm offering the program had gained exclusive access to one carrier who was offering a new product for dental malpractice.  He couldn’t tell me what made his product unique beyond his exclusive access to the carrier, so the whole situation left me pondering the real meaning of the term ‘program’ and how it is often thrown around so loosely in our industry.

I often witness other wholesale brokers using the term to infer that they have some kind of unique access to an insurance product that their competitor, like me, can’t get to.  Does this sound familiar: “I have a special program for that”?  Obviously, there are many different ways to use the term ‘program’ in our industry. However, my experience has shown that when wholesale brokers overtly claim that they have a program, they often don’t.

So, how can you tell when a wholesale insurance broker is faking a program just to get you to call them?

There are four main characteristics that make a program more than just a loose idea or a dishonest pitch:

1. Exclusivity – Is the wholesale broker the ONLY access point to this particular insurance product or carrier? If so, why would the carrier limit their distribution to only one broker?
2. Uniqueness – Does the insurance product itself possess unique features that make it truly standout among all of the competing products? If not, what’s the value of this program and why would a wholesaler marry themselves to it?
3. Control – Does the wholesaler maintain direct control over the program or are they completely beholden to the supporting carrier?
4. Transparency – Will the wholesaler answer any of the questions above clearly? How much commission or other incentives does the wholesale broker receive for placing business within the program? How are those commissions and incentives shared with the retailer?

Without these four key components, insurance programs may be nothing more than a way of fooling you into thinking that a wholesale broker has something that no one else has.

At Ethos, we seldom offer insurance programs, here’s why:

• Wholesalers should bring unbiased options to retailers.

We’ve always believed that one of the primary functions of a wholesaler is to bring multiple, unbiased options to our retail partners.  So, when a wholesaler promotes a real program, they are likely incented to place business into that program first.  This represents a bias towards one option that may not always be the best option for the retailer and their insured.

• Lack of under-served niches.

Today’s medical professional liability (‘med-mal’) industry continues to see a prolonged ‘soft-market’ business cycle.  This means there are tons of carriers competing with one another for the same types of business.  So, there’s no shortage of excellent options for most insurance buyers.  When there are so many choices already, why is a special program needed?  Yes, there are some under-served niches that do benefit from specialized programs, but they are rare.

Insurance isn’t rocket science and figuring out what someone means by using a simple term shouldn’t be either.  So, the next time you see or hear someone advertising their “insurance program”, take a moment to contemplate its characteristics.  If it doesn’t sound completely honest, then chances are it’s a fake.

If you need help figuring out if a program is real or fake, feel free to give me a call.  Oh, and don’t forget…Caveat emptor!