Best Practices for Working Relationships Between

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TABLE OF CONTENTS,Introduction 1,Establishing the Relationship 4. Contracts 8,Binding Authority 14,Certificates of Insurance 18. Submissions 22,Renewals 28,Policyholder Service 38. Surplus Lines 44,Financial Ratings of Insurers 48,Appendixes i. Appendix A Retail Agency Profile Form ii,Appendix B Wholesale Agency Profile Form iv.
Appendix C Retailers Best Practices Evaluation Form vi. Appendix D Wholesalers Best Practices Evaluation Form viii. Appendix E Suggested Wording for Contract Provisions xi. Appendix F Submission Checklist for Retailers or How to Get to the Top of the Pile xii. Appendix G DOs and DON Ts for Retailers Working With Wholesalers xiii. Appendix H DOs and DON Ts for Wholesalers Working With Retailers xiv. Appendix I Disclosure Statement for Brokered Business xv. Appendix J Surplus Lines Checklist xvi, Appendix K Sample Letter Disclosure of Surplus Lines Placement xvii. INTRODUCTION, The Texas Surplus Lines Association TSLA and the Independent Insurance Agents of Texas IIAT formed a. Task Force in 2003 to review the relationships that exist between wholesalers and retailers who are members of. their respective associations The Boards of Directors of TSLA and IIAT each appointed three members of their. associations to the Task Force and assigned staff to coordinate the project. REPRESENTING TSLA REPRESENTING IIAT,Paul Rainey Bill Harrison. RSI International Brown Brown,Arlington San Antonio. Rose Perez Bryan Shofner,Leicht General Agency Shofner Associates.
Houston Lubbock,Dan Oberheu Criss Sudduth,Plus Inc Ark Insurance. Austin Tyler,Jean Patterson David VanDelinder,Executive Director TSLA Executive Director IIAT. Austin Austin,David Surles,IIAT Director of,Professional Liability. The Task Force commissioned surveys of TSLA and IIAT members to assist them in reviewing current practices. and developing recommendations to enhance the working relationships between members of both groups. Forty one of approximately 84 TSLA members and 271 of approximately 1 700 IIAT members responded to the. survey The publication was revised in September 2014 to update references to current laws and rules. About TSLA, TSLA was founded in 1956 to promote the general business well being of its membership to protect the public. and its trust in the business of insurance through the promotion of sound authorized and eligible markets within. the State of Texas and to encourage compliance with provisions of the Texas Insurance Code as they relate to. excess and surplus lines insurance The association is very active on legislative and regulatory issues TSLA. publishes annually a Membership Roster Product Guide Known as the purple book the guide includes a list. of TSLA members and the products they offer It is mailed to over 3500 agents in Texas including IIAT and FIWT. members and is distributed at their conventions through the TSLA exhibit booth In addition the product guide. is found on the TSLA web site at www tsla org,About IIAT.
IIAT was founded in 1898 to represent the interests of independent insurance agents with a major commitment. to professionalism in providing education governmental advocacy insurance markets and technical resources. Membership in IIAT includes membership in the Independent Insurance Agents Brokers of America IIAT. maintains a market search guide on its web site at www iiat org to assist its members in finding specific products. offered by wholesalers,What is a wholesaler, Wholesale insurance agencies in Texas provide a variety of insurance products through different types of. insurance companies A single wholesaler may wear multiple hats in the insurance marketplace and perform. different services depending on the type of insurer it represents and its relationship with the insurer. For the purpose of this publication we have chosen to use the term WHOLESALER to mean any insurance. entity that serves as an intermediary between a retailer an agency that has direct contact with an insurance. policyholder or prospect and the insurance company that serves as the risk taker on an insurance policy. Wholesalers are known by a variety of titles both by themselves and the rest of the insurance industry including. broker managing general agent surplus lines agent or broker and program underwriting manager. Defined in historical and legal terms a BROKER is someone who represents only the policyholder and not the. insurance company in the insurance transaction Some retailers especially large independent agencies refer to. themselves as brokers even though they generally operate like any other retail insurance agency In Texas there. is no legal recognition of or license for a broker In common usage the term broker has come to mean just. the opposite of its historical and legal roots it is an agency that accepts insurance business from another agency. for placement with an insurance company represented by the broker Most wholesalers refer to themselves as. brokers in a generic sense while in legal and licensing terms they are either managing general agents or surplus. lines agents usually holding both types of licenses In Texas persons with general lines or risk managers licenses. also can be wholesalers or brokers, A MANAGING GENERAL AGENT is a wholesaler who represents one or more insurers with varying degrees. of authority including one or more of the following appointing retail agents within a specific geographic area. accepting business from appointed retail agents within agreed guidelines and negotiating and paying claims. In Texas a Managing General Agent license is required when the agent has supervisory responsibility for the. local agency and field operations of an insurance company or is authorized by an insurance company to accept. or process on its behalf insurance policies produced and sold by other agents The license is not required if the. person or entity maintains a surplus lines agents license general lines property and casualty agents license or a. risk managers license unless the premium volume accepted from other agents represents 50 percent or more of its. total annual business or is more than 500 000 annually. A SURPLUS LINES AGENT or SURPLUS LINES BROKER places insurance policies with non admitted. surplus lines insurance companies and is licensed in Texas as a Surplus Lines Agent Surplus lines insurance. companies are not admitted to do business in Texas but are approved for surplus lines by the Texas. Department of Insurance A policy written through a surplus lines company includes a separate surplus lines. tax and stamping office fee that must be collected by the surplus lines agent and remitted to the appropriate. authorities A surplus lines agent can be a retailer that places its own customers insurance with a surplus lines. company or it can be a wholesaler that places surplus lines business referred to it by a retailer. In a legal sense and for licensing purposes a PROGRAM UNDERWRITING MANAGER generally meets the. definition of Managing General Agent as described above. The wholesale insurance market in Texas, While no exact numbers exist to accurately determine the size of the wholesale insurance market in Texas. anecdotal information suggests it is HUGE, Surplus lines business is only a part of the overall wholesale market but the amount of surplus lines premium. written in Texas is a good starting place to put a number on the overall market According to the Surplus Lines. Stamping Office of Texas surplus lines companies wrote an estimated 4 billion in premium in 2012 the majority. of which was presumably produced by independent agencies. Combined with admitted company business the total premium volume placed through wholesalers in Texas. could easily exceed 5 billion, IIAT executives estimate that the average retail agency places 20 percent of its premium volume through.
wholesalers Some retailers place considerably less that 20 percent while others with no standard markets place. 100 percent of their business through wholesalers, Wholesalers and retailers can t live without one another In order for both parties to survive there must be. constant and effective communication that reinforces the relationship Relationships between the two must be. professional and workflows must be efficient in order for both sides to reach their ultimate goals serve the needs. of their clients and make a profit for themselves and for the insurance companies they represent. How to use this report, This report is intended to increase communication between retail and wholesale agents with the goal of. improving systems and procedures for the benefit of both groups and their customers A summary list of. recommendations for both groups is provided at the end of each section of this report In the Appendix separate. forms are provided for retailers and wholesalers that aggregate these recommendations for each group These. forms are titled Best Practices Evaluation Many of these recommendations attempt to establish standards for. communications and practices that will facilitate the flow of business between the two groups. At a minimum wholesalers and retailers interested in improving their business practices should review the. recommendations that relate to their respective businesses Where the recommendations do not reflect current. practice further discussion with their business partners on the other side of the fence is encouraged Business. partners should also be notified of where current practice is in line with these recommendations. Participants in this task force hope that this report is the beginning of improved cooperation between retailers. and wholesalers As one of the largest wholesale production states in the country Texas can lead the way in. standardizing business practices for the benefit of all involved. See Appendix for best practices evaluations,ESTABLISHING THE RELATIONSHIP. Why wholesalers need retailers, Wholesalers need relationships with a sufficient numbers of retailers to ensure a continuous flow of submissions. that will lead to successful placements through insurance companies represented by the wholesaler To. accomplish this goal a wholesaler must carefully select retailers based on criteria established by the wholesaler. Generally wholesalers want retailers who, Need the markets and services provided by the wholesaler.
Submit an acceptable number of applications that lead to successful placements. Submit accurate and complete applications,Provide adequate lead time for placement. Promptly pay premiums for policies issued by the wholesaler and. Operate in a professional and efficient manner, Information used by wholesalers to qualify retailers. A wholesaler will require a retailer to submit a variety of information in order to qualify the retailer before. accepting business While the required information may be similar to that requested by insurance companies. the selection process by wholesalers is generally less formal and stringent Primarily the wholesaler wants to be. sure that the retailer will be submitting the type of business desired by the wholesaler and that the retailer truly. needs the markets offered by the wholesaler In addition the wholesaler wants to contract with financially viable. retailers that have a history of paying their bills on time. Why retailers need wholesalers, Retailers need wholesalers in order to place insurance for clients whose needs are not met by the retailers. appointed companies This includes not only clients that are hard to place because of unusual or hazardous. exposures but also clients that have special coverage needs that are not fulfilled by so called standard. companies In general retailers are looking for wholesalers who. Provide access to markets needed by the retailers clients. Represent financially sound insurers, Provide prompt courteous and efficient service and. Furnish timely quotes that lead to a high hit ratio. How many wholesalers does a retailer need Because of the specialty nature of the wholesale market it is. generally necessary for the retailer to establish relationships with more than one wholesaler To capitalize on. the full benefits of the wholesale market the retailer should be generally aware of client needs and establish. relationships with wholesalers who can meet those needs Retailers should know the strengths and weaknesses. of the wholesalers they represent When marketing accounts retailers should carefully consider which single. wholesaler is most capable through company representation specialization and experience of bringing the. submission to a successful conclusion Trying to market the same account with more than one wholesaler is. usually not an efficient approach, Information used by retailers to qualify wholesalers.
Retailers are concerned with a wholesaler s reputation in the industry In addition retailers place a great deal of. reliance on personal relationships with a wholesaler s management and marketing staff. Standardized profile forms, Because an overwhelming percentage of retailers and wholesalers indicate they would use an industry. standard profile form to develop basic information the Task Force developed such forms. see the Appendix The Task Force recommends that retailers and wholesalers use these forms as. checklists to evaluate their qualifying process,Errors and omissions insurance. Despite the three respondents who say they are offended if a retailer asks for evidence of E O the. for Working Relationships Between Wholesalers amp Retailers JANUARY 2004 REVISED December 2015 A publication of Independent Insurance Agents of Texas Texas Surplus Lines Association Independent Insurance Agents of Texas P O Box 684487 Austin Texas 78768 800 880 7428 fax 512 469 9512 iiat org Texas Surplus Lines Association 9020 I Capitol of TX Hwy N Suite 370 Austin TX

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