Updated Conning analysis of distribution costs now available to WSIA members
November 17, 2021
MEDIA RELEASE
FOR IMMEDIATE RELEASE
For more information contact:
Brady Kelley
WSIA, Executive Director
Rebekah Humphrey
Conning, Inc., Director, Insurance Research
Updated Conning analysis of distribution costs now available to WSIA members
Kansas City, MO -- A recent analysis conducted by Conning, Inc. reconfirmed that wholesale insurance distribution does not increase the cost of the transaction to the insured. The study, which examined 2016-2020 data, found that the total non-loss cost ratio for the wholesale composite was lower than the retail composite by 1.8%. The analysis of the cost of distributing commercial insurance policies through wholesale and retail brokerage channels was conducted by Conning, Inc.’s Insurance Research Division and serves as an update to a study originally published in 2016. The Wholesale & Specialty Insurance Association (WSIA) retained Conning, Inc. to conduct the objective analysis of the distribution costs, cost structure and ratios between the wholesale and retail channels.
To conduct the analysis, WSIA and Conning identified two composite groups of insurance companies as a proxy for each mode of insurance distributors for selected commercial lines. Insurers that use wholesale brokers as their predominant distributors were included in the “Wholesale Composite,” and insurers that use retail brokers as their predominant distribution were included in the “Retail Composite.” The Wholesale Composite was composed of 99 companies with aggregate direct written premium of $38.3 billion, and the Retail Composite was composed of 205 companies with aggregate direct written premium of $69.2 billion. Additional details about the composites and how they were developed is available in frequently asked question supporting the study.
“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 that wholesale distribution comes with no additional transaction cost at the time, and we’re obviously pleased that five years later that remains true,” said Davis Moore, WSIA President and Vice Chairman, Brokerage, Amwins. “The last 10 years of data definitively indicate that retailers and insurance buyers should leverage a wholesale specialist to find the right solution for their complex risks at no additional cost.”
Conning measured all non-loss costs relative to direct written premium from 2016 to 2020 for these companies. The comparison found:
- The total non-loss cost ratio for the wholesale composite was lower than the retail composite by 1.8 percentage points.
- Wholesale non-loss cost ratios were lower in each year of the study, 2016-2020.
- The wholesale composite’s commission ratio is consistently around 3 points higher than the retail composite but is offset by the wholesale composite’s non-commission cost ratios that average nearly 4 points lower than the retail composite.
- The wholesale composite non-commission cost ratio has improved each year, while that of the retail composite increased in 2018 before improving in 2019 and 2020.
- In each of the years measured, the annual growth rate in direct premium written for insurers in the wholesale composite exceeded the annual growth rate in direct premium written for insurers in the retail composite.
The new report, accompanying FAQs, and wholesale value briefing points are available on the WSIA website. WSIA is actively committed to messaging the value of wholesale distribution to retailers and risk managers, and these tools can also be accessed by members to reference when reviewing and sharing the Conning report with their partners. In addition to these materials, WSIA and Conning will offer a recorded webinar highlighting the study methodology and results in early 2022.
“The WSIA Board of Directors is proud of the work that has gone into the analysis, and this is something that every member should leverage and communicate. We have always known that wholesale distribution brings innovation, expertise and custom solutions to the table for insureds, but Conning’s analysis definitively shows that those tailored solutions are cost-effective and come with no additional cost. There’s no reason not to seek a wholesale quote on behalf of insureds.”
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