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Wholesale Agent

Wholesale Agent

Definition

An insurance agent who deals with retail agents and not directly with individual insureds. The wholesale agent serves as an intermediary between the retail agent and the insurer.

Related Terms

Managing General Agent (MGA)

A specialized type of insurance agent/broker that, unlike traditional agents/brokers, is vested with underwriting authority from an insurer. Accordingly, MGAs perform certain functions ordinarily handled only by insurers, such as binding coverage, underwriting and pricing, appointing retail agents within a particular area, and settling claims.

Typically, MGAs are involved with unusual lines of coverage, such as professional liability and surplus lines of insurance, in which specialized expertise is required to underwrite the policies. However, MGAs also write some personal lines business, especially in geographically isolated areas (e.g., western Oklahoma, North Dakota) where insurers do not want to set up a branch office.

MGAs benefit insurers because the expertise they possess is not always available within the insurer's home or regional offices and would be more expensive to develop on an in-house basis.

Retail Agent

An insurance agent who acts as an intermediary between an insured and the marketplace. In some instances, retail agents deal directly with an insurer in arranging coverage, while in others, retail agents work with managing general agents or wholesale brokers to secure coverage for their client-insured.

Wholesale Broker

A type of insurance broker who acts as an intermediary between a retail broker and an insurer, while having no contact with the insured. Wholesale agents place business brought to them by retail agents. Unlike a retail broker, wholesale brokers have direct contact with the insurer, whereas the retail agent who produced the business does not. The same broker can function as a retailer or wholesaler, depending on the specific situation.

Wholesale brokers often possess specialized expertise in a particular line of coverage or in a line of coverage that is unusual and/or have greater access to or influence with certain insurance markets, which is especially valuable when dealing with a difficult-to-place risk.

There are two types of wholesale brokers: managing general agents and surplus lines brokers. The latter work with the retail agent and the insurer to obtain coverage for the insured; but unlike a managing general agent, a surplus lines broker does not have binding authority from the insurer.

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